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Marriott International (MAR)Stock (Hospitality Industry, Hotel Industry, Resorts & Casinos Industry)
 Marriott International Inc. (NYSE:MAR) is one of the leading worldwide operators and franchiser of hotels and related lodging facilities. Marriott pioneered the concept of establishing a global brand name for a hotel company when it entered China in 1991, a concept which is gaining momentum now. In fact, Marriott’s competitors have now become more proactive in promoting this concept and companies, such as Starwood and Hyatt, are leading the way. Starwood introduced a brand, which does not provide the full array of services of a hotel (limited service brand) whereas Hyatt acquired AmeriSuites and subsequently re-branded it to Hyatt. Marriott earns 25 percent of its revenue in the form of management and franchisee fee, which provides the company with a stable and predictable stream of revenue, and shields it from any temporary downturn in the industry. Hotel companies are highly dependent on the number of customers a hotel attracts. Thus, in case the number of travelers coming to a particular region declines, the revenues from the hotel in that region will also decline. However, if the company owns the brand and the hotel is run by a third-party, the company is ensured a fixed amount regardless of the number of customers staying at the hotel. In general, the hotel industry faces a threat from Internet reservation channels, which represent a growing share of hotel room bookings. These intermediate channels charge higher commissions and demand lower room rates from hotels, which puts tremendous pressure on the revenues as well as margins of hotels. Marriott has built its own central reservation system to counter this threat from third parties. Marriott is the leader in online hotel room sales with 25 percent of its revenues being generated through this system.
[edit] Company DescriptionMarriott International, Inc. (Marriott) is a worldwide operator and franchiser of hotels and related lodging facilities. At the end of 2006, the company had more than 2,800 hotels spread across 68 countries. Marriott generates 75 percent of its earnings from hotel operations and the rest from timeshares. The company has over 85 percent of its properties based in the U.S. The company has a distinct multi-brand, multi-channel central reservation system, which enables a customer to choose the rooms as per his/her preference. For example, the system will enable the customer to find and book the cheapest room available in all the Marriott hotels in a city. In 2005, Marriott used this integrated technology infrastructure to make over 70 million online reservations; online reservations accounted for over 25 percent of the company’s revenues in 2006. In 2006, the company posted revenues of USD 12.2 billion and a net income of USD 608 million as compared to a revenue of USD 11.6 billion and net income of USD 669 million in the previous year. The company grew at a compounded annual growth rate (CAGR) of 7.4 percent during 2000-06. [edit] Business DriversRevPAR (revenue divided by average number of rooms occupied in a year – revenue per average room), occupancy rates (percentage of total rooms occupied) and average daily rates (the average rate charged by a hotel for one room for one day) are the major revenue drivers for the industry. Increase in the number of hotels owned or franchised by a company as well as the number of rooms available for rent provides an indication of how the company is expanding its capacity to cater to the growing number of travelers. Occupancy rates and revenues per available room on the other hand indicate how efficiently a company is using its available resources (i.e. hotels and rooms). The following table shows Marriott’s past performance relative to the above-mentioned revenue drivers.
Several companies in this industry, including Marriott, are increasing their presence in developing countries, such as China and India, apart from registering moderate expansion in the fragmented U.S and European markets. The expansions being undertaken by players such as Marriott are being driven by the growth in international tourism in these countries. Internet reservation channels are gaining prominence over the traditional modes. Customers are willing to pay a premium to make reservations through the Internet as it does not require their physical presence at the time of the booking. This has emerged as a threat for companies in this industry as these Internet reservation channels charge a higher commission from hotels and also demand lower room rates. However, Marriott has developed an online multi-channel central reservation system to counter this threat and has met with considerable success. Marriott is increasingly relying on management and franchisee fee as a source of income because this provides the company with stable revenues, which are not affected by any increase/decrease in the number of customers. However, as these franchisees are run by third parties, their objectives may be different from that of Marriott. For example, Marriott may be focused on establishing a brand by providing a consistent level of services to their customers, while the franchisee may just focus on maximizing revenues. [edit] Business Segments and ProductsMarriott’s operations are grouped into three distinct business segments – lodging facilities, timeshare operations and synthetic fuel segments. The lodging business involves developing, operating and franchising hotels and corporate housing properties under 13 brand names. Marriott also develops, operates and markets timeshare ownership properties under four separate brand names. A large part of their total revenues come from North American Full-Service Lodging Segment (43 percent of total revenues in 2006), which comprises owned hotels, resorts, conference centers and club-sports. The company operates under multiple brand names, including JW Marriott, Marriott, Ritz-Carlton, Courtyard, Fairfield Inn, Springhill Suites, Residence Inn, Towneplace Suites, Renaissance and Bulgari. [edit] Customer DemandCustomers for the hotel industry include tourists as well as business travelers. Tourists may be further categorized into low-medium income groups and high-income groups as the income of a person will determine the kind of hotel he/she chooses. For example, people with high income are more likely to stay in an upscale luxury hotel, which a person with a low-medium income may not be able to afford. Marriott’s business model caters to all segments of the population serving people from the low-medium income group to leisure and upscale travelers. The demand from low-medium income customer is primarily affected by an increase in airfares. These customers generally have a fixed budget when they plan their vacations. Thus, if they are forced to spend more on airfare, their ability to spend on a hotel room, resort or other services declines. On the other hand, an economic slowdown would have a more significant impact on the volume of business travel as compared to the impact of increase in airfares. In addition to these factors, certain events, such as acts of terrorism, wars, and outbreaks of contagious diseases have a severe impact on the demand from all customer segments as individuals are never willing to expose themselves to any event that will threaten their personal safety. Thus, when there are events such as 9/11, the invasion of Afghanistan, the outbreak of Severe Acute Respiratory Syndrome (SARS), or the tsunami in the Indian Ocean, people either stop traveling to those respective countries or choose alternative destinations for travel, which has a negative impact on the hotel and tourism industry in the affected area. [edit] Competitive LandscapeMarriott’s competitors include Starwood International, Choice Hotels International (CHH), Trump Entertainment Resorts, Hilton Hotels, InterContinental Hotels, The ACCOR Group and Orient-Express Hotels (OEH). The industry is highly fragmented and no player commands more than 20 percent of the market share. Marriott enjoys a 9 percent share in the U.S. and 1 percent at the international level. Competition in the industry is generally based on the quality of rooms, restaurants, meeting facilities and services, attractiveness of locations, availability of a global distribution system, price and other factors. Although Marriott’s global presence across 68 countries enables it to offer services to a large number of customers, it lags behind its competitors who are present in 80-100 countries. The following table compares Marriott’s performance to its competitors in 2006.
One major trend in the industry is the increasing competition in the area of increasing branded offerings. Marriott was one of the pioneers in promoting the concept of foreign brand awareness in the industry; however, its competitors have begun doing so more pro-actively. Starwood’s planned limited service brand, named “Project XYZ” and Hyatt Corporation’s purchase of AmeriSuites brand and subsequent re-branding to Hyatt Place are steps in this direction.
 Marriott International2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] Bulls/Investment Positives
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