Case Study Critique: Marriott International

About Marriott International

Marriott International was founded in 1927 by J. Willard Marriott, Alice Sheets Marriott and
Bill Marriott. Marriott International stands on the pillars of hard work, integrity, excellent
customer service and desire for excellence(Marriott, 2020). Focusing and nurturing the pillars
of the group has led to its growth from a root beer stand to a renowned organisation whose
operations are spread across the world.
It is one of the largest players in the international lodging industry and works as an operator,
franchisor and offers license of hotels. The company also has many residential and time share
properties which operate under distinctive brand names and serve different customer
segments at difference price and service. The company primarily focuses on aspects of
managing, franchising and licensing the properties and has very few properties of its own.
The strong 30 brands which are in the portfolio of Marriott International are displayed in the
figure below:

Source:(Marriott, 2020)
The company has operations in North America, Asia Pacific, Europe, Middle East, Latin
America and Africa. The company operates in 131 locations (Marriott International 2020)

Core Values & Heritage of Marriott

Marriott International boasts of a proud and robust and an open and transparent culture which
stands on the following towers of strength(Marriott, 2021a):-

1. Putting People First: The company keeps its employees first as it believes in the
premise that a happy employee leads to a happy customer. The company focuses on
the wellbeing of the employees and encourages diversity and inclusion at workplace.
The company believes that principles of diversity and inclusion extend to all its
properties across the world and the organisation believes in creating opportunities for
the locales and focuses on the overall sense of wellbeing of all.

2. Pursuit for Excellence: Marriott has pursued the goal of superior customer
experience through its various brands under the luxury, premium and select
categories. The company focuses on the simple formula of good food and good
lodging for all at fair prices.

3. Embrace Change: Innovation is the key to success in the industry. Marriott with his
innovations has established the benchmarks for the modern hospitality industry. The
organisation challenges the status quo and focuses on the dynamic needs of the
customers and respond to their dynamic desires.

4. Act with Integrity: The organisation has high ethical and legal benchmarks. The
ethical standards are embedded in smallest of activities undertaken in the
organisation. The organisation is committed to socially responsible activities and our
commitment to human rights.
Brand Portfolio

The brand portfolio of the organisation offers a combination of persuasive brands and has two
styles of hotels namely Classic and Distinctive wherein the classic category offers time-
honoured hospitality to the modern tourist whereas distinctive category offers memorable
experiences with a specific perspective. Both the categories have three tiers namely luxury,
premium and select. The classic luxury brands are JW Marriott, Ritz Carlton and St. Regis
whereas Distinctive luxury include Bulgari, Edition etc. The luxury segment offers
personalised and extra-ordinary amenities to its customers. The services in the Premium
category are curated with sophistication and the properties that make to the Classic Premium
list are Marriott hotels, Sheraton, Marriott Executive Apartments. In the Distinctive Premium
category are Westin, Le Meridien, Gaylord Hotels etc. Select category is famous for longer
stays with a home like comfort and availability of easy amenities and the properties that make
up to the list are Courtyard, Residence Inn, Four Points, Protea hotels etc.
Towards the end of 2019, the organisation had 2,144 company operated operations which
accounted for 584,879 rooms and 5,205 franchised and licensed properties which accounted
for 796,042 rooms(Marriott, 2020).

The year 2016 saw a the acquisition of Starwood Hotels & Resorts leading to Starwood
becoming an indirect wholly owned subsidiary of the business and is known as Legacy-
Starwood(CNBC, 2016) followed by another acquisition in the year 2019 of Elegant Hotels
which also emerged as a wholly owned subsidiary of the company. Since Marriott is
synonymous with high standards, quality and care, the brand names, service marks and logos
of the company are protected against any unauthorised claims and used. The company
registers and protects its trademark as intellectual property to avoid any misuse.

All the properties that the organisation operates follow the local laws and regulations
pertaining to environment. It includes issues related to health and safety of stakeholders,
disposal of hazardous waste, etc. It does not have a material impact on the organisation and as
a socially responsible organisation the company will continually improve the practices and
act like a responsible corporate citizen(Marriott, 2018).

Competitor Analysis & Market Share

The Global Hotels & Resorts industry will bounce back to business soon after the economic
downturn of the global economy after COVID-19. The increase in global per capita after the
economy improves will lead to higher discretionary income of the customers especially in the
emerging economies wherein improved tourism structure might attract more customers.
However, it is important to remember that the global market is still fragile and the slowdown
in China’s economy might have a significant impact on the hotel industry.

The closest competitors to Marriott International are Wyndham Destinations, Intercontinental

Hotels, Hilton Worldwide, Hyatt Hotel Corporation, Best Western Hotels & Resorts and
Radisson Hotel Group. Marriott International has the highest sales of 21 billion dollars and
has the second highest brand value with over six billions worldwide whereas Hilton has the
highest brand value of 10.83 billions US dollars in the year 2019(Statista, 2020). The sales
revenue of the company was more than double of any other hotel organisation(Statista, 2020).
The company claims that it has approximately 16 % share in the US hotel market on the basis
of the guest room and has less than 4% share of the hotel market outside of America(Statista,
2020). The company claims that its brand name is attractive to hotel owners as they generate
higher Revenue per Available Room (“RevPAR”) in contrast to the close competitors of the
organisation(Marriott, 2020). Also, the organisation states that properties of Marriott are
constantly improved to maintain the competitiveness with international competitors and local
competitors as per the location.

Apart, from it the company also faces competition as a lodging operator and franchisor as US
only has about 1800 lodging organisations wherein 18 of them represent more than 100
properties(Marriott, 2020). They include private firms, national and international and other
franchisors. Competition also emerges from companies that offer online travel services as
well as from Airbnb and HomeAway which allows guests to book apartments and short-term
rentals instead of hotel rooms. The parameters of competition in the lodging industry are also
varied like brand recognition and reputation, location, guest satisfaction, quality of service,
amenities, accommodation, security, loyalty programs etc.

Marketing, Sales, Loyalty Program & Reservation Systems

The company in the year 2019 combined its three loyalty programs namely Marriott
Rewards, The Ritz Carlton Rewards, and Starwood Preferred Guest under the umbrella name
of Marriott BonvoyTM. The members who are a part of the Marriott Bonvoy have access to
variety of benefits, discounts and experiences. The loyalty program at Marriott helps a
traveller to earn rewards and miles with any partner airlines other myriad benefits. The
Loyalty program of the business has been successful in repeated business and loyal customers
for the company(Marriott, 2021b). Over 50% of the bookings in the year 2019 were by the
members of the Loyalty program.

The organisation provides for a centralised booking system, advertising, marketing and other
promotional activities for the lodging facilities operated by the organisation; however, the
owners are required to reimburse the costs to us. The company provides centralized
reservation services and advertising, marketing, and promotional services, as well as various
accounting and data processing services, and owners are also required to reimburse us for
those costs. The web and mobile services provide an excellent booking experience to the
customer and also easily enrols them for the loyalty program and book at the member
rates(Holhauser, 2021). However, the elite status can only be reached with longer stays and
the company also charges resort fees on special nights unlike its competitors like Hyatt and
Hilton (Holhauser, 2021). The company also promotes the program ‘Look no Further’ which
offers best guaranteed rates which leads to strong customer relations and also provides more
access to customer to book through direct channels. To grow customer engagement many
innovative digital services like check-in check out, mobile key etc. were offered to the
customer. The premise was to offer a simple yet efficient booking experience to the guest,
thus heightening the service experience of the customers leading to higher guest satisfaction.
The company operated 22 hotel reservations, eight in the US and 14 in other parts of the
world which undertook booking requests across the globe. The reservation system of the
organisation plays an integral role in managing the inventory and utilises third party agents
wherever required making it cost-efficient in nature(Marriott, 2020). This helps in driving the
economies of scale and leads to enhanced profits for the owners as well as franchisees. It also
helps the organisation to increase its own revenue. Marriott International claims that the sales
and revenue management is one of the sources of strategic advantage for the organisation
because the organisation never fails to invest in best of people, processes and innovative
systems.
The sales deployment strategy of the organisation is strategically aligned with the customer
demands and avoids duplication by individual hotels, thus covering a large number of
accounts and minimising employees’ efforts and further helps in scoping large number of
accounts. The organisation uses a proprietary revenue management system which helps in
making optimal pricing decisions, enhances efficiency and focuses on generating higher
property level revenue. A large number of properties in the portfolio tend to use a web-based
program to manages rates and other modification processes which leads to higher price
flexibility and also is time efficient in nature. The company is into long term agreement with
JP Morgan Chase and American Express especially for the US issued credit cards and they
are linked with the loyalty program of the hotel. Similar practices are also adopted in Canada,
UK and Japan as the company believes that co-brand credit cards increase the success of the
loyalty program.

Property Management

The 2,144 company operated properties include long term management and lease agreements
under the name of “Operating Agreement”. The terms and conditions of the operating
agreement may, but the company earns a base management fee which is a percentage of the
revenues of the hotel and also charges an incentive management fees, which depends on the
profit earned by the hotel. The management agreements also involve reimbursement of the
cost of operations and are drawn for a period 0f 20-30 years, but can be extended
later(Marriott, 2020).
The lease agreements also similarly vary in terms of conditions; however, they include fixed
annual as well as additional rentals. Additional rentals are charged when the revenue exceeds
a given benchmark amount(Marriott, 2020). Operating Agreements in many cases provide
the privilege to the owner to terminate the agreement if the company doesn’t meet certain
performance criteria and doesn’t make desired financial results in a given period of time.
Marriott International is responsible for hiring, training and supervising the workforce at the
property. It is also responsible for purchasing the supplies and the owner of the property is
supposed to reimburse the costs to the company. The marketing, sales and promotional
activities, are centralised in nature. Also, Marriott International provides for data processing
and accounting services which are reimbursed by the owner to the company.

The company has about 5,205 franchised and licensed properties. In this format the owner is
allowed to use the brand name and systems of the organisation. Under the umbrella of
franchising, Marriott International receives an initial application fees and charges a continual
royalty fees which ranges from 4-7 percent of the room revenues and 2-4 percent of food and
beverages revenue for brands that demand full service(Marriott, 2020). Royalty fees is also
received under license agreements under the name of Marriott Vacations Worldwide
Corporation. The license fee includes a fixed annual fees and additional variable fees based
on the sales volume.

Risk Management

Marriott International operates in a high risk and competitive business environment. There
are various risks that the organisation could face. For instance, due to the highly competitive
nature of business, there is a constant competition with other national and international
chains. Marriott can succeed moly if it offers distinctive service, value and quality to
customers and offering seamless experience. Also, more competition and new lodging
arrangements could have significant impact on the hotel industry and may lead to price wars
in such markets.

Since the company does business on a global platform, any international and national
condition can hamper the growth of the organisation. For instance, the surge in Covid-19 has
worst affected the travel and tourism business due to travelling restrictions. For instance,
Covid-19 is displaying a second wave in many countries highlighting that the grave situation
can extend longer than required and it will be difficult for the organisation to mitigate it. All
the properties of Marriott Bonvoy have adopted Covid Appropriate Behaviour, however,
travel restrictions and government restrictions to curb the effects of the disease could pose
major risk to the business worldwide. There are other operational risks like termination of
management and franchise agreement before the scheduled timeline. It may lead to financial
risks and in many cases legal battles with the owner also lead to significant legal fees also.
Although the organisation has taken cybersecurity measures to protect the data of the
organisation, but cybersecurity risks could also be damaging to the organisation(CloudTech,
2020). The company is also prone to investment and securities risks. All these risks have a
significant impact on the business growth, reputation, financial condition and operating
results and liquidity of the company. Although the company has tailored strategies to manage
risks some of the risks are external and uncontrollable and could have an adverse impact on
the organisation.

Human Resource Management

One of the primary principles on which Marriott stands is the importance it provides to the
employees. The company realises that a happy employee is the key to happy customer. Thus,
apart from providing a robust pay package, the company also offers excellent quality of work
life and provides a balance of monetary and non-monetary rewards to inspire the workforce.
Robust training programs, career and succession planning are some of the areas where the
company has adopted best practices which has led to higher retention of workforce(Marriott,
2020). Marriott’s values and heritage have a constant impact on the HR policies of the
organisation.

Conclusion & Recommendations

To conclude, Marriott International represents the power of its brand name, reputation and
Marriott Bonvoy trademark and loyalty program, with a focused approach towards its’ asset
light business model. As per the UN, World Tourism Organisation the year 2019 saw a
booming 1.5 billion international tourists’ arrivals globally, however, due to the adverse
impact of the Covid-19 the travel and tourism industry was worst affected.

While the industry bounces back from the downturn caused by COVID-19, Marriott is well
positioned for the opportunity, although the threat of COVID-19 is not completely over. The
company has a robust 30- brand portfolio and a robust and strong loyalty program which is
read to attract new guests. The brand portfolio of the company acts as a source of strategic
advantage for the organisation and helps in increasing the market share of the company
worldwide. Also, the variety of categories like Premium and select place the properties of the
Marriott distinctively and aim to provide plethora of experiences and price points to the
customers. The company depicts a bright future as about 20% of the rooms added in the year
2019 were conversions from its competitors brands highlighting that in such a competitive
market, Marriott has a distinctive brand name and reputation.
The company has a significant cash flow which helps it to make attractive investments like
investing in Starwood properties in 2016 and in Elegant hotels in 2019 leading to incremental
growth and increased stockholder value. The asset light business strategy which means a
large part of the business is franchised or licensed has also led to meaningful cashflows for
the company and the company has been able to return over $9.8 billion to stockholders
through dividends and share repurchases.

While the travel and tourism industry make an attempt to bounce back Marriott can use its’
expertise to create bespoke strategies for its customers and provide them with curated
experiences which contribute to the brand name of the company. The organisation can focus
on personalising the travel experience of an individual and apart from providing an excellent
lodging it can help the tourists to enjoy the culture and heritage of a region by launching
customised program like ‘A day at countryside’ or ‘Dinner with an American family’ or other
unique experiences like Champagne Sabering, Cooking a continental meal. Such programs
may provide the guest a complete experience in the boundaries of the property and will help
them to immerse in local culture.

References

CloudTech. (2020). Marriott reported another data breach: Why cyber risk assessment is
important. Retrieved from
https://cloudcomputing-news.net/news/2020/apr/01/marriott-reported-another-
data-breach-why-cyber-risk-assessment-important/
CNBC. (2016). Marriott buys Starwood, becoming world’s largest hotel chain. Retrieved from
https://www.cnbc.com/2016/09/23/marriott-buys-starwood-becoming-worlds-
largest-hotel-chain.html
Holhauser, B. (2021). Marriott Bonvoy Rewards Program: Everything You Need to Know.
Retrieved from https://www.valuepenguin.com/travel/marriott-bonvoy-rewards-
program
Marriott. (2018). MARRIOTT SUSTAINABILITY AND SOCIAL IMPACT REPORT. Retrieved from
Maryland:
Marriott. (2020). Marriott International 2019 Annual Report Retrieved from
Marriott. (2021a). Core Values & Heritage. Retrieved from
https://www.marriott.com/culture-and-values/core-values.mi
Marriott. (2021b). Marriott Bonvoy Benefits. Retrieved from
https://www.marriott.com/loyalty.mi
Statista. (2020). Sales Revenue of selected leading hotel companies. Retrieved from
https://www.statista.com/statistics/273064/revenue-of-the-largest-hotel-groups-
worldwide/