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Marriott International

Strategic Management

2/10/2014

Gaurav Acharya

1 | P a g e

Marriott International Inc. is one of the US’s top hospitality companies and has been in business since

1927. The company operates a variety of lodging services, including franchising hotels, vacation resorts,

executive apartments, corporate housing and conference centers. Marriott International Inc. is a publicly

traded company on the New York stock exchange and Chicago exchange board. In total the company

has nearly 2,800 franchised properties where it has more than 500,000 rooms in more than 68 countries.

It all started when the company’s founder, J.W Marriott, opened an A&W root beer stand in Washington

D.C in May 1927. After noticing their business needed a boost they added food to their menu. The

restaurant was called the Hot Shoppe (“Our History”). In1928 the Marriott opened their third restaurant;

and in 1929 the restaurant chain was incorporated as Hot Shoppes Inc. (“Our History”)

The company made its first public offering in 1953 and in 1955 the Marriott entered the hospitality and

food service market. The company also opened its first hotel the TWIN Bridges Marriott Motor hotel in

Virginia in 1957. (“Our History”); the company grew by both acquisitions and by starting new

businesses.

At first, the Marriott started acquiring companies like Host International in 1982 which helped them to

have a solid reputation. Numerous other acquisitions of hotel brands have let the company to become a

highly leveraged hospitality empire. In 1993 there was a turning point for the company when Marriott

International split into two separate companies (“Company Prospective”). One became Marriott

International which was mainly involved in managing the hotel industry and the other became the

management of hotel property. (“Company Prospective”). Over the time the company has brought itself

out from the food industry and focused primarily on the lodging industry.

Areas of Operations:

The company mainly operated in five business segments:

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North American full services

North American limited services

International

Luxury

Time Share (“Business Description”)

The North American and International brands include Marriott Hotels and resorts, courtyard by

Marriott, JW Marriott, renaissance hotels, Renaissance club sport, Fairfield inn and suits etc. The

Luxury lodging includes The Ritz Carlton and Bulgari Hotel and Resorts. The time share segment

brands include Marriott Vacation clubs, The Ritz carlton Destination club, The Ritz Carlton

Residences and Grand Residences. (“Business Description”)

Marriott International Inc falls under hospitality industry. In this particular industry there are

departments like housekeeping, Accounting, Marketing, Maintenance and Receptionists. All these

departments require mainly human beings to perform the job task; therefore, labor is one of the

biggest expenses in the hotel industry. (Hotel, motel & resorts,”2014)

These days company do not own and operate all their business products for example Marriott

franchises its property to many across the globe. By doing franchising a parent company can lend its

name to a local operator; who uses the name and operates the business the franchisee than has to pay

a fee to the franchisor. Also, these days there are a lot of government rules and regulations for hotel

industry especially during hiring phase.

In US there are around 40,000 companies that operate Hotels and have about 50,000 properties with

the annual revenue of $150 billion dollars. (“Hotel, motel & resorts”2014)

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Companies in this industry operate short-term lodging facilities including hotels, motels and resorts.

(“Hotel, motels & resorts”2014). According to Euromonitor International “the hotel industry

generates about $460 billion revenue per year”.

Competitive Landscape

Business and Tourist travel are both demand oriented. They both are affected by the economic

conditions. During the global recession people did not travel as they were losing jobs and they had

limited money whereas if the economy is strong people will spend more money on vacation and

travels. However, large companies in this sector have more advantage during slow months mainly

due to economies of scale.

One of the major marketing tools in this industry is the hotel website. These days all the hotels try to

add features like online reservation or partner themselves with online booking sites like Priceline,

Travelocity etc, which saves both time and hassle for a customer. Company’s website is made very

attractive showing rooms and lounge and other facilities; a consumer can look at these and reserve a

room for them. Information technology plays an important role in day to day operations of hotel

enterprise as it only takes couple of minutes for a person to book a hotel room online.

If we look at the travel and tourism industry there are mainly two kinds of travelers; business who

generally are travelling because of work related and leisure which is mainly family vacations. On a

scale of 100, 40% percent are the business travelers and rest are the leisure travelers.(Hotel, motel&

resorts” 2014). So to succeed in this industry the business has to look for features that can cater both

the parties. It should build conference rooms which can cater large groups for company functions

and build recreation facilities for families. News paper advertisement and travel magazine also are

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important marketing tools for hotel industry. News Paper provides house to house marketing

whereas magazines can provide reach business door steps.

While pricing rooms the range is generally set from economic to luxury and services are full, limited

and all suits. The hotel industry also provides loyalty programs or point system which generally

rewards its customer which helps the company to retain back its clients.

Tourism industry worldwide is a trillion dollar industry and some of the most popular destinations

are United States, Spain, France, China, India and Italy. The current economic growth may help the

tourism industry a lot. Appendix B shows the percentage of international tourist arrivals.

From the pie chart located in Appendix B we can see that Europe accounts for 51% of International

tourist arrival followed by the Asia Pacific region. Recent data provided by the UN World Tourism

Organization in year 2011, China is the fastest growing tourism source. Hotels to cater these guests

should have staff that speaks in Chinese language.(“International Insight”)

Although travelling in Europe and North America has slowed there are countries like Brazil, India,

and China which has the fastest growing tourism source.

Porter’s Five Forces

Porter’s five forces model generally relates an industry in five different areas:

Bargaining power of customer,

Rivalry among existing firms,

Bargaining power of suppliers,

Threats of substitute

Threats of new market entry.

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Threat of new market entry: is mainly determined by size, economies of scale, switching cost,

loyalty of customers etc. (Analyze of hotel industry), There are many costs that are associated when

a person is trying to open a hotel. The costs that are associated are like fixed cost meaning

purchasing of furniture etc and labor cost who are used for day to day operations. Hotels also have

to target to fill their rooms and try to rotate as much as possible to be profitable. Another important

factor that the hotel owner has to look upon is location. Nobody would like to stay a night at a hotel

which is located in bad neighborhood.

Threat of Substitute: The hotel industry in all major cities is not threatened by substitute product.

(Analyze of hotel industry). During low tourist season the prices are generally lowered so that guest

comes in. In the case of Marriott who has different brands for different class; if a person does not

like high end hotel they can easily go for the one which is relatively of lower price. A hotel can

compete itself on the facilities that it has like free gym, Wi-Fi, free breakfast, airport shuttle etc.

Bargaining power of suppliers: The Bargaining power of suppliers is not the strongest in this

industry the owner who are the suppliers are simply competing in a similar product.

Bargaining power of Buyers: In hotel industry there is high bargaining power of buyer. Since there

are many hotels available in a town the person can shop around and go with the lower rate hotels.

Also bargaining power of buyers tends to be high especially during some event when a group tries

to book many rooms. In that particular time hotel tries to give them best deals so that they do not go

to their competitor.

Rivalry among Existing firm: The only rivalry that exists in the hotel industry is trying to sell the

rooms during off seasons.

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Strategic Analysis

Marriott International Inc. has one of the most reliable services. The Marriott’s main focus is on

customer satisfaction. We all know, in this industry you have to build a strong customer base that

would choose to stay in your hotel in any part of the world. The company provides excellent service

in all of its business properties. One can easily get the warm hospitality of the Marriott in part of the

world.

The company has been successful in finding and retaining employees by offering them a benefits

package. The company runs by a motto that states “If we take care of our associates they will take

care of the guest”. This motto is indeed a very helpful statement in the hospitality industry as you

generally want the customer to be back as you have to run a business.(“Our Competitive Strength”).

The managers hire people who have a “Spirit to Serve” and then train them for various departments

of the hotel. (“Our Competitive Strength”) The main motive of this is that they want every employee

to be happy with their job and give good service to the customer.

The company gives a lot to society too. They have programs that are meant for veterans who have

small businesses where they would buy goods from the veterans. (“Services to Society”).Also, they

are a participant of the fisher foundation which is meant for veterans. In this program, a US citizen

can donate their hotel points to a veteran’s family. The company provides military discounts in

many of their hotels. (“Services to Society”)

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These days’ people use the products and services of those companies who recycle their product.

Marriott International has also done the same; the company makes sure that their computers in all

their locations are recycled and by doing this they have been able to eliminate more than 600,000

pounds of waste ending up in landfills. The company also purchased 47 million Bic Ecoution pens

which are biodegradable and are made from recycled content. These kinds of work have benefitted

society which has made people to be more loyal to this company. (“Services to Society”)

The company also has job trainings for people with disability. At the beginning they generally give

young people with disability job training in Marriott hotels and later hire them for jobs. This

program is a part of social responsibility that the company does. (“Marriott includes job training as

part of social responsibility”)

India these days have been a major tourist attraction especially in cities like Mumbai and Goa where

youngsters and families go for fun and amusement. The country’s geography is such that it has

beaches, deserts and mountains. This is indeed a plus point for a country like India as it can cater

any kind of tourist. The Marriott, by providing mid-size hotels, would help international tourists to

enjoy the same Marriott hospitality that they would find in America.

The company also has tried to change a little to attract people from India, by offering services they

do not offer elsewhere. The services mainly are mid-market budget hotels with large banquet,

meeting spaces, 24 hours laundry etc. The company, by providing large banquet hall would

generally attract Indian customers because, in India, when there is a family function like a marriage

or special events guests are invited from all parts of the world or even domestically. During these

kinds of function the host family reserves rooms for them till the time the function is over. The host

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would look for rooms that are reasonable for them to pay; by providing mid budget hotels and

catering to the taste of Indian people would certainly help the company to grow more in India.

Another way of expanding is by Acquisition. The company has done the same by purchasing one of

the Africa’s largest hotel groups. This action was taken by the company to double the rooms in

Africa (“Marriott Checks in the African Continent”). The deal involves 116 hotels that South

Africa’s major hotel group operates. (“Marriott Checks in the African Continent”). This deal would

attract more investors as they would see that Africa is a growing economy and also one of the

popular tourist destinations for jungle safaris.

The company reward system play an important role in retaining customers into their hotels by

introducing Marriott Reward point savers. This allows members to redeem fewer points for some of

the Marriott’s properties. The reward points can also be used for car rentals, park passes, and retail

merchandise. Their reward system has been voted the “Best Hotel Reward Program in the world” by

the business travelers’ magazines and was names “Best Hotel loyalty Programs by readers of

Business week. (“Marriott rewards Welcome”).

The company’s business model which is more of franchising property rather than owing has made it

unique than its competitors which has helped them to save money in the form of cost saving and

also attracting guests.

The company was awarded as one of the best places to work (CNN 2013). The company has low

employee turnover rate by offering their employees a total value proposition.

Today company operates itself with five guiding principles: (“Hotel Online Special report”)

Get it right the first time: this is mainly to retain good employees and hire the right person.

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Money is a big this but it’s not only the thing: The company tries to provide a good price

for its customers, competitive compensation and a great work place for its employees.

Caring workplace is a bottom line issue: Marriott tries to create a value care, dependability

and sense of community. They want that their employees are safe and secure all the time

Promote within: they try to promote employees for managerial positions within the

organization. This motivates an employee to work even better with efficiency. The company

also heavily invests money on training the employees; this is mainly done so that they can

retain the employees.

Build your brand: The Company says that by building the brand name will help in bring

back customer as no matter where the person is travelling they will look for Marriott. (Hotel

Online Special report)

The company has also expanded into mobile check in and check out system (forgone 2013). By adding

this system a person can check in the hotel with the help of his or her cell phone; they do not have to

stand in a line at the receptionist’s desk which saves a lot of time. This system also benefits the business

as a means of cost saving.

These days anywhere we go there are signs that say no smoking in front of business premises. Marriott

is going smoke free. All of the company’s North America and corporate hotels are becoming smoke

free. (Marriott Chain going Smoke free in September). This strategy was built to fit in with the

industry’s latest buss word.

Another strategy that the company undertook was by opening the world’s tallest hotel in New York.

(Marriott.com). New York has always been the number tourist destination as there are some major

tourist attractions present.

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Marriott has invested a lot in differentiating itself from its competitors. The company is taking a lot of

measurement in minimize the consumption of water. The company uses Energy and Environmental

Actions to achieve energy and water saving goals. (“Marriott.com” 2014) The company is also working

with U.S Green Building Council in developing green hotels. (“Marriott.com” 2014).These kinds of

actions taken by the company will definitely help them to bring in more guests inside their hotels.

Another important strategy that company took was by going with the slogan “Be You with US”.

(“Working Mother.com”2012), this was the company’s marketing strategy in LGBT community for the

year 2012. This slogan was mainly to value each and every customer that stayed in the hotel.

SWOT ANALYSIS

Strengths Weakness

Market Position Over Dependency on the US Market

Strong Brand Portfolio Reputation

Property Portfolio Operating Cost

Opportunities Threats

Strategic Acquisition Business Risk

Growing Tourism Industry Environmental Risk

Portfolio Expansion Competition

Terrorism

Strengths: Marriott International is one of the leaders in the industry. It is a leading hospitality industry

which operates all over US and in 68 different countries. The company’s portfolio is best in the world.

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Weakness: Company’s high dependency on any specific region increases its business risk. Although

company operates in many countries it derives majority of its income from North America. The

company franchises most of its properties although franchising gives a fix income for the hotel however;

its reputation is at stake if the franchisee does not give the kind of service that customers think of

Marriott. Marriott also has a high operating cost compared to its competitors.

Opportunities: The Company has the opportunity to acquire companies in different parts of the world

by merging with some of the leaders in those areas. The Company should also look into expanding more

in countries like China and India.

Threats: The Company does have environmental risk when there is some kind of epidemics going

around in some country tourism will generally decrease in that particular region for some time which

would lower the hotel revenue. The company also faces threats from local hotel owners who can provide

lodging for lower prices. Marriott being an American company can be a target for different terrorist

groups. In the past the company has been attacked by terrorists groups.

Performance Appraisal

Companies like Marriott and others which are in the hospitality industry are closely related to economic

cycle. It is said that during economic hardships people try to minimize cost on leisure activities. (q

finance).

Hotel provides restaurants, meeting rooms’ theater, gym etc; labor is the most expensive operating factor

it is hard to find a suitable person to carry out the given job. To avoid this problem the company tries to

promote employees from inside the organization.

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In hotel industry revenue comes from three different sources like room, food and alcohol. Pie

chart provided in appendix A gives us a clear picture of the break down. It shows that income

from the room is the maximum revenue generator; therefore, it is very important for hotels to

have maximum occupancy.

Leisure activities mainly mean travelling to different places during vacation etc. During the time of

economic boom people will spend more money on vacation and other outdoor recreation activities; bad

economy people do not spend money on travels. Another way of calculating hotel revenue is by looking

at the amount of time the room rotates its guests.

Other factors that would help company to make more money are like cost control, inventory

management, strategic planning etc. Any company should have enough cash for just in case activities so

that it can run day to day operations.

For the performance appraisal part of this paper I will be mainly examining the key ratios of Marriott.

For better understanding as to where Marriott stands in the financial position I have compared it with

other major groups in the hotel industry.

All the financials and other financial related articles have been taken from mergent online data base

which has been provided by the California Lutheran University’s library database.

Return on Assets

Name 2012 2011 2010 2009 2008 Industry

Avg

Marriott 9.32% 2.66% 5.42% -4.12% 4.06% 6.83%

Inter 17.45% 16.44% 9.86% 7.09% 10.61%

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Continental

Starwood 6.09% 5.06% 5.15% 0.79% 3.40%

Wyndham 4.32% 4.52% 4.04% 3.10% -10.69%

Figure 1: Data provided by Mergent Online

ROA is an indicator as to how profitable a company is in comparison to its total assets (Investopedia

2014). It also gives us a clear picture as to whether or not managers of the business entity are utilizing

the company’s assets carefully or not.

From the figure above we can get a clear picture that Marriott for the past five years have been able to

utilize their resources properly. The company’s percentage is above industry average and also better

than some of its competitors. The company’s return on assets ratio from 2011 to 2012 increased by

6.66% which gives its investors a feeling that managers of the firms are managing the finances properly.

To get a result like this brand name has played an important role.

Return on Equity (ROE)

2012 2011 2010 2009 2008 Ind avg

Marriott -0- 49.25% 33.59% -27.51% 25.77%

Inter Cont 127.14% 115.65% 133.33% 297.90% 1306.42% 19.58%

Starwood 18.40% 18.03% 22.21% 4.24% 17.75%

Wyndham 19.17% 16.20% 13.52% 11.65% -36.57%


Return on Equity is the amount on net income returned as a percentage of average shareholders’ equity

(Investopedia 2014), the higher the percentage the better profits are generated through the use of

shareholders money. From the chart above we can notice that 2009 has not been a good year for the

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company as it has a negative ROE. The reason behind this might have been the global recession so

people did not spend money on vacation.

So little revenue came in and so there was less revenue and more of expenses which resulted in lower

net income for the company. In 2012 the company repurchased its stock so that the more ownership goes

in their hand and also they could sell the stock back to the public once the prices go up. The company

repurchased too much stock because of which their stock holder’s equity became negative and there was

no return on equity for the year 2012.

Net Profit Margin:

2012 2011 2010 2009 2008 Ind avg

Marriott 4.83% 1.61% 3.92% -3.17% 2.81%

Inter Cont 29.70% 26.75% 17.20% 13.85% 14.13% 6.51%

Starwood 8.89% 8.69% 9.41% 1.55% 5.57%

Wyndham 8.82% 9.80% 9.84% 7.81% -25.09%


Net Profit margin is very important and useful when we compare similar industry. It measures how

much out every dollar of sales a company actually keeps in earnings. (Investopedia 2014)

In this group Intercontinental has the best profit margin ratio. Marriott is below industrial average which

means that company has to cut costs and focus more on marketing which would bring in more guests in

their hotel.

Current Ratio

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2012 2011 2010 2009 2008 Ind avg

Marriott 0.53 0.52 1.35 1.25 1.33

Inter Cont 0.85 0.67 0.49 0.4 0.48 1.27

Starwood 0.95 1.27 1.07 0.74 0.81

Wyndham 0.97 1.11 1.11 0.92 0.88

Data provided by Mergent Online

Current Ratio is mainly concerned with the company’s ability to pay back its short term liabilities.

(Investopedia 2014). The Current ratio also gives us the information if the company is efficient or not.

Anything above 1 is regarded as good. However, in the case of Marriott which has a current ratio of

0.53% it is not good as it is below industry average as well as less than its competitors. It looks like

company has been using a lot of cash for development. The company’s stock repurchase program has

drained a lot of cash from its accounts.

Quick Ratio:

2012 2011 2010 2009 2008 Ind avg

Marriott 0.4 0.38 0.57 0.41 0.41

Inter Cont 0.72 0.59 0.42 0.32 0.4 1.18%

Starwood 0.47 0.54 0.61 0.26 0.35

Wyndham 0.52 0.58 0.58 0.48 0.44

Data provided by Mergent online

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Marriott does not have too much inventory in hand therefore; their quick ratio and current ratio both are

similar for the past two years. Since the company does not have enough cash as they are reinvesting

company’s quick ratio is also lower.

Debt to Assets:

2012 2011 2010 2009 2008

Marriott 46% 37% 33% 29% 35%

Inter Cont 39% 23% 45% 49% 55%

Starwood 20% 29% 34% 34% 41%

Wyndham 48% 45% 40% 22% 21%


Marriott has carried a lot of debt to grow the company for the past five years. Companies when

expanding do borrow money by issuing stocks and bonds. When financing activities takes place the debt

of the company rises. Once the company starts paying back its debt the percentage that we see above

will decrease.

Debt to Equity:

2012 2011 2010 2009 2008 Ind avg

Marriott -0- -0- 1.78 2.01 2.24

Inter Cont 4.08 1.26 2.93 7.53 -0- 0.71

Starwood 0.58 0.92 1.36 1.62 2.47

Wyndham 2.36 1.8 1.28 1.31 1.62


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From the chart provided by the mergent online data base we can see that the company has a negative

debt for 2011 and 2012. The reason for this is the stock repurchase program.

Long term Debt to Equity:

2012 2011 2010 2009 2008 Ind avg

Marriott -0- -0- 1.7 1.96 2.16

Inter Cont 4.03 1.22 2.86 6.82 -0- 1.19

Starwood 0.53 0.88 1.3 1.62 2.16

Wyndham 2.08 1.69 1.2 1.17 1.42


Marriott’s long term debt is not that lower than its total debt ratio this means that company does not

need short term financing. From the chart above we can see that Marriott does not have any long term

Debt to Equity for the year 2012 and 2011 because of the negative stock holder equity.

Times Interest Earned:

2012 2011 2010 2009 2008

Marriott 6.19 2.17 3.06 -3.54 4.26


Times Interest Earned is the ratio of earnings before interest and taxes for a period (accounting

explaining). This ratio measures the ability to pay its debt or not.

By looking at the data above it shows that Marriott is healthy enough to pay back its money.

Total Assets turnover:

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2012 2011 2010 2009 2008 Ind avg

Marriott 1.93 1.65 1.38 1.31 1.44

Inter Cont 0.59 0.61 0.57 0.51 0.75 0.93

Starwood 0.68 0.58 0.55 0.51 0.61

Wyndham 0.49 0.46 0.41 0.4 0.43

Total Assets turnover is a financial ratio that measures the company’s efficiency in using its assets and

generating sales (“Boundless.com”2014).

Compared to its competitors Marriott’s variance is quite larger than others. This might be due to their

way of doing business. Which is to own very small percentage of properties and having very little

inventory.

Receivable Turnover:

2012 2011 2010 2009 2008

Marriott 12.42 13.59 13.17 12.57 12.59

Inter Cont 5.71 5.28 4.61 4.12 4.82

Starwood 10.95 10.4 10.56 9.43 10.11

Wyndham 10.66 10.2 9.29 8.68 7.08

This ratio mainly shows as to how many times per year a company can collect its receivables (Ready

Ratios). By looking at the figure above one can see that Marriott has been consistent in collecting money

for the past five years. In hotel industry receivable turnover is mainly fees that are incurred however,

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these ratios do not impact the business much as it hospitality industry not a manufacturing or distributing

industry.

To conclude this part despite some of the areas needs to improve overall financial report does look good

despite some negative ratios.

Strategy Formulation and Implementation:

From their company strategy of hiring employees, having low employee turnover their services to

the society the future of Marriott is bright. One of the most important things that they have done is

to be the best in the industry is that their business has evolved during the time. They kept innovating

themselves by franchising properties or have become environmental friendly organization. The

company should not wait until its competitor makes a move it should diversify itself.

The strategy that I recommend for Marriott is to enter into apartment management industry and

managing senior living facilities.

Why consider Nursing homes?

It is said that Nursing homes are forecasted to grow at an annual compound rate of 5%

between 2013-2017. (First Research).

Between 2015 and 2030 the number of Americans 65 and over will increase from 50% to

around 72% this means the demand for nursing homes will increase. (First Research)

In the United States the Nursing homes receives more than half of revenue from Medicare

and Medicaid (First Research)

The average revenue per worker in the US is about 65000. (First Research)

Why Apartment management?

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Raising real estate values and mortgage rates have made buying homes more expensive.

(Bloomberg,2013).

New number shows just above 65% of Americans currently own homes. (U.S News, May 2012)

Top quality renters value in a property is managers are ethical or not.

Growing trend towards previous homeowners choosing to rent (Rental Properties, February

2013)

Apartments assets $1.1 trillion to economy (Rental Properties, February 2013)

Residential rental Properties is the thing to invest (Rental Properties, December 2012)

Renting is more affordable option (Rental Properties, February 2013)

From the information gathered above one can get the feeling that rental property is playing an important

role in the US economy.

I think the Marriott International can do a lot if they enter in rental property business because they have

the management skills, staff and strategy. However, everything comes with a price there are some

disadvantages too that will come along the side.

Marriott international these days manage and franchise hotel properties these days even there are many

other property management companies which do the same with rental properties.

There are indeed a lot of similarities in both of these industries:

Hotel Apartment

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Labor Intensive Realistic Approach

Service Oriented Oversee all repairs

Location Negotiation Contacts

Reputation

Are of Operations

Customer Loyalty

All of the above are the similarities that both of these industries have. Therefore, Marriott International

will not have a big issue in managing properties. Marriott will not have difficulty in marketing their new

line of business, finding technology or training staff as business segment is somewhat the same. Since

hotel industry and apartment management has high employee turnover the company should give its

employees an option if they would like to work in the apartment management. This would give an

option to an employee if they would like to work elsewhere but within the same company.

The company can have a realistic approach as to how much their revenue will be for a year and what

will be the end of the year profit after cutting out expenses. Marriott also has a good reputation in the

hotel industry so tomorrow if in the news there is a headlines that Marriott International Inc. is entering

in apartment management business, many people will think once if they want to change the apartment

and move in at the Marriott managed apartments.

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Some of the differences between these two industries:

Hotel Apartments

Revenue Fluctuating Fixed

Bad Economy Poor Performance Good Performance

Good Economy Good Performance Bad Performance

Agreement Long Term Short Term

Diversity Property Diversity Less Diversity

If Marriott enters into apartment management industry it will provide company steady revenue and also

help the company to diversify its product. Steady revenue will be achieved in apartment because people

will generally stay in a hotel for a night or two where as in apartment people lease a unit for at least a

year. Also during the time of recession people will not buy homes and they will choose to live in an

apartment so during bad economic condition apartment industry will help the company to create money.

By entering in apartment industry Marriot will have money no matter what kind of economy we are in.

According to triangle “National hotel occupancy rate for 2013 was 62.1%” the predictions have

been high this year. The vacancy rate mainly due to fewer jobs has helped apartment sector to grow,

People do not travel when the economy is not good as they do not have enough money to spend on

leisure activities this is just the opposite in apartment industry. If the economy is bad people would

rather rent a property than to buy a house. Apartment industry is not that volatile compares to hotel

23

industry. By entering into Apartment industry Marriott International will be able to earn stable

revenue than hotels.

As noted in the company’s website Marriott’s best way is by putting people first, pursuing

excellence, embracing change, acting with integrity and serving the world. Keeping all these into

considerations the company has indeed been very successful in managing and franchising its hotels.

The company can do the same if it enters the apartment industry. Everyone knows Marriott and its

way of doing business so if it enters into apartment industry it can easily get people in their

apartment complex.

The company is evolved around its employees, and for this it has earned rewards like best place to

work. Happy employee indeed is a great plus point for service related industry and Marriott can do a

lot better if it enters the apartment industry as it is also customer oriented. Marriott I think is very

responsive towards customers so they can easily have many residents in its building.

To get started in apartment industry it needs all factors of economy which are land, labor and

capital. Land is not a problem as they will be managing already existing building, but for capital

they have to borrow money from financial institution. The company mainly has to spend money

building infrastructure like painting or changing some damaged doors or buying equipment like

refrigerators. Other than that there is indeed a minimum cost associated with R&D, since it is

apartment management. Another source of obtaining money would be borrowing from shareholders.

To implement this strategy a new division has to be added for managing day to day operations. The

company has to do hiring which can be done both internally and externally. By hiring internally it

means coming giving chance to its employees if they want to work in apartment industry and by

24

hiring externally means looking for some people for the top positions who have been in this industry

for years.

This could also save some money for the company. If hired within the organization it would mainly

give some people an opportunity to work in different business environment. The company can

control cost in some of the departments like H/R, Marketing, Information technology and finance

and accounting. They can hire people and train them so that they can fit in many positions.

These days we all have seen that apartment management companies give a lot of facilities to its

customers like gym, laundry, 24 hours maintenance and security, party hall, free Wi-Fi in

recreational areas etc. The company also has to do a lot like these to attract people inside their

complexes.

To grow business employee reward system is very important and Marriott should also do the same.

Commission based on sales should be implemented to boost the employee’s moral if they are able to

increase the occupancy in Marriott managed apartments.

From the research above we have found out what would be the advantages for a company to operate

another industry. However, like coin has two sides there are some disadvantages too.

Firstly, investors might not be happy to finance the company to enter into these new markets as

there are many key players already dominating this industry

Secondly, financing can also be a big issue as slight increase in the percentage rate might hamper

profit.

Lastly; to earn stable profit management has to acquire a lot of units to manage it.

25

Conclusion

In today’s world for a company to succeed and make profit risk taking is very essential. Companies

who recognize their competencies have done extremely well. Marriott till today’s date has been very

successful from the decisions they have taken and if they think of diversifying their current business

I think they will be even better.

26

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28

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Appendix A

Products, Operations & Technology

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Product Segmentation by Revenue - Census Bureau

Appendix B

Percent of International Tourist Arrivals - UN World Tourism Organization, 2011

30

Appendix C

Balance Sheet

MARRIOTT INTERNATIONAL, INC. CLASS A (MAR) CashFlowFlag BALANCE SHEETFiscal year ends in December. USD in millions except per share data.

2008-12

2009-12

2010-12

2011-12

2012-12

AssetsCurrent assetsCashCash and cash equivalents 134 115 505 102 88Total cash 134 115 505 102 88Receivables 898 838 938 875 1028Inventories 1981 1444 1489 11 22Deferred income taxes 186 255 246 282 280Prepaid expenses 81 54Other current assets 169 199 123 57Total current assets 3368 2851 3382 1324 1475Non-current assetsProperty, plant and equipmentGross property, plant and equipment 2519 2548 2556 2095 2530

Accumulated Depreciation-

1076-

1186-

1249 -927 -991Net property, plant and equipment 1443 1362 1307 1168 1539Equity and other investments 249 250 265 216Goodwill 875 875 875 875 874Intangible assets 710 731 768 846 1115Deferred income taxes 727 1020 932 873 676Other long-term assets 1780 845 1469 559 447Total non-current assets 5535 5082 5601 4586 4867Total assets 8903 7933 8983 5910 6342Liabilities and stockholders' equityLiabilitiesCurrent liabilitiesShort-term debt 120 64 138 355 407Accounts payable 704 562 634 548 569Accrued liabilities 633 519 692 650 745Deferred revenues 70Other current liabilities 1006 1142 1037 1005 1052

31

Total current liabilities 2533 2287 2501 2558 2773Non-current liabilitiesLong-term debt 2975 2234 2691 1816 2528Minority interest 11Other long-term liabilities 2004 2270 2206 2317 2326Total non-current liabilities 4990 4504 4897 4133 4854Total liabilities 7523 6791 7398 6691 7627Stockholders' equityCommon stock 5 5 5 5 5Additional paid-in capital 3590 3585 3644 2513 2585Retained earnings 3565 3103 3286 3212 3509

Treasury stock-

5765-

5564-

5348-

6463-

7340Accumulated other comprehensive income -15 13 -2 -48 -44

Total stockholders' equity 1380 1142 1585 -781-

1285Total liabilities and stockholders' equity 8903 7933 8983 5910 6342

Appendix C

Income Statement

MARRIOTT INTERNATIONAL, INC. CLASS A (MAR) CashFlowFlag INCOME STATEMENT

Fiscal year ends in December. USD in millions except per share data.

2008-12

2009-12

2010-12

2011-12

2012-12 TTM

Revenue1287

91090

81169

11231

71181

41332

2

Cost of revenue1125

6 96731021

61103

91022

91153

1Gross profit 1623 1235 1475 1278 1585 1791Operating expensesSales, General and administrative 803 722 780 752 645 732Restructuring, merger and acquisition 55 51Other operating expenses -20 614Total operating expenses 838 1387 780 752 645 732Operating income 785 -152 695 526 940 1059Interest Expense 163 118 180 164 137 129Other income (expense) 72 -148 36 -6 46 28Income before taxes 694 -418 551 356 849 958

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Provision for income taxes 350 -65 93 158 278 302Other income 15Net income from continuing operations 359 -353 458 198 571 656Net income from discontinuing ops 3Other 7Net income 362 -346 458 198 571 656Net income available to common shareholders 362 -346 458 198 571 656Earnings per shareBasic 1.02 -0.97 1.26 0.56 1.77 2.13Diluted 0.98 -0.97 1.21 0.55 1.72 2.13Weighted average shares outstandingBasic 356 356 363 350 323 307Diluted 356 356 378 362 323 308EBITDA 1047 -115 909 688 1131 1245

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mar final

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