Marriott Corporation

Marriott Corporation

        Marriott International is the current leader in the hotel/lodging industry.  Founded in 1927, by J Willard Marriott, and his wife Alice, it had its beginning as the first A&W Root Beer franchise.  By 1957, Marriott made a historic move into the hotel industry, opening their first hotel in Arlington, Virginia, under the management of their son, Bill Marriott. (Marriott International, 2015).  Between 1957 and 1985, the Marriott Corporation had expanded into Mexico, began providing lodging for the cruise industry, and debuting the first Courtyard hotel.  Between 1986 and 2011, they acquired several more hotels, including Fairfield Inn, Residence Inn, Renaissance, Executive Stay, and 49% of the Ritz-Carlton Hotel Company.    By 2012, Marriott had added an additional five hotels after acquiring Gaylord Hotels Brand, bringing the current number of properties owned by the corporation to 4,300, in 81 countries (Marriott International, 2015).   Most of its current properties are franchised, with the Marriott family owning about 30% of the corporation (Yahoo Business).

        Marriott International, Inc. is one of the leaders in lodging, and is currently headquartered in Bethesda, Maryland.  They have made their mark worldwide, as operator, franchisor, and licensor of hotels and timeshare properties.  Under its current model, the hotels are typically franchised, rather than owned.   “At year-end reporting, in 2014, of the total number of hotels available worldwide, Marriott operated 41 percent under management agreements; the franchisees operated 56 percent under franchise agreements;   [Marriott] owned or leased only two percent”. (2014 Marriott Shareholders Report) With a current focus on long-term contracts and franchises, which more structural stability for the company, with minimal investment. This strategy shown substantial growth, while decreasing financial jeopardy.

        Currently ranked #221 by Fortune 500 Magazine, Marriott International generated almost 14 million dollars in revenue during the 2014 fiscal year.  First quarter earnings for 2015, surpassed first quarter earnings in 2014 by nearly 20 percent (Fortune 500 Magazine).

        Competition in the hotel and lodging industry, is largely based on the quality of rooms, restaurants, meeting facilities, and location.  Availability and price also can also sway the decision of customers.  “Although Marriott’s global presence across 70 countries enables it to offer services to a large number of consumers, it falls short its competitors who are present in 80-100 countries”. (Yahoo Business)  Marriott Internationals most significant competitors include other large leaders in the hospitality industry.  One of its toughest competitors is Hilton Worldwide Holdings, Inc.  Based in McLean, Virginia, Hilton currently possess 4,400 hotels, resorts and timeshares in 97 countries. (Hilton Worldwide Website).  Accor Hotels, based in Paris, France, currently owns 3,800 establishments, including Novotel and IBIS. With around 290 hotels based in the United States, Accor, most notably has the most of its functioning properties overseas (Accor Website). Marriott’s other leading competitor is InterContinental Hotels Group PLC (IHG), with a global headquarters in the United Kingdom.  IHG, which owns some of the largest names in the hotel industry, which include Holiday Inn and Holiday Inn Express, Crowne Plaza, and more upscale hotels, such as Hotel Indigo.  They currently have just over 4,900 establishments, with more than 1,200 in the pipeline for expansion. (IHGPLC Website).

        Marriott International has determined that currently, its greatest potential for growth in the Middle East and Africa.  According to Business Excellence, “Economic forecasts may be mixed in the West, but Marriott International’s vision for its operations in the Middle East and Africa remains uncompromised.”  Marriott is fortunate, in that they have multiple brands, allowing them maintain a dominant growth position in the established industry, while targeting underdeveloped markets with their brands that have already been established. (Business Excellence).

According to the Houston Chronicle, “the functions of a research and development department are to engage in new product research and development, existing product updates, quality checks and innovation”. (Houston Chronicle – Small Business).  Research and Development, as specific to Marriott, has functions very closely related to that of the sales team, production department and other divisions, and requires collaboration. The department is crucial in locating new areas in which to expand, in order to remain competitive in their market, through research.

Marriott’s growth of business internationally, leaves them susceptible to business risks.  Internationally, there are region specific economic recessions.  In certain areas, such as much of Asia, where the economy is in an upturn, there is a potential for substantial profit increase.  However, areas of lower revenue, can likewise create reduced profits, and otherwise halt business.  Marriott expects that the total revenue of international business will increase in the future.  Also, Marriott is subject to declines and rapid recoveries from declines, as dictated by the global business cycle. Based on economic and market research “this recovery is due to an increase in personal income. Since decrease in personal disposable income brought forth the reduction in demand for hospitality and transportation industries, increasing incomes put upward pressure on demand for hotels and transport.”(Marriott SEC Filing – March 2010).   During recessions, orders for new establishments are halted, creating a reduction in the number of available rooms, even as the rate of global travel and overall hotel population increases. When there is a small increase in supply, this leads to higher demand and occupancy rate.  When the occupancy is higher, rates can be increased. The upward turn, results in higher prices, which in turn creates more profit for Marriott.