TALAL-BIN-TAMIM

[Link] BAIG
USMAN ALI ASHRAF
 History and Overview
INTRODUCTION:
Marriott International, Inc. is a worldwide operator and franchisor of a broad
portfolio of hotels and related lodging facilities. Founded by J. Willard Marriott, the company
is now led  b y s o n J . W . ( B i l l ) M a r r i o t t , J r . T o d a y , M a r r i o t t I n t e r n a t i o n a l h a s
a b o u t 3 , 1 5 0   l o d g i n g  properties located in the United States and 67 other countries and
territories.

History

Marriott was founded by J. Willard Marriott1927 when he and his wife opened a root
beer  stand in Washington D.C.
 
As a missionary in the sweltering, humid summers in Washington, Marriott was convinced that
what the city needed was a place to get a cool drink. They later expanded their enterprises into a
chain of restaurants and hotels. The Key Bridge Marriott in Arlington, Virginia is Marriott
International’s longest operating hotel, and will celebrate its 50th anniversary in 2009.
Their son and current Chairman and
Chief Executive Officer, J.W. (Bill) Marriott, Jr. has led the company to s
p e c t a c u l a r   worldwide growth. Today, Marriott International has about 3,150 lodging
properties located in the United States and 67 other countries and territories.

M a r r i o t t   I n t e r n a t i o n a l   w a s   f o r m e d   i n   1 9 9 2   w h e n Corporation split  i n t o   t w o
companies, Marriott International and Host Marriott Corporation. In 2002 Marriott
International began a major restructuring by spinning off many Senior  Living
Services Communities (which is now part of  Sunrise Senior Living) a n d
Marriott Distribution Services, s o t h a t i t c o u l d f o c u s   o n h o t e l   o w n e r s h i p a n d
m a n a g e m e n t . T h e changes were completed in [Link] International headquarters
in the Bethesda area o f   unincorporated Montgomery County, Maryland, United States I n
A p r i l 1 9 9 5 , M a r r i o t t I n t e r n a t i o n a l a c q u i r e d a 4 9 % i n t e r e s t i n t h e Ritz-
Carlton Hotel Company LLC. Marriott International believed that it could increase sales and
profit margins at the Ritz, a troubled chain with a significant number of properties
either losing money or barely breaking even. The cost of Marriott's initial
investment was estimated to be about$200 million in cash and assumed debt. The
next year, Marriott spent $331 million to take over the Ritz-Carlton Atlanta and buy a
majority interest in two properties owned by William Johnson, a real estate developer who
had purchased the Boston Ritz Carlton i n 1 9 8 3 a n d expanded his Ritz holdings over the
next twenty years.
The Ritz began expansion into the lucrative timeshare market among other new
initiatives made financially possible by the deep pockets of Marriott, which also lent its own
in-house e x p e r t i s e i n c e r t a i n a r e a s . T h e r e w e r e o t h e r b e n e f i t s f o r R i t z -
C a r l t o n f l o w i n g f r o m i t s relationship with Marriott, such as being able to take
advantage of the parent company’s reservation system and buying power. The partnership
was solidified in 1998 when Marriott boosted its interest in Ritz-Carlton to 99 percent.
By 1999 revenues from the 35 hotels it operated around the world totaled about $1.4
[Link] International ownedR a m a d a   I n t e r n a t i o n a l   H o t e l s   &   R e s o r t s u n t i
l i t s s a l e o n September 15, 2004 to Cendant. It is the first hotel chain to serve food that is
completely free of  transfats at all of its North American properties. In 2005, Marriott
International and Marriott Vacation Club International comprised two of  t h e 5 3
entities that contributed the maximum of $250,000 to the second
i n a u g u r a t i o n o f   President George W. Bush. On July 19, 2006, Marriott announced
that all lodging buildings they operate in the United States and Canada would become
non-smoking beginning September 2006. "The new policy includes all guest rooms,
restaurants, lounges, meeting rooms, public space and employee work areas."

Vision and mission statement

Vision:
To become the leading provider and facilitator of the luxury, leisure and business experiences
across the globe.

Mission:
“To create an environment conducive and helpful to both our employees and
customers, thereby encouraging our employees to work at their maximum capacity in being of
service to our customers whilst providing our customers with Good Food & Good
Service at a Fair Price”

Propose vision statement:

For more than 76 years, Marriott has earned a reputation for delivering the best service with the
best people. That’s an imperative that never changes, and a strategy that has served well in good
times and bad. Marriott international is an industry leader because they never get satisfied,
they’re always looking for ways to improve, and strive tirelessly for excellence. They proudly
serve guests in nearly 70 countries, with a lodging portfolio that includes more than 2,700 hotels,
resorts and timeshare properties, as well as corporate housing apartments, across 18 distinctive
brands.
Proposed Mission statement:
Marriott international tries to maintain its loyal customer base and attract new customers in both
domestic and international markets with its commitment to provide best quality services.
Marriott international will lead the industry through commitment to innovation, service, growth,
and quality. Its franchise system ensures profitability for retailers, shareholders
and franchisees while providing convenient access for customers. Marriott international desires
to instill the belief that the company is a set of capabilities with high morale employees working
in best conditions provided by Marriott. Marriott delivers superior profitability to their owners
and franchisees. Marriott associates are the best in the business they do their best to serve their
customers with skills, enthusiasm and work hard to guarantee the success.
 External Audit
Opportunities:
1) Environmentally and family orientation

2) Decrease cost of real estate in U.S: there is gradually decrease in the cost of the real estate in
America due to the recession.

3) Eco-tourism: Now days the trend of eco-tourism is developing so there’s been an opportunity
for the Marriott international to provide the nature friendly environment to their customers.

4) Emerging Asian travel and tourism markets: Now days there has been high increase in the
Asian tourism and travel market that provides the opportunity for Marriott to spread its business
in Asia.

5) Improving hospitality market in U.S: North America the single largest market of Marriott
showing signs of normalcy after recessionary turbulence. The lodging industry which derives its
growth from economic climate is also recovering fast from the recessionary blues.

6) Rising income: Owing to the rise in income levels, people have more spare money to spend,
which is expected to enhance leisure tourism

7) Economic growth: it is noted that there has been economic growth of about 2.9% per year so
it’s an opportunity for the Marriott to increase its business worldwide.

8) Population growth: there has been population growth of 310 million which allows Marriott to
extend its business.

9) Franchising: there is opportunity for the Marriott to increase its franchises in the different
countries around the globe.

10) Emerging markets: in order to offset the negative impact of such a challenging business
environment and to capitalize on the opportunities present in emerging markets a number of
hotels have turned to them. Marriott international is no different and Asia- Pacific countries
became key target markets.

Threats

1) Vulnerability to terrorists attacks raise security and safety concerns: The tourism industry is
affected by threats from terrorists attack after Sep 11, 2001. Marriott a symbol of luxury and
power has been a prime target of terrorist’s attacks.
2) Timeshare business vulnerable in a dismal capital and credit market: The timeshare business
segment of the company is still facing the heat of troubled financial and credit markets. The
company, under this segment, markets and sells residential properties; finances consumer
purchases; and operates resorts.

3) Fragmented and intensely competitive lodging industry: The Company faces a strong

competition both as a lodging operator and as a franchisor. The US lodging market is highly
crowded with several key players like Accor, Hilton Hotels, Starwood and Intercontinental Hotel
Group and others, have a strong established base in US.

4) Labor issues: Some of the company’s union contracts in New York, Chicago, Boston, and
many other major cities are set near to expire. The hotel union is threatening a strike in all of
these cities simultaneously.

5) Rising interest rates: The US has seen 17 successive interest rate hikes over the past few years
leading to the current high of 5.25%. Inflation fears in US may see another raise in the short-
term. This could affect the company’s growth plans by increasing the financing costs.

6) High labor cost in America: there is high labor cost in America which is the most largest
market for the Marriott International.

7) Economic recession: recession hits worldwide which affects the hotel industry highly and due
to this the consumer spending get decrease.

8) Political instability: there is political instability in various countries which can appear as a
threat to Marriott international and affects its business.
.
9) Increase of real estate in Asia: there has been high increase of real estate prices in Asia so it
can affect the Marriott international to generate revenues from Asia region.

10) Economy brand development: The rapid growth achieved by economy hotel brands in the
last three years posses a potential threat for mid-scale, limited service brands such as Springhill
suits.

Internal Audit
Strengths

1) Large expanse of brands: Marriott international have large expanse of brands which includes;
the Ritz-Carlton, JW Marriott, Bulgari hotels and resorts, Edition, Autograph collection, AC
hotels, Marriott hotels and resorts, Renaissance hotels, Courtyard by Marriott etc.

2) Geographic presence: Marriott is one of the key players in lodging and hospitality industry
with operations spanning 68countries around the globe. Although the US is single largest market
of the Marriott, yet 43% of the earnings before interest and tax is contributed by the company’s
international operations.

3) Global leader in the hotel market: Marriott international is the leader in the global hotels
market with a near 5% value share in 2007 and a large geographic presence.

4) Excellent strategies to attract and retain the customers: Marriott international have the
excellent strategies to attract the customers and retain the customers through price, quality,
satisfaction etc.

5) Eco-friendly: Marriott international is adopting the trend of eco friendly tourism to prevent the
nature and the environment.

6) High revenue and growth rate: Marriott international generates the high revenue between
2004-2006 from $10.1 billion to $12.16 billion and enjoy the high growth rate.

7) IT solutions: Marriott international is upgrading its properties with technology that responds
to the needs of business and leisure travelers. In the latter part of the review period for example it
has transformed its public areas to encourage guests to work and socialize through the adoption
of the latest design, technology, food and beverage offerings.

8) Franchising: Marriott international have large no of franchisees over 60 countries which

facilitate the rapid expansion of its portfolio.

9) Strong presence in all the segments: The Company has presence in all the segments: luxury,
upper moderate, moderate and lower moderate price segments.

10) Higher brand recognition and recall makes the company priority choice for clients: Marriott
is one of the leading hotel and leisure companies known for its strong brand portfolio in all the
major segments and market. The company operates in most major markets and segments around the world
through its luxury brands.

Weaknesses:
1) Focus on US instead of international establishments (over reliance on US market): Marriott
international mainly focus on the US as North America is its main market for the business.
Marriott international remains heavily reliant on the US making sensitive to the changing
fortunes of its domestic market.

2) Over dependence on luxury brands: Marriott international primarily focus on the luxury
products but there is large population which cannot afford the luxuries.

3) Terrorism threats: Marriott international is being targeted by the terrorists and the extremists.
4) Lack of low cost lifestyle brand: Marriott international does not have a low cost lifestyle brand
product portfolio like aloft from Starwood and hotel indigo from IHG.

5) Courtyard brand: the courtyard brand of the Marriott international is maturing and losing its
core business customers.

6) Business model which has the potential to dilute the brand perception and limit the revenue
growth: Marriott follows the business model wherein it emphasizes on managing and franchising
hotels, rather than owning them. The company operated 46% of its hotel rooms under
management agreements, 52% under franchise agreements, and only 2 % were owned or leased
as of December, 2009. But, as compared to this, only 33.6% of the revenue in FY2009 were
earned through franchise and management agreements while 66.4% from owned or timeshare
sales and service.

7) High leverage combined with downgrade in rating will affect the future capital generation and
expansion projects: The Company has substantial debt to equity ratio. The ratio increased from
0.7 in 2006 to 2.24 in2008 and stood at 2.01 in 2009. In percentage terms, the company’s long
term debt to equity ratio stood at 291.96% as against the industry standard of 56.07%.

8) Weak financial performance affecting the company’s expansion plans: Marriott registered

weak financial performance in the FY2009 due to the slowdown in the economy and the lodging
industry. The company’s revenues declined by almost 15.3% in 2009 compared to the previous
fiscal.

9) Operating income decrease: Marriott international faces the loss of $76 million in 2006 due to
high oil prices.

10) Low gross margins: Marriott international have low gross margin of 13.6% where as Hilton
has 30%.
SWOT MATRIX:
STRENGHTS: WEAKNESS:
1. Large expanse of brands: 1. Focus on US instead
Marriott international have of international
large expanse of brands establishments (over
which includes; the Ritz- reliance on US market).
Carlton, JW Marriott etc. 2. Over dependence on
2. Geographic presence: luxury brands: Marriott
Marriott is one of the key international primarily
players in lodging and focus on the luxury
hospitality industry with products but there is
operations spanning large population which
68countries around the globe. cannot afford the
3. Global leader in the hotel luxuries.
market: Marriott international 3. Terrorism threats:
is the leader in the global Marriott international is
hotels market with a near 5% being targeted by the
value share in 2007 and a terrorists and the
large geographic presence. extremists.
4. Excellent strategies to 4. Lack of low cost
attract and retain the lifestyle brand: Marriott
customers: Marriott international does not
international have the have a low cost lifestyle
excellent strategies to attract brand product portfolio.
the customers and retain the 5. Courtyard brand: the
customers through price, courtyard brand of the
quality, satisfaction etc. Marriott international is
5. Eco-friendly: Marriott maturing and losing its
international is adopting the core business
trend of eco friendly tourism customers.
to prevent the nature and the 6. Business model
environment. which has the potential
6. High revenue and growth to dilute the brand
rate: Marriott international perception and limit the
generates the high revenue revenue growth.
between 2004-2006 from 7. High leverage
$10.1 billion to $12.16 combined with
billion and enjoy the high downgrade in rating will
growth rate. affect the future
7. IT solutions: Marriott capital generation and
international is upgrading its expansion projects.
properties with technology 8. Weak financial
that responds to the needs of performance affecting
 business and leisure the company’s expansion
travelers. plans.
8. Franchising: Marriott 9. Operating income
international have large no of decrease: Marriott
franchisees over 60 countries international faces the
which facilitate the rapid loss of $76 million in 2006
expansion of its portfolio. due to high oil prices.
9. Strong presence in all the 10. Low gross margins:
segments: The Company Marriott international have
has presence in all the low gross margin of 13.6%
segments: luxury, upper where as Hilton has 30%.
moderate, moderate and
lower moderate price
segments.
10. Higher brand
recognition and recall
makes the company priority
choice for clients.
OPPORTUNITIES: SO Strategies: WO Strategies:
1. Environmentally and SO1. Apply eco-friendly WO1. Expand in Asia as
family orientation: efforts and eco-tourism the travel and tourism
2. Decrease cost of real across the chain to promote industry of Asia is
estate in U.S: there is the nature as well open the increasing and that can be
gradually decrease in the hotels at the areas around the profitable market for the
cost of the real estate in world which provides the eco- Marriott
America due to the tourism and strategically build international(W1,O4)
recession. the hotels/resorts that would W02. Make the joint
3. Eco-tourism: Now days most preserve the ventures with the locals in
the trend of eco-tourism is environment (S5,O1,O3,) the countries where is risk
developing. SO2. Acquire or establish and threats from the
4. Emerging Asian travel hotels in Asia as there is high terrorists and use the
and tourism markets. increase in the travel and locals
5. Improving hospitality tourism market of name(W3,W1,O4,O8)
market in U.S. Asia(S2,O4) WO3. Build the low cost
6. Rising income: Owing SO3. Allow the investors from hotels in US as it is the
to the rise in income other countries to open the large market for the
levels, people have Marriott international Marriott international and
more spare money to franchises to their provide the benefit to the
spend, which is countries(S8,S2,S3,O9) medium and low level
expected to enhance customers(W4,W2,O2.O5)
leisure tourism.
7. Economic growth: it
is noted that there has
been economic growth
of about 2.9% per year
so it’s an opportunity for
the Marriott to increase
its business worldwide.
8. Population growth:
there has been population
growth of 310 million
which allows Marriott to
extend its business.
9. Franchising: there is
opportunity for the Marriott
to increase its franchises
in the different countries
around the globe.
10. Emerging markets
THREATS: ST Strategies: WT Strategies:
1. Vulnerability to ST1. Hire, train and support WT1. Make joint ventures
terrorists attacks raise the localities where Marriott with the locals in the other
security and safety operate to win the heart and countries where is risk
concerns. mind of the locals(T1,S4) and threats from the
2. Timeshare business terrorists(T1,W3)
vulnerable in a dismal ST2. Provide financial support
capital and credit to the franchisees in the Asia WT2. Use relationship
market. to start or support the with employees in order to
3. Fragmented and operations(S8,S3,S13,T9) temporarily reduce
intensely competitive salaries to be more
lodging industry. competitive(W8,T4,T6)
4. Labor issues: Some
of the company’s union WT3. Focus on the other
contracts in New York, countries for the
Chicago, Boston, and expansion of business
many other major cities and also make low cost
are set near to expire. hotels in other
The hotel union is countries(W1.T4,T5)
threatening a strike in all
of these cities
simultaneously.
5. Rising interest rates:
The US has seen 17
successive interest rate
hikes over the past few
years leading to the
current high of 5.25%.
Inflation fears in US may
see another raise in the
short-term.
6. High labor cost in
America.
7. Economic recession:
recession hits worldwide
which affects the hotel
industry.
8. Political instability: there
is political instability in
various countries.
9. Increase of real estate
in Asia.
10. Economy brand
development: The rapid
growth achieved by
economy hotel brands in
the last three years
posses a potential threat
for mid-scale, limited
service brands such as
Springhill suits.
External Factor Evaluation Matrix (E.F.E):
Key external factors Weight Rating Weighted
score
Opportunities
1. Environmentally and family orientation 0.03 3 0.09
2. Decrease cost of real estate in U.S: there is gradually 0.05 4 0.2
decrease in the cost of the real estate in America due to the
recession.
3. Eco-tourism: Now days the trend of eco-tourism is 0.02 3 0.06
developing.

4. Emerging Asian travel and tourism markets 0.06 4 0.24

5. Improving hospitality market in U.S: North America the 0.04 3 0.12
single largest market of Marriott showing signs of normalcy
after recessionary turbulence. The lodging industry which
derives its growth from economic climate is also recovering
fast from the recessionary blues.
6. Rising income: Owing to the rise in income levels, 0.05 3 0.15
people have more spare money to spend, which is expected
to enhance leisure tourism.
7. Economic growth: it is noted that there has been economic 0.07 3 0.21
growth of about 2.9% per year so it’s an opportunity for the
Marriott to increase its business worldwide.
8. Population growth: there has been population growth of 0.045 3 0.135
310 million which allows Marriott to extend its business.
9. Franchising: there is opportunity for the Marriott to 0.035 4 0.14
increase its franchises in the different countries around the
globe.
10. Emerging markets: in order to offset the negative impact 0.05 3 0.15
of such a challenging business environment and to capitalize
on the opportunities present in emerging markets a number of
hotels have turned to them. Marriott international is no
different and Asia- Pacific countries became key target
markets.
Threats
1. Vulnerability to terrorists attacks raise security and safety 0.05 3 0.15
concerns.
2. Timeshare business vulnerable in a dismal capital and 0.05 2 0.10
credit market
 3. Fragmented and intensely competitive lodging industry. 0.09 4 0.36
4. Labor issues: Some of the company’s union contracts in 0.05 3 0.15
New York, Chicago, Boston, and many other major cities are
set near to expire.
5. Rising interest rates: The US has seen 17 successive 0.04 4 0.16
interest rate hikes over the past few years leading to the
current high of 5.25%. Inflation fears in US may see another
raise in the short-term.
6. High labor cost in America. 0.07 3 0.21
7. Economic recession: recession hits worldwide which 0.08 3 0.24
affects the hotel industry.
8. Political instability: there is political instability in various 0.04 2 0.08
countries.
9. Increase of real estate in Asia. 0.05 3 0.15
10. Economy brand development: The rapid growth achieved 0.03 2 0.06
by economy hotel brands in the last three years.
Total Weighted Score 1.00 3.155

(Note: Assign a rating between 1 and 4 to each key external factor to indicate how effectively
the firm’s current strategies respond to the factor, where 4= the response is superior, 3= the
response is above average, 2= the response is average and 1= the response is poor and the weigh
shows the relative importance of the factor to being successful in the industry (0.0) indicates that
certain opportunity or the strength is not important and higher the weight goes the more
important the opportunity or the threat is.

Analysis:
The total weighted score for Marriott international is 3.155, which is much above the average
(2.50) this shows that Marriott international is doing extremely well by taking advantage of
external opportunities and avoiding threats; however there is a definite room for improvement in
some opportunities.
Internal Factor Evaluation: IFE MATRIX
Key internal factors Weight Rating Weighted
Score
Strengths
1. Large expanse of brands: Marriott international have 0.10 4 0.40
large expanse of brands which includes; the Ritz-Carlton,
JW Marriott etc.
2. Geographic presence: Marriott is one of the key players 0.10 4 0.40
in lodging and hospitality industry with operations
spanning 68countries around the globe
3. Global leader in the hotel market: Marriott international 0.10 4 0.40
is the leader in the global hotels market with a near 5%
value share in 2007 and a large geographic presence.
4. Excellent strategies to attract and retain the customers: 0.05 4 0.20
Marriott international have the excellent strategies to attract
the customers and retain the customers through price,
quality, satisfaction etc.
5. Eco-friendly: Marriott international is adopting the trend 0.04 3 0.12
of eco friendly tourism to prevent the nature and the
environment.
6. High revenue and growth rate: Marriott 0.05 4 0.20
international generates the high revenue between 2004-
2006 from $10.1 billion to $12.16 billion and enjoy the
high growth rate.
7. IT solutions: Marriott international is upgrading its 0.02 3 0.06
properties with technology that responds to the needs of
business and leisure travelers.
8. Franchising: Marriott international have large no of 0.04 4 0.16
franchisees over 60 countries which facilitate the rapid
expansion of its portfolio.
9. Strong presence in all the segments: The Company 0.10 3 0.30
has presence in all the segments: luxury, upper
moderate, moderate and lower moderate price
segments.
10. Higher brand recognition and recall makes the 0.07 4 0.28
company priority choice for clients: Marriott is one of
the leading hotel and leisure companies known for its
strong brand portfolio in all the major segments and
market.
Weaknesses
1. Focus on US instead of international establishments 0.04 1 0.04
(over reliance on US market): Marriott international
mainly focus on the US as North America is its main
market for the business. Marriott international remains
heavily reliant on the US making sensitive to the
 changing fortunes of its domestic market.
2. Over dependence on luxury brands: Marriott 0.04 2 0.08
international primarily focus on the luxury products
but there is large population which cannot afford the
luxuries.
3. Terrorism threats: Marriott international is being 0.04 1 0.04
targeted by the terrorists and the extremists.
4. Lack of low cost lifestyle brand: Marriott 0.03 2 0.06
international does not have a low cost lifestyle brand
product portfolio like aloft from Starwood and hotel
indigo from IHG.
5. Courtyard brand: the courtyard brand of the 0.02 2 0.04
Marriott international is maturing and losing its core
business customers.
6. Business model which has the potential to dilute 0.02 2 0.04
the brand perception and limit the revenue growth:
Marriott follows the business model wherein
it emphasizes on managing and franchising hotels,
rather than owning them.
7. High leverage combined with downgrade in 0.03 2 0.06
rating will affect the future capital generation and
expansion projects: The Company has substantial debt
to equity ratio. The ratio increased from 0.7 in 2006 to
2.24 in2008 and stood at 2.01 in 2009.
8. Weak financial performance affecting the company’s 0.02 2 0.04
expansion plans: Marriott registered weak financial
performance in the FY2009 due to the slowdown in the
economy and the lodging industry. The company’s
revenues declined by almost 15.3% in 2009 compared to
the previous fiscal.
9. Operating income decrease: Marriott international faces 0.04 1 0.04
the loss of $76 million in 2006 due to high oil prices.
10. Low gross margins: Marriott international have low 0.05 1 0.05
gross margin of 13.6% where as Hilton has 30%.
Total weighted score 1.00 3.01

(Note: We assign a 1-4 rating to each factor to indicate weather; that factor represents a major
weakness (rating=1), a minor weakness (rating=2), a minor strength (rating=3), or a major
strength (rating=4) and the weight assigns represents whether the importance of the factor to
survive in the industry from (0.00) represents not important and higher the weight goes the
important the factor become.

Analysis:
The total weighted score for Marriott international is 3.01 which is high. This shows that Marriott is doing
very god and its internal position is strong but there is definitely rooms for improvements like tighten the
security of its hotels as there is threat to Marriott and also expand its business internationally rather than
focus only on US.

Competitive profile matrix

Marriott Hilton hotels Accor
international
Critical success Weight Rating score Rating Score Rating Score
factor
Advertisement 0.09 1 0.09 1 0.09 1 0.09
Financial position 0.17 4 0.68 4 0.68 3 0.51
Global expansion 0.13 4 0.52 4 0.52 2 0.26
Market share 0.17 4 0.68 3 0.51 3 0.68
Management 0.13 2 0.52 4 0.52 4 0.26
Product quality 0.13 4 0.52 4 0.52 2 0.52
Customer service 0.09 4 0.36 4 0.36 4 0.36
Price competitive 0.09 1 0.09 2 0.09 3 0.09
Total 1.00 3.46 3.29 2.77

(Note: the ratings values are as follows; 1= major weakness, 2=minor weakness, 3= minor
strength and 4= major strength and the weight assigned represents how much important the
factor are to being successful in the industry)

Analysis:

The two most important factors to being successful in the industry are financial position and
market share as indicated by the weight assigned are 0.17. Marriott international is fully utilizing
its financial position, market share, global expansion, and product quality and customer service
but there is a definite room for the improvement in advertising, management and price
competitive as they are not fully utilized compared to the competitors. However Marriott
international is doing much well than its competitors as its score is much higher than the
competitors.
Financial Ratios:
2006 2005
Liquidity Current asset 3314 M 3390 M
ratios
Current liability 2522 M 2133 M
Current ratio 1.31 1.59
Current assets 3314 M 3390 M
Inventory 1208 M 1164 M
Current liability 2522 M 2133 M
Quick ratio 0.835 1.043
Leverage Debt 5970 M 5278 M
ratios
Total assets 8588 M 8530 M
Debt to Total Assets 0.6951 0.6187
Debt 5970 M 5278 M
Equity 2618 M 3252 M
Debt to Total Equity 2.280 1.623
Long term debt 1818 M 1681 M
Equity 2618 M 3252 M
Long term debt to 0.694 0.516
equity
EBIT 997 M 717 M
Interest expense 124 M 106 M
Times interest earned 8.04 6.764
Activity ratios COGS 11149 M 10995 M
Inventory 1208 M 1164 M
Inventory turnover 9.229 9.445
Sales 12160 M 11550 M
Fixed assets 1238 M 1134 M
Fixed assets turnover 9.822 10.185
Sales 12160 M 11550 M
Total Assets 8588 M 8530 M
Total Asset Turnover 1.41592 1.35404
Sales 12160 M 11550 M
A/R 1117 M 1001 M
A/R turnover 10.8863 11.5384
A/R 1117 M 1001 M
 Sales/365 33.315 M 31.643 M
Average collection 34 32
period
Profitability Sales 12160 M 11550 M
ratios
COGS 11149 M 10995 M
Gross profit 1.091 1.051
EBIT 997 M 717 M
Sales 12160 M 11550 M
Operating profit 0.0819 0.0620
margin
Net income 608 M 669 M
Sales 12160 M 11550 M
Net Profit Margin 0.05 0.057
Net Income 608 M 669 M
Total Assets 8588 M 8530 M
ROA 0.070 0.078
Net income 608 M 669 M
Equity 2618 M 3251 M
ROE 0.232 0.205
Net Income 608 M 669 M
No. of shares common 5M 5M
stock outstanding
EPS $121.6 $133.8
Diluted EPS $ 1.41 $ 1.45
Basic EPS $ 1.50 $1.55
Market price 38.13 32.12
EPS 1.50 1.55

price to earnings 25.42 20.72

Analysis of important ratios:
Current ratio:
Current ratio gets decreased with respect to the last year due to the increase in the liability but the
ratio is above than 1 which shows that the current assets are enough to meet the short term
liabilities.
Inventory turnover:
Inventory turnover shows how quickly the inventory is converted into cost of goods sold and
then back into inventory. The inventory turnover ratio of Marriott international decreased
slightly in 2006 as compared to the previous year.
Return on assets:
The return on assets shows the after tax profits per dollar of assets. ROA of Marriott
international in 2006 is 0.070 which is slightly low than the previous year.
Return on equity:
Return on equity shows the after tax profits per dollar of stockholders investment. And in this
case the ratio gets improved as compared to the previous year. In 2006 it is 0.232.
Earnings per share: The basic EPS of Marriott in 2006 is $1.50 and diluted is $1.41.
SPACE Matrix:
Ratings
Financial strengths
1. Return on investment +5
2. Revenue +6
3. Sales growth +5
+6
4. Cash flow

Industry strengths
1. Technological know-how +4
2. Growth potential +5
3. Productivity +6
4. Financial stability +4
Environmental stability
1. Risk involved in business -4
2. Competitive pressure -2
3. Rate of inflation -2
4. Technological changes -3
Competitive advantage
1. Product diversity -1
2. Market share -1
3. Product quality -1
4. Customer loyalty -2

Conclusion:

FS average = 5+6+5+6 = 22/4 = 5.5

IS average = 4+5+6 +4 = 19/4= 4.75

ES average = -4-2-2-3 = -11/4= -2.75

CA average = -1-1-1-2 =-5/4 =-1.25

Directional vector coordinates:

X-axis: CA + IS = -1.25+ 4.75 = 3.5

Y-axis: FS + ES= 5.5– 2.75= 2.75

Strategy Profile:
FS

2 (3.5, 2.75)
1

CA -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 IS

-1

-2

-3

-4

-5

-6

ES

Aggressive:
 Backward, forward and horizontal integration.
 Market penetration
 Market development
 Product development
 Diversification

(Note: We assign a numerical value ranging from +1(worst) to =6 (best to each of the variable s
that make up the FS and IS dimensions. Also we assign a numerical value ranging from -1(best)
to -6(worst) to each of the variables that make up the ES and CA dimensions.)
Boston Consulting Group (BCG) Matrix:

Relative market share

High Low

Stars

High

QUESTION MARKS

Market
Growth
Cash Cows DOGS

Low

Analysis:

The hotel industry is very fragmented and no one got the market share more than 20%.Marriott
international has high market share in the industry of 9% as Marriott got the market cap of
$16.97 Billion in 2006 which is highest in the industry, however the growth of industry is also
high approx 7%, so Marriott international fall in the 2nd quadrant which is star and its follows
backward, forward or horizontal integration, market penetration, market development, product
development.
 Internal-External Analysis

Internal factor analysis

Strong 3.0 to 4.0 average 2.0 to 2.99 weak 1.0 to 1.99

High II III
3.0 to
4.0 I

External
Factor Averag IV V VI
e 2.0 to
Analysis 2.99

low 1.0 VII VIII IX

to 1.99

Internal External matrix:

Analysis:

IFE score is mention on x axis and EFE score is mention on y axis. IFE score is 3.155 and EFE
score is 3.01, so Marriott international fall on 1st quadrant which shows that Marriott
international should follow backward, forward or horizontal integration, market penetration,
market development, product development strategies.
Grand Strategy matrix:
Grand Strategy Matrix Analysis

Rapid Market Growth

Quadrant II Quadrant I
 Market development  Market development
 Market penetration  Market penetration
 Product development  Product development
 Horizontal integration  Forward integration
 Divestiture  Backward integration
 Liquidation  Horizontal integration
Weak  Related diversification Strong
Competitive Competitive
Position Position

Quadrant III Quadrant IV

 Retrenchment  Related diversification
 Related diversification  Conglomerate
 Unrelated diversification  diversification
 Divestiture  Joint Ventures
 Liquidation

Slow Market Growth

Analysis:

The competitive position of Marriott international is strong and the industry has rapid market
growth (about 7%, search from internet and the reference is mentioned in appendix) so Marriott
international falls in 1st quadrant and which tell that Marriott international is in an excellent
strategic position and should continued its strategy on market penetration, market development,
product development as they seems appropriate strategies. As Marriott international have
excessive resources they should also consider on backward, forward or horizontal integration and
it can also take advantage of external opportunities to in several areas.
Quantitative Strategic Planning Matrix (QSPM):
AS = Attractiveness Score; TAS = Total Attractiveness Score

Strategic Alternative
Launch new low cost Open new
brand worldwide to cater franchises or
the low or medium hotels in Asia,
income level Middle
population(product East(Market
development) development)
Key factors Weight AS TAS AS TAS
Opportunities
1. Environmentally and family 0.03 1 0.03 2 0.06
orientation.
2. Decrease cost of real estate in 0.05 3 0.15 1 0.05
U.S: there is gradually decrease in
the cost of the real estate in America
due to the recession.
3. Eco-tourism: Now days the trend 0.02 - -
of eco-tourism is developing.
4. Emerging Asian travel and 0.06 2 0.12 4 0.24
tourism markets
5. Improving hospitality market in 0.04 3 0.12 1 0.04
U.S: North America the single
largest market of Marriott showing
signs of normalcy after recessionary
turbulence.
6. Rising income: Owing to the 0.05 2 0.10 4 0.20
rise in income levels, people have
more spare money to spend,
which is expected to enhance
leisure tourism.
7. Economic growth: it is noted that 0.07 2 0.14 3 0.21
there has been economic growth of
about 2.9% per year so it’s an
opportunity for the Marriott to
increase its business worldwide.
8. Population growth: there has 0.045 3 0.135 4 0.18
been population growth of 310
million which allows Marriott to
extend its business.
9. Franchising: there is opportunity 0.035 2 0.07 4 0.14
for the Marriott to increase its
franchises in the different countries
around the globe.
10. Emerging markets: in order to 0.05 1 0.05 2 0.10
offset the negative impact of such a
challenging business environment
and to capitalize on the
opportunities present in emerging
markets a number of hotels have
turned to them.
Threats
1. Vulnerability to terrorists attacks 0.05 2 0.10 4 0.20
raise security and safety concerns.
2. Timeshare business vulnerable 0.05 - - - -
in a dismal capital and credit
market
3. Fragmented and 0.09 2 0.18 3 0.27
intensely competitive lodging
industry.
4. Labor issues: Some of the 0.05 - - - -
company’s union contracts in New
York, Chicago, Boston, and many
other major cities are set near to
expire.
5. Rising interest rates: The US has 0.04 - - - -
seen 17 successive interest rate
hikes over the past few years
leading to the current high of
5.25%. Inflation fears in US may
see another raise in the short-term.
6. High labor cost in America 0.07 _ _ _ _
7. Economic recession: recession 0.08 3 0.24 4 0.32
hits worldwide which affects the
hotel industry.
8. Political instability: there is 0.04 - - - -
political instability in various
countries.
9. Increase of real estate in Asia. 0.05 2 0.10 4 0.20
10. Economy brand development: 0.03 - - - -
The rapid growth achieved by
economy hotel brands in the last
three years.
1
Strengths
1. Large expanse of brands: 0.10 4 0.40 2 0.10
Marriott international have large
expanse of brands which includes;
the Ritz-Carlton, JW Marriott etc.
2. Geographic presence: Marriott is 0.10 2 0.20 4 0.40
one of the key players in lodging
and hospitality industry with
operations spanning 68countries
around the globe
3. Global leader in the hotel market: 0.10 - - - -
Marriott international is the leader
in the global hotels market with a
near 5% value share in 2007 and a
large geographic presence.
4. Excellent strategies to attract and 0.05 - - - -
retain the customers: Marriott
international have the excellent
strategies to attract the customers
and retain the customers through
price, quality, satisfaction etc.
5. Eco-friendly: Marriott 0.04 - - - -
international is adopting the trend of
eco friendly tourism to prevent the
nature and the environment.
6. High revenue and growth rate: 0.05 3 0.15 4 0.20
Marriott international generates
the high revenue between 2004-
2006 from $10.1 billion to $12.16
billion and enjoy the high growth
rate
7. IT solutions: Marriott 0.02 - - - -
international is upgrading its
properties with technology that
responds to the needs of business
and leisure travelers.
8. Franchising: Marriott 0.04 1 0.04 3 0.12
international have large no of
franchisees over 60 countries which
facilitate the rapid expansion of its
portfolio.
9. Strong presence in all the 0.10 _ _ _ _
segments: The Company has
presence in all the segments:
luxury, upper moderate,
moderate and lower moderate
price segments.
10. Higher brand recognition and 0.07 - - - -
recall makes the company
priority choice for clients:
Marriott is one of the leading
hotel and leisure companies
known for its strong brand
portfolio in all the major segments
and market.
Weaknesses
1. Focus on US instead of 0.04 3 0.12 4 0.16
international establishments (over
reliance on US market)
2. Over dependence on luxury 0.04 4 0.16 1 0.04
brands: Marriott international
primarily focus on the luxury
products but there is large
population which cannot afford
the luxuries.
3. Terrorism threats: Marriott 0.04 1 0.04 3 0.12
international is being targeted by
the terrorists and the extremists.
4. Lack of low cost lifestyle brand: 0.03 4 0.09 1 0.03
Marriott international does not
have a low cost lifestyle brand
product portfolio like aloft from
Starwood and hotel indigo from
IHG.
5. Courtyard brand: the 0.02 - - - -
courtyard brand of the Marriott
international is maturing and
losing its core business customers.
6. Business model which has the 0.02 - - - -
potential to dilute the brand
perception and limit the revenue
growth.
7. High leverage combined with 0.03 _ _ _ _
downgrade in rating will affect
the future capital generation and
expansion projects: The Company
has substantial debt to equity
ratio. The ratio increased from
0.7 in 2006 to 2.24 in2008 and
stood at 2.01 in 2009.
8. Weak financial performance 0.02 3 0.06 4 0.08
affecting the company’s expansion
plans: Marriott registered weak
 financial performance in the
FY2009 due to the slowdown in the
economy and the lodging industry.
The company’s revenues declined
by almost 15.3% in 2009 compared
to the previous fiscal.
9. Operating income decrease: 0.04 - - -
Marriott international faces the loss
of $76 million in 2006 due to high
oil prices.
10. Low gross margins: Marriott 0.05 - - -
international have low gross margin
of 13.6% where as Hilton has 30%.
1
Total 2.795 3.46

(The range for attractiveness Scores is 1= not attractive, 2= somewhat attractive, 3= reasonably
attractive and 4= highly attractive.)

Analysis:

Two alternative strategies selected in QSPM are:

1. Launch new low cost brand worldwide to cater the low or medium income level
population (product development).
2. Open new franchises or hotels in Asia, Middle East (Market development)

As the Total Attractiveness Score of second strategy “Open new franchises or hotels in Asia,
Middle East (Market development)” so select this strategy.
Recommendations:

 Marriott international mainly focus on the US as North America is its main market for the
business so instead of focusing mainly on US it should also focus on the other countries
as they have great potential also.
 Marriott international primarily focus on the luxury products but there is large population
which cannot afford the luxuries so it should introduce a low cost brand to cater the low
and middle level income population.
 Marriott international is being targeted by the terrorists and the extremist so they have to
tighten the security of their hotels in order to provide the safe environment to its
customers,
 Marriot international should have to focus on the improvement of its courtyard brand as it
is maturing and losing its core business customers.
 Marriot international should have to follow the business model which emphasizes on
managing and franchising hotels, rather than owning them. The company operated 46%
of its hotel rooms under management agreements, 52% under franchise agreements, and
only 2 % were owned or leased as of December, 2009. But, as compared to this, only
33.6% of the revenue in FY2009 were earned through franchise and management
agreements while 66.4% from owned or timeshare sales and service.
 Marriott international should make joint ventures in other high risk countries and use the
local’s name.
 Marriott international needs to pursue market development in Asia with new brands that
extend its new World.
 Marriott international should see to restructuring to reduce cost and increase efficiency.
 Marriott international should slowly depart from time-share hotels as its not performing
well and going in losses.
 Marriott international should hire, train and support the localities where it operates in to
win the hearts and minds to increase its international and local customers.
 Marriott international should use relationship with its employees to temporarily reduce
salary to be more competitive.
 Marriott international should focus on the eco-tourism and apply eco-friendly efforts as it
became the rising trend.
References:
 Case study from book, Strategic Management 12th edition by Fred R. David
 [Link]
expecting-robust-growth-in-2011-and-2012/
 [Link]
in-US-BDRC