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 International, Inc. (Marriott) is a worldwide operator and franchiser of hotels and related lodging facilities. The company has around 3,500 hotels spread across almost 70 countries. Marriott generates around 90% of its earnings from hotel operations chidiacha and a nominal amount from timeshares. The company's largest geographic segment is the United States. . Moreover, Marriott operates reservation centers, many of which are located in the United States, and 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.
|MAR Revenue Segments||2010 (in millions of $)||2009 (in millions of $)||2008 (in millions of $)|
|North American Full Service||5,108||4,848||5,631|
|North American Limited Service||2,149||1,986||2,233|
Marriott’s operations are grouped into five distinct business segments – North American Full-Service Lodging, North American Limited-Service Lodging, International Lodging, Luxury Lodging, and Timeshare. The lodging business involves developing, operating and franchising hotels and corporate housing properties under 20 brand names overall. 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. The company operates this business segment under four brand names: Marriott, JW Marriott, Renaissance, and Renaissance ClubSport.
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 with respect to its online reservation usage in the industry, with 75% of all Marriott room reservations booked online on Marriott's website. 
The growth of Marriott's operations outside of the United States also makes them susceptible to the risks of doing business internationally due to geopolitical factors and region-specific economic recessions. Certain areas such as China and India are booming, which could substantially increase profits due to region-specific economic booms. However, concentrated recessions could lower revenues, increase costs, reduce profits or otherwise halt business. The company expects that the international share of its total revenues will increase in future years. As a result, they are increasingly exposed to higher risk.
Based on Marriott's recovery after the recession between 2008-2009, Marriott is subject to declines and rapid recoveries from declines as dictated by the global business cycle. This recovery is due to an increase in personal income. Since decrease in personal disposable income brought forth the reduction in demand for hospitality and transportation industries, increasing incomes put upward pressure on demand for hotels and transport. This upward pressure has resulted in increased prices. Increased prices may bring Marriott more profits. During recessions, new orders for rooms have come to a standstill, thus reducing the available number of rooms present for an ever-increasing global travel and hotel population. For example, in 2010, the smaller increase in supply and higher demand lead to a rise in occupancy. Higher occupancy rate is typically followed by increased daily rates. This increase in occupancy rate may continue beyond the first year since hotels are delaying or have delayed construction orders for more rooms until market has shown stability.
The industry is highly fragmented and no player commands more than 20 percent of the market share. 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 70 countries enables it to offer services to a large number of customers, it lags behind its competitors who are present in 80-100 countries.
Starwood Hotels: Starwood Hotels owns and operates luxury hotels, retreats, and residences across the world. Approximately half of Starwood's hotels are outside of North America, with 397 in Europe, Africa, the Middle East, and Asia and new Starwood hotels are being built in developing countries like China. The company manages franchises that operate under its various brand names - St. Regis, The Luxury Collection, W, Westin, Le Méridien, Sheraton, Four Points, Aloft, and Element.
Choice Hotels International (CHH): CHH is a worldwide franchisor of hotels and the nation’s first hotel chain. The company franchises over 5,400 hotels under the Comfort Inn, Comfort Suites, Cambria Suites, Sleep Inn, Mainstay Suites, Quality Inn, Clarion, EconoLodge, Rodeway Inn, and Suburban Extended Stay brands throughout the US and more than 40 countries and territories. Choice generates a majority of its revenue from royalty fees, which are based as a percentage of gross room revenue of its franchised hotels.
Hilton Hotels: Hilton is one of the leading hotel and leisure companies in the world. It is primarily involved in the management and development of hotels across the globe. Initially Hilton focused on acquiring and owning more real estate. However, it has recently changed its growth strategy, and it now focuses on spreading its operations through franchisees. This enables the company to earn revenues in the form of franchisee fee without incurring any additional costs to purchase real estate and construct hotels.
InterContinental Hotels: IHG is the largest hotel company by number of rooms, with nearly 600,000 rooms in over 100 countries around the world. It operates a diverse portfolio of brands across multiple economic segments, including Intercontinental Hotels and Resorts, Crowne Plaza Hotels and Resorts, Holiday Inn, and Holiday Inn Express. IHG makes most of its money by franchising hotels. Out of the nearly 4,000 hotels bearing IHG brands, it owns only 18.
Orient-Express Hotels (OEH): Orient-Express Hotels (NYSE: OEH) is a hotel and leisure group, which is focused on the luxury market. The company owns and operates luxury hotels, restaurants, tourist trains, and river cruises in over 25 countries. OEH's hotels, many operated only seasonally, target luxury travelers.
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 Hotels & Resorts (HOT)'s planned limited service brand, named “Project XYZ” and Hyatt Hotels Corporation (H)’s purchase of AmeriSuites brand and subsequent re-branding to Hyatt Place are steps in this direction.
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|The Hospitality Companies
Hilton Hotels Marriott International Wynn Resorts Loews Starwood Hotels