Executive Summary
Marriott International Inc. is a global leading hotelier established in 1927 by J. Willard Marriot and his wife, Alice Sheets Marriot. The company deals with operating hotel, residential, and timeshare properties. The company opened its first hotel in 1957 in Twin Bridges Marriott Motor Hotel in Arlington before expanding to other parts of the United States. Marriott International Inc. began its operations as a root beer stand and has, over time, grown to be a leading operator of global hotel chains, with approximately 30 brands spread across 130 countries worldwide. Among the popular brands of Marriott International Inc. include Delta Hotels, Moxy Hotels, Marriott executive apartments, Gaylord Hotels, and Edition Bulgari, among other brands (Marriott International Inc., 2020).
According to Marriott International Inc. (2020), Marriott International Inc. has its headquarters in Bethesda, Maryland, in the United States. Arne M. Sorenson, the current president and CEO of the company, took over in March 2012 from the current executive chairman, Bill Marriott. The latter was a long-time CEO of the company. Sorenson oversees over 176,000 employees and has made significant acquisitions to see the company grow with the recent acquisitions being the global Starwoods Hotel and Resorts. Marriott International Inc. became a public company in 1953 after expanding into a chain of hotel shops and restaurants from a simple root beer stand. In 1993, the hotel had a split giving birth to Marriott International, which through acquisitions and other restructuring models from 2000, has grown to become a competitive global company in the hospitality industry. In 1995, the company acquired The Ritz-Carlton and, further in 2015, acquired the Delta Hotels.
The mission statement of Marriot International Inc. is “To enhance the lives of our customers by creating and enabling unsurpassed vacation and leisure experiences.” (Marriott International Inc., 2020). Through its mission statement, the company commits to “enhance the lives of customers” by providing quality and professional hotels and lodging services that meet customers’ needs. Further, Marriott International promises to meet customer expectations in vacation and leisure “by creating and enabling unsurpassed vacation and leisure experiences.” Marriott International has managed to live to its mission by remaining competitive through innovative customer practices customized to meet each customer’s needs. Marriott International has always strived to achieve its mission by creating an unmatched business environment for its customers that has raised its profile in the market.
Marriott International Inc. offers numerous products and services to its customers. The major hospitality services of the company include hotel and lodging services, which are placed under various segments globally. The hotel and lodging services are categorized into three categories: premium, select, and timeshare categories. Each of these categories offers a unique customer experience based on the pricing category of the services.
The current news about the company shows worse business performance due to the effect of Covid-19. The adverse effect may be worse than that of the 9/11 and 2008 financial crisis combined. The pandemic may cause the revenue of the company to drop by 90% in the United States, is the pandemic is not contained. The stock price is also bound to drop significantly (Kevin, 2020). In other news, the first quarter of the company earning reports indicates unimpressive results. The first quarter saw a revenue drop for the company by 22.5% due to the global effect of Civid-19 (Popovic, 2020).
Industry and Competitive Analysis
The hospitality industry is one of the most competitive industries globally. The global operating sphere of Marriott international places the company at the face of stiff competition from other global hotel companies such as Hilton, InterContinental, Hyatt, Wyndham Hotel and Resorts, Shangri-La International Hotel Management Ltd, IHG, Choices Hotels and Four seasons among others. According to Heraldkeepers (2019), the hotel industry’s luxury segment in 2017 was 83.1 billion, with an estimated growth of 4.3% based on CAGR. The top five competitive hotels globally are Marriott International Inc. Four Seasons, Hilton, Hyatt Hotels, and Shangri-La International Ltd, which has a combined market share of 26.375 based on the CSIMarket 2019 statistics. The market share of Marriot International Inc. is about 13.59%, which is the highest market share. Hilton follows a market share of 6.59%, whereas Shangri-La, Four Seasons, and Hyatt have market shares of 1.24%, 2.41%, and 2.53%, respectively. According to the 2017 data, the company’s largest customer market came from the United States, China, and the European Union. The customer market share of these market indicated the United States with a leading market share of 32.05%, China and the European Union had a customer market share of 18.58% and 17.28% respectively (IBIS World, 2020)
The operating environment of the hospitality companies is dynamic, and the external business environment has a significant effect on the performance and competitiveness of the respective companies. The external factors that affect the performance and competitiveness of Marriott international include the political factors, the economic environment, social frameworks of the societies, the evolving technological advancement, and the legal framework across countries. These external factors play a significant role in shaping the strategies adopted by the company to remain competitive.
The political environment is dynamic across countries and differs across nations. This postulates the need for Marriott International to develop flexible business strategies and operations that suit the changing political landscape. The performance of companies in the hotel industries relies heavily on the political stability across nations to strive because conflicts are detrimental to business operations. In its strategy of global expansion, Marriott International must consider the system of governance in various countries, taxation policies, intellectual property rights, and rate of corruption since they are crucial political factors that affect the success of the business.
The economic environment also plays a crucial role in shaping the competitiveness of the hospitality industry. Global economies differ in growth, inflation, interest rates, and business cycles, which affects business operations significantly. Whereas other economies experience high economic growth, other economies are struggling to keep their economic growth and international companies such as Marriott must establish a tradeoff balance in investment in developed and developing countries. It is important for the company to consider the business cycle across countries and globally to develop suitable economic strategies to cope with fluctuating business cycles (Marriott International Inc., 2019).
The hospitality industry is also shaped by the social changes in the environment. It is undoubtable that the hotel and lodging companies relies heavily on the social factors that affect consumption. It is important for international companies such as Marriott International Inc. to study the social dynamics of people across nations to develop and implement business strategies and operations that suit the social behavior of the target market. For example, the current pandemic of Covis-19 has largely affected the social dynamic of people which has significantly affected the hospitality industry. The epidemic has also affected the tourism sector which has consequential effect on the hospitality industry. These social factors has significant effect on Marriot’s operating environment. Advancement in technology has also shaped the competitiveness of companies in the hospitality industry. Advancement in technology has led development of online bookings and online shopping which is crucial for companies in the hospitality industry (SelectUSA, 2017).
Establishing a reputable brand name is crucial for such a company as Marriott International. A reputable global brand name is key in expanding the customer base of the company by attracting new clients while retaining the existing customers. Additionally, the growth in the tourism sector has positioned companies in the hospitality industry to reap largely (SelectUSA, 2017). Tourism increase position Marriott to increase its customer base.
Business Environment Analysis
Porters Five Forces
Understanding the internal and external business environment is crucial for viability and sustainability of Marriott International Inc. Porters five forces is an important model in assessing the external business environment of Marriott International Inc. Porters five forces recognize the element of competition, buyer bargaining power, supplier relationship and entry into the market as crucial factors that affects business operations (Cheng, 2013). Competitive rivalry under the porter’s five forces recognize the effect of competition for any business. Marriott International Inc. faces stiff competition from other global hotel brands. With the similarity of products and services offered in the industry, the degree of competition is high among companies prompting innovation as key to remaining competitive in the market. As indicated Marriott International faces stiff competition from other global hotel operators such as Hilton Worldwide, Four Seasons Hotels and Resort, Intercontinental Hotels and Wyndham Destinations among others. However, despite the increasing level of competition, Marriott International has remained competitive in the market by expanding the brand portfolio of its products and services. This allows the company to gather for all categories of customers (Lesse et al., 2016).
The bargaining power of suppliers is also a critical force in Marriott’s business environment. Suppliers are crucial business partners that influence the pricing of products and services by the company (Magretta, 2011). Sustainability of Marriott competitiveness relies on the ability of the company to develop viable supplier relationships. Marriott International relies heavily on suppliers for such services as online bookings, travel agencies, recreational products, supply of food and drinks, internet services and personal services among others. Marriott has developed extensive supplier networks that enable the company to source its various services from many suppliers to manage the suppliers bargaining power.
The bargaining buyer of the buyers is also a force that influence business operations. The bargaining power of buyers acknowledges the influence of buyers on prices of goods and services and the power of a buyer to dictate the service demand. With its global operations, Marriott’s draws its buyers from the global market as well as local market in respective countries of operations. To manage its buyer bargaining power, Marriott international has expanded its brand of services to meet the needs of various customers.
With the growing innovation in the hospitality industry, the threat of substitution for products is evidence in the market. Companies in the hospitality industry have invested in research and development to study the evolving needs of humans to determine actions that meet the demand of customers. Marriott International has developed continuous expanded its products and services to gather for the various demands of customers.
Threat of entry into the hospitality industry is also a significant force affecting Marriott (Magretta, 2011). Although the cost of venturing into the market is high, the hospitality industry has seen the expansion of existing companies into other markets whereas other new companies enter the market. Companies have employed such strategies as franchise, joint ventures and licenses to expand their operations thus postulating stiff competition to Marriott International.
SWOT analysis.
Evaluating the strengths and opportunities of Marriott International aids the company in overcoming its weaknesses and threats. Among the strengths of Marriott International is a strong brand reputation (Dhir, 2019). Marriott has established a strong brand associated with quality and affordability which has enhanced its growth in the market. The second strength is associated with the Marriott ways, which postulates the unique way of operations by the company. Marriott boast of its mission that foster on putting its customer interest firsts and pursuing excellence in its operations. Marriott has also focused on innovation which is a key strength to the company. Marriott International has developed over 30 brands portfolios available worldwide (Renner, 2010).
Marriott international has its weaknesses including overemphasis on expansion which has clouded the company’s ability to offer uniform products across different regions of operations. Secondly, as a family business, Marriott has established norms of business operations that have seem slow to changes in business environment as it is built on family values (Renner, 2010).
Based on Gürel and Tat (2017), numerous opportunities are available for Marriott international. Among the opportunities include increase in global travels which positions the company to increase its customer base. A shift in consumer behaviour to demand of luxury products and services is an opportunity for Marriott to venture and expand its brands portfolio. The need for personalized service among customers also places Marriott at the center of reaping by innovating personalized customer services. The presence of unexploited and underexploited markets such as Africa and Middle East is a great opportunity for Marriot to venture.
The threats facing Marriott International include stiff competition in the hospitality industry from other global players such as Hilton Worldwide and Four seasons Hotel and resort among others (Dhir, 2019). Additionally, the prevailing pandemic of Covid-19 which has significantly affected the hospitality and tourism industry has led to closure of some Marriott ventures which has reduced the profitability of the company.
Even though Marriott has its weaknesses and threats, the strengths and opportunities of the company are significant to position the company at a competitive edge in the hospitality industry.
Marketing Analysis
The success of Marriott International Inc. in a competitive business environment can be owed to its sound marketing strategies. Marriott has established s strong marketing mix for its business that has enabled the sustainability of business operations (Bowie et al., 2016). According to Dhir (2019), Marriott International has segmented its target market and develop products and services that serve the demands of each market. Marriott International has segmented its target market using demographic and personal customer characteristics into luxurious services which is meant for customers requiring private and luxurious services and the premium service customers.
As opined by Morritt and Weinstein (2012), through research and development, Marriott International has developed products and diversified into 30 brand portfolios. The major products of the company include hotel and lodging services. Marriott International has also divided its brand portfolios into three categories comprising of premium, select and timeshare categories. Each of this category of services offer unique customer experience with differentiated pricing models.
To attract and maintain its customers, Marriott International has developed sound pricing models for its services. Each of the product category has its pricing level in line with the products and services offered in the respective category. Among the pricing strategies for its products is the premium pricing strategy for the premium products which covers 21 of the 30 brand portfolios. The premium pricing strategy has often been backed by discounts and deal offers to attract and retain its customers (Enz et al., 2015).
Through global expansion, Marriot International has ensured that its place in the marketing mix is fulfilled. With its presence in over 130 countries globally, the company has ensured that its customers are able to access its services at their comfort. Marriott International has continuously expanded its operations to emerging market to capture the emerging opportunities to ensure business sustainability. The company has expanded through the strategies of joint ventures, licenses and franchises (Wong and Wickham, 2015).
Promotion of its products and services has also been a key marketing strategy for the company. Marriott International has ventured into digital platforms such as social media to advertise its products and services (Leung et al., 2017). The company has also expanded the scope of operations of its websites to enable customers’ book their products and services at their comfort. Additionally, Marriott International has developed numerous rewards programs for its customers to enhance customers’ loyalty (Lieber, 2018).
Financial Analysis
Understanding the financial performance of an entity helps in assessing its viability and sustainability. Financial performance postulates how well the business meets its shareholder value. The financial performance of Marriott international can be assessed based on financial data for 2017, 2018 and 2019. The income statements of the company gives the revenue and expense for the three years. For the three years the revenue of the company has been decreasing with a revenue decline from 22.9 billion in 2017 to 20.9 billion in 2019. The decrease in revenue is occasioned by synergies and incorporation of Starwood into Marriott group. Consequently, the company has been unable to effectively control its expenses and hence the analysis indicates an 8.02% increase in expenses. Despite decrease in revenue the company has been unable to decrease its expenses. This has resulted in decrease profit for the company for the three years.
A ratio analysis relative to its competitor Bookings Holdings Inc. and industry average, Marriott International indicates unfavorable financial performance. Marriott International has a liquidity problem as indicated by its low current ratio of 0.47 compared to its competitor with 1.83 and industry average of 0.93. This indicates that Marriott International may be unable to meet its short term obligation when due. Marriott International has also a high debt to equity ratio of 15.56 compared to the competitor with 1.45 and industry average of 1.24. This indicates that Marriott international relies heavily on debt to finance is operations. If not control, a rise in debt to equity ratio may result in financial constraints for the company.
Statistics on stock trading for the company for 2019 indicate a current stock price of $75.26 with a 52 days average of $74.57 – $79.32 and a 52 week average of $46.56 – $153.39.
Based on this data, the financial performance of Marriott International is unfavorable. There is need for the company to evaluate its leverage position to minimize liquidity problems.
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