Running head: MARRIOTT 1

Case 4: Marriott
Sparkle Smithson-Brown

BAM 479 Strategic Management

Professor Harvel-Jenkins

November 20, 2020

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Case Statement

Marriott competes in a highly competitive hospitality industry. Marriott specializes in

luxury brand lodging experiences. Marriott is confronted with financial obstacles and loss of

market share over the next 3 years due to the unprecedented challenges Covid-19 has impacted

the hospitality industry and the world as whole.

Vision Statement

“To become the premiere producer and facilitator of leisure and vacation experiences in the

world” (Marriott, 2020).

Mission Statement

“To enhance the lives of our customers by creating and enabling unsurpassed vacation and

leisure experiences” (Marriott, 2020).

Mission Table Evaluation

Table 1 Mission Table Evaluation Matrix

Customers Products/Service Markets Technology Concern for Survival,

Growth & Profitability
Yes Yes Yes No No

Concern for Concern for

Philosophy Self-Concept Public Image Employees
No Yes No No

Taking Marriott’s vision/mission statement through the evaluation matrix reveals only

four of the nine components were utilized. The evaluation suggests Marriot’s vision/mission

statement could be improved if it were to integrate the other components: technology, concern
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for survival, growth and profitability, philosophy, concern for public image, and concern for

employees.

Customers are identified within the mission statement. It is evident the company’s

purpose is to complement the lives of customers by providing the best experience.

Products/Services are stated within the mission statement, the company’s service is to

provide exceptional hospitality coupled with the most memorable lodging experience.

Markets are addressed in the vision statement as it states “world”; referencing a global

market. Marriot possess to be a global provider in the hotel industry meeting all needs and

desires of travelers domestically and internationally.

Technology is not identified within the mission statement. Inclusion of technology could

identify how Marriot is being innovative to enhance the customer’s experience and overall

satisfaction.

Concern for survival, growth, and profitability is not incorporated in the mission

statement. Including this component would communicate to stakeholders its commitment for

continual growth and financial soundness.

Philosophy is another component not identified in the mission statement. Considering

Marriott’s website states is core values: “putting people first, pursuing excellence, embracing

change, acting with integrity and serving our world” (Marriott, core values and heritage, 2020),

including this element in the mission statement would have a significant impact on how the

company is perceived.
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Self-concept is identified in both the vision and mission statement. Marriott clearly

communicates its distinctive advantage of being the hospitality global leader in leisure and

vacationing experiences.

Concern for public image is another component absent from the mission statement.

Although, Marriott includes this component in its core values, it should also include this

component in the mission statement to reinforce its responsibility to the community and

environmental concerns.

Marriott also does not address its concern for employees in the mission statement. Part of

Marriott’s core values; putting people first, Marriott states “take care of associates and they will

take care of the customers” (David, 2016, p.387), incorporating this characteristic would have a

positive impact on the mission statement. The concern for employees provides not only a

foundation for employee morale but could serve as an emotional connection with the customer.

Consumers tend to favor firms where the employees are valuable assets.

Company Profile

Marriott never stops searching for inventive ways to serve their customers, provide

opportunities for associates, and continually grow business. The company began as a nine-seat A

& W root beer stand and today is a top employer which exemplifies superior business operations,

based on five core values: put people first, pursue excellence, embrace change, act with integrity,

and serve the world (Marriott, core values and heritage, 2020). Since 1927, Marriott has valued

diversity and inclusion, embracing differences is critical to success and an ever-growing global

portfolio.
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As Marriott continues to change and grow, the beliefs remain constant. “Being a part of

Marriott means being a part of a proud history and thriving culture” (Marriott, core values and

heritage, 2020). The core value of putting people first dates back to the founder’s philosophy.

The people first culture has consistently earned Marriot awards and recognitions globally. Giving

associates opportunities to grow and succeed is part of the company’s DNA. Marriott values

their employees and is strong believer in the philosophy: “take care of associates and they will

take care of the customers” (Marriott, core values and heritage, 2020).

Dedication to the customer shows in everything Marriott does. The company’s

reputation for superior customer service dates back to J. Willard Marriott’s original goal “good

food and good service at a fair price.” “Marriott takes pride in detail-everyday, in every

destination worldwide” (Marriott, 2020).

Invocation has always been part of the Marriot story, “one company -many brands is

Marriott’s innovative model” (Marriot, core values and heritage, 2020). The Marriot family

helped shape the modern hospitality industry. Marriott has “uncompromising ethical and legal

standards. This extends to the day-to day business conduct, employee policies, supply chain

policies, environmental programs and practices, and the commitment to human rights and social

responsibility” (Marriott, 2020).

Marriott offers an unparalleled collection of brands, from luxury, vacation clubs, to

inviting spaces at a great value, accommodating all individual traveler’s needs and wants.

Marriott also offers credit cards programs through Chase and a loyalty program. Marriott’s

brands consist of: The Ritz-Carlton, St. Regis, EDITION, The Luxury Collection, W Hotels, JW

Marriott, Marriott, Sheraton, Marriott Vacation Club, D Delta Hotels Marriott, Le Meridien,

Westin, Autograph Collection Hotels, Design Hotels, R Renaissance Hotels, Tribute Portfolio,
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Gaylord Hotels, Courtyard by Marriott, Four Points by Sheraton, Springhill Suites by Marriot,

Protea Hotels Marriot, Fairfield by Marriot, AC Hotels Marriott, Aloft Hotels, Moxy Hotels,

Marriott Executive Apartments, Residence Inn by Marriott, TownePlace Suites by Marriot,

Element, and Homes & Villas by Marriott International.

Milestones

 1927-- Marriott began as a root beer stand founded by J. Willard Marriott and wife, Alice

in Washington D.C. Good food and food service at a fair price became a guiding

principle for Hot Shoppes restaurants –and for Marriott International as it grew (Marriott,

core values and heritage, 2020).

 The Marriott’s and business partner, Hugh Colton, open the first A&W franchises—and

the name “Hot Shoppes” is born (Marriott, core values and heritage, 2020).

 1937—In flight airline catering debuts when Hot Shoppes begins delivery of boxed

lunches to passengers at Hoover Airport, south Washington, D.C (Marriott, core values

and heritage, 2020).

 1953—Hot Shoppes, Inc stock becomes public at $10.25/per share and sold out in two

hours of trading (Marriott, core values and heritage, 2020).

 1957—Marriott made a historic shift into the hotel business in 1957. The world’s first

motor hotel opened in Arlington, Virginia, under the management of J. Willards

Marriott’s son, Bill (Marriott, core values and heritage, 2020).

 1969—Marriott opens its first international hotel in Acapulco, Mexico (Marriott, core

values and heritage, 2020).

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 1972—Marriott partners with Sun Line becoming the first lodging company to enter the

cruise business (Marriott, core values and heritage, 2020)

 1988—Marriot opens its 500th hotel in Warsaw, Poland, the first western-managed hotel

in Eastern Europe (Marriot, core values and heritage, 2020).

 2012--- Guinness World Records recognized the 5 Star JW Marriott Marquis Hotel Dubai

as the world’s tallest hotel (David, 2016, p.385).

 2015—Marriott International acquires Delta Hotels and Resorts, becoming the largest

full-service hotelier in Canada (Marriott, core values and heritage, 2020).

Marriott’s cultural legacy, putting people first, is still present today while continually to

expand and shape the future of travel. Consistent with its exemplary record on workplace

equality, the firm has numerous female executives (David, 2016, p.387); demonstrating its

value of diversity and inclusion.

External Factor Assessment

The External Factor Evaluation Matrix identifies emerging opportunities and threats

Marriott faces within the hotel industry. Even though, Marriott is the largest hotel company in

the world, to remain a leader it is vital to assess the external factors “for making decisions that

culminate a winning strategic plan” (David, 2016, p. 81).

Key External Factors

Weighted
Weigh
  Opportunities t Rating Score
The increase demand for lodging supply
1 0.15 4 0.60
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2 Emerging Asian travel and tourism markets 0.10 2 0.20

3 Growing middle class in Africa 0.08 3 0.24

4 4.4% overall RevPAR growth 0.06 3 0.18

5 Add-on fees 0.05 3 0.15

6 Emerging markets 0.05 3 0.15

7 Increase in disposable income in China and India 0.04 3 0.12

8 Franchising 0.03 3 0.09
Technological innovations to improve customer
9 experience 0.03 1 0.03

10 Population growth 0.02 3 0.06

Weighted

  Threats Weight Rating Score

1 COVID-19 Pandemic 0.07 2 0.14

2 Fluctuating foreign currency exchange rate 0.06 2 0.12

3 Fragmented and competitive hotel industry 0.06 2 0.12

4 Global expansion 0.04 3 0.12

5 Changes in privacy and data security laws 0.04 1 0.04

6 Terrorism / Political unrest 0.03 1 0.03

7 Economic downturns 0.03 2 0.06

8 Environmental regulations 0.02 2 0.04

9 Labor regulations / negotiations 0.02 2 0.04

10 A new source of supply for lodging (Airbnb) 0.02 2 0.04

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  Total 1.00   2.57

Referencing the above EFE, Marriott possessives many successful opportunities to gain

and sustain competitive advantages within the hospitality industry. Most of the opportunities

correlate with the most prominent opportunity being the increase demand for more lodging

supply. Marriott has over more than 4,100 properties in over 80 countries and territories around

the world, over 700,000 rooms and an additional 200,000 in the development pipeline (David,

2016, p. 385). Being the largest hotel company globally will allow Marriott to continual to

capitalize on other opportunities acknowledged in the EFE such as the growing middle class in

Africa and the emerging tourism in the Asian markets.

The expanding middle class, rapid economic growth, and an increase of international

flights into Africa is another opportunity recognized in the EFE for continual growth, expansion,

and investment for Marriott. The growing middle class leads to more domestic travel, increasing

the need for lodging. The continent’s GDP is anticipated to grow at over 5% annually over the

next several years which will raise more people into the middle class. The growing economy

allows Marriott to expand its footprint globally. “Africa has significant untapped potential for

travel and tourism, both as a destination and source of new global travelers” (Marriott continues

investment, n.d.). An estimate of 36 million tourists visited the continent in 2015, and the number

is expected to continue to grow (McNew, 2016, para 8). “The acquisition of Protea Hospitality

Group makes Marriott the largest hotel company in Africa” (David, 2016, p.391).

The next most notable opportunity recognized in the EFE for the hospitability industry to

potentially capitalize on is the emerging Asian travel and tourism markets. Asia has experienced

unprecedented growth in the tourist department. Asia recorded 324 million tourist arrivals in
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2017, close to a quarter of the world’s total. The domestic tourism in many markets in Asia has

seen a tremendous growth due to the growing middle class, improved transportation, and

upgraded travel products (Asia Pacific, 2018). “A notable feature of tourism in Asia Pacific is 80

percent of the traffic is intraregional. China generates over 16.2 percent of total international

overnight arrivals in the region and is the largest source market for most destinations in the

region” (Asia Pacific, 2018). The robust growth in these segments is presenting exciting growth

opportunities and leveraging strong demand for Marriott’s brands. Marriott is responding with an

aggressive target to have more than 1000 hotels open by of 2020 (Marriott, 2019). As the leading

hospitality company, it is in its DNA to provide travelers with opportunities to explore

unchartered territory as a way of broadening horizons and achieving a deeper understanding of

the world.

The most prominent threat to the hospitality industry is the COVID-19 pandemic. The

pandemic has led to a worldwide crisis with effects to the hospitality industry. As far as the

business level, the impact of the crisis has reached every industry in the world with travel and

tourism taking a massive hit. Marriott is responding to these unprecedented times by the

company’s 50% fee discounts and payment deferrals for most of its hotel franchisees and owners

(Hudson, 2020, para 6). Marriot has 91 percent of its hotels open and approaching cleanliness in

a new way with advanced technology.

Another threat to the hotel industry is the impact of the fluctuating foreign currency

exchange rate. The rise and fall of the currency exchange rate have a huge impact on

international travel and tourism. The exchange rates strongly influence hotel demand in luxury,

upper-scale segments. Marriott offers its guest the best rate guarantee which is evaluated in the

currency of the Marriott reservation to help assist in rate discrepancies attributed to fluctuations
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in currency exchange rates (Marriott, help, 2020). When a hospitality firm operates business in

other countries, the impact of the fluctuating foreign currency exchange rate could result in gains

or losses for the company.

The overall weighted score for Marriott is 2.57, indicating it is performing well by taking

advantage of opportunities and managing threats. However, the matrix reveals there are areas in

which management can implement improvement through strategic planning to remain the leader

in the hospitality industry.

Internal Factor Assessment

The Internal Factor Assessment for Marriott allows an opportunity to evaluate major

strengths which contribute to its success while assessing internal weakness for continual

improvement.

Key Internal Factors

Weighted
Weigh
  Strengths t Rating Score

1 The largest hotel company in the world 0.10 4 0.40

2 Large product profile 0.08 4 0.32

3 16% market share in U. S. 0.06 4 0.24

4 High brand recognition 0.06 3 0.18

5 New cancellation policy 0.05 3 0.15
6 Majority of properties are franchised 0.05 4 0.20

7 RevPAR increase 6.6% 0.04 3 0.12

8 Strong luxury brand 0.04 3 0.12

9 Strong global presence (3% market share) 0.03 4 0.12

1
0 Owns less than 1% of its 1.4 million rooms 0.02 3 0.06
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Weighte
Weigh Ratin d
  Weaknesses t g Score

1 Revenue fell 6.6% to 4.68 billion 0.08 1 0.08

2 Excessive focus on expansion 0.07 1 0.07

3 Stock Price down 30% 0.06 1 0.06

4 Data breach lawsuit against Marriott 0.05 2 0.10

Low current ratio 1.83 compared to industry
5 5.58 0.05 1 0.05

6 Over dependence on luxury brands 0.04 2 0.08

7 Management agreements 0.04 1 0.04

8 1/3 of rooms located outside the U.S. 0.03 2 0.06

Growth and development depended upon 3rd
9 party owners/operators 0.03 2 0.06
1
0 Majority of revenue comes from U.S. 0.02 1 0.02
  Total 1   2.53

According to the IFE, Marriott’s major strength is attributed to the fact of being the

largest hotel company in the world. Marriott has 30 brands, located in 135 countries and

territories, 7400 plus properties, and 140 million loyalty members (Marriott, 2020). Marriott’s

well-established brands fuel growth. Marriott’s strategy of “managing, rather than owning, hotels

results in a strong balance sheet and healthy cash flow. This allows for expansion without being

overly limited by debt” (Marriot, 2001).

Another strength for Marriott is its expansive product profile. Marriott is designed to

serve all needs and wants of travelers by offering wide variety of accommodations from luxury
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to business in all areas of the world. Marriott can meet the needs of virtually all guests, even if

travel spending changes.

A major weakness for Marriott is its drastic decline in total revenue. The current

pandemic has led to a “collapse in global travel as governments impose restrictions, companies

halt business trips, conferences were called off and vacations plan put on hold” (Sabastian, 2020,

para 7). The plunge in hotel bookings drastically wiped out profits for Marriott.

Another weakness Marriott is facing are the class-action lawsuits over mass data breach.

Marriott is facing multiple lawsuits stemming from the direct failure to have in place adequate

and reasonable cybersecurity safeguards. Marriott “failed to provide timely, accurate, and

adequate notice to guests whose information may have been obtained by hackers” (Valle, 2019,

para 2). Marriott’s data protection short comings will lead to extensive increase in legal costs

but will negatively affect the company’s reputation with guests and other stakeholders. Marriot is

facing lawsuits in the United States and England.

The overall score of the IFE for Marriott is 2.53. This score signifies Marriott is

continuing to maintain competitive advantage while capitalizing on internal strengths and there is

room for improvement like investing more in cybersecurity to protect against future data

breaches.

SWOT Analysis

Marriott is the largest hotel company globally. The company’s main opportunities consist

of continual economic growth in the middle class globally, increase in domestic and international

travel, and shift in consumer behavior to more luxury accommodations. Major threats in the
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environment include current unprecedented times due to the global pandemic, the industry

fragmentation, and competitive industry.

Marriott strengths include being the leader in the hospitality industry, global presence,

and well-established product brand. Major weakness includes weak financial performance due

the pandemic, tarnation of its reputation due to lawsuits, and excessive focus on global expansion

could lead to dilution of brand perception.

Marriott is taking advantages of opportunities while minimizing external threats and

continually to build upon its strengths and recognizing its weaknesses to implement strategic

planning to increase profitability.

Industry Analysis

Porter’s Five-Forces Model Analysis

Porter’s five forces model, developed by Michael Porter, is a strategic analytical tool to

assess the competitiveness, attractiveness, and profitability of an industry. “Porter’s five forces is

a framework for analyzing a company’s competitive environment” (Chappelow, 2020, para 4).

The five forces are: rivalry among competing firms, potential entry of new competitors, potential

development of substitute products, bargaining power of suppliers, and bargaining power of

consumers.

Rivalry Among Competing Firms

The hospitality industry is a fiercely competitive industry. The existence of the rivalry

among the major competitors in the hotel industry is so enormous that it results in driving down

prices and decreases profitability within the industry. “The intensity of rivalry among firms is

one of the main forces that shape the competitive structure of an industry” (Intensity of rivalry,

n.d. para 1). Intensity of rivalry within an industry affects the competitive environment and
MARRIOTT 15

influences the ability of competitors to achieve profit. In the hotel industry, the nature of

competition is driven by demand and customer expectations. The nature of the competition is

also influenced by traveler’s decision on brand and image associated with a company as it serves

as a guarantee of excellent accommodations and facilities. Competing firms in the hospitality

industry must focus on marketing product differentiation, establish brand recognition, and

customer satisfaction to attract and maintain customers. Common strategies in acquiring or

competing for rival’s business in the hospitality industry include merging with competitors to

increase market share, partnering with airlines and banks to expand loyalty programs, and

providing superior quality amenities and services.

Marriott is able to maintain a competitive edge over its rivals by having an established

strong brand recognition, differentiation in products such as being the first hotel chain to serve

‘Trans Fat-Free food across the U.S, and maintaining customer satisfaction (Bhasin, 2018).

Marriott’s top competitors are InterContinental, Wyndham Worldwide, Hilton Hotels,

Accor S.A., Best Western, Choice Hotels, and Starwood & Resorts (David, 2016). Marriott

remains the largest hotel company in the world due to its many acquisitions and mergers.

Potential Entry of New Competitors

The threat of new competitors entering an industry, is one of the forces that mold the

competitive landscape of a particular industry along with determining the attractiveness of an

industry. When new firms can easily enter a particular industry, the intensity of competitiveness

among firms increases. The threat of new firms entering an industry exerts a significant influence

on the ability of current companies to generate profit. With new competition entering an

industry, the current player’ competitive position will be at risk. The threat of potential entry of

new competitors depend on the ability and barriers to entry. Barriers to entry include the need to
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gain economies of scale quickly, the need to gain technology and specialized know-how, the lack

of experience, strong customer loyalty, strong brand preferences, large capital requirements, lack

of adequate distribution channels, government regulatory policies, tariffs, lack of access to raw

materials, possession of patents, undesirable locations, counterattack by entrenched firms, and

potential saturation of the market (David, 2016, p.73).

The threat to enter the hotel industry is low due to the barriers such as a large scale of

capital for entry. However, the hotel industry faces threats from new entrants in distribution

such as Google, Facebook, Amazon, and Airbnb (Brandau, 2020). Indirect competitors

accumulate global demand and leverage market power to capture profits from the incumbent

firms.

“Overall, the hotel industry is quite fragmented with only around 51 percent of the total

hotel market being derived from the major brand’s properties. The future outlook appears much

more positive for branded hotel companies in general, as 72 percent of hotels currently being

developed belong to major hotel companies” (David, 2016, p.391).

Potential Development of Substitute Products

“The threat of substitutes is the availability of other products that a customer could

purchase from outside an industry. The competitive structure of an industry is threatened when

there are substitutes products available that offer a reasonably close benefits match at a

competitive price” (Threat of substitutes, 2018, para 1). The existence of substitute products

could potentially limit the profitability of an industry.

In the hospitality industry the threats of the potential development of substitute products

are low to moderate. Direct substitutes for staying in hotels include Airbnb’s, people staying

with relatives, friends, RV’s, and camp sites. The hotel industry is facing technology-fueled
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indirect substitutes with the emerging video conferencing such as Zoom and MS Teams, these

forms of communication could lead to the decline in business travel. “Some 33 percent of

workers said video conferencing technology reduces business travel, allowing to conduct

meetings without the expensive, time-consuming trips” (Bayern, 2019, para 9).

Consumer switching costs are low between different accommodation options. Marriott

mitigates the threat of substitutes by inspiring brand loyalty through marketing efforts and

creative incentives like loyalty programs.

Bargaining Power of Suppliers

“The bargaining power of suppliers affects the intensity of competition in an industry,

especially when there are few suppliers, when there are few good substitute raw materials, or

when the cost of switching raw materials is especially high” (David, 2016, p.73).

Marriott has a diverse supplier program, Exchanges, that ensures purchases from socially

diverse -suppliers. Partnering with diverse-owned businesses opens Marriott to immense

opportunities (Marriott, exchanges, 2020). The program provides additional competitive edge

for socially diverse suppliers compared to others. Marriott International Procurement oversees

global procurement and partner’s Avendra supports the company purchasing across the

Americas. Even though, the suppliers are a primordial part of the success of the hotel industry;

the bargaining power of suppliers is low. The surge in availability of supplies and the switching

costs to alternative suppliers are low creating a weaker bargaining power for suppliers in the

hospitality industry. The low supplier power creates a more attractive industry and increases

potential profit for Marriott.

Bargaining Power of Consumers

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“The bargaining power of consumers can be the most important force affecting

competitive advantage. When customers are concentrated or large in number or buy in volume,

their bargaining power represents a major force affecting the intensity of competition in an

industry” (David, 2016, p.74).

The bargaining power of the consumer in the hospitality industry is high. Customers are

constantly demanding value through better quality accommodations or additional services. The

internet provides unlimited access to hotel-specific information allowing customers to compare

and contrast amenities and guest experiences. The heightened ease for consumers to make

comparisons strengthens the consumers bargaining power. The presence of travel fare

aggregators, such as Orbitz, permits consumers to search multiple accommodations

simultaneously and book at discounted prices. The continual advances in technology and

communication contributes to the increase of bargaining power of the consumer in the hotel

industry. There are little, if any, switching costs for the consumer to change to a competitor.

Marriott responds by continually to innovate by challenging the status quo to create

value for the guest, strong brand recognition along with price guarantees, and loyalty programs.

Marriott is limiting the bargaining power of the consumer by creating incentives and

differentiation to prevent the threat of profits.

Competitive Strategies

SWOT Matrix

The SWOT Matrix is an important matching tool that aides in the development of four

types of strategies: SO (strengths-opportunities) strategies, WO (weaknesses-opportunities)

strategies, ST (strengths-threats) strategies, and WT (weaknesses-threats) strategies. The key to

the matrix is to match the strengths with the weaknesses, weaknesses with the opportunities,
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strengths with the threats, and the weaknesses with the threats to establish strategic planning to

continue to improve the strengths while taking advantage of the opportunities and reducing the

effects of weaknesses while avoiding potential threats.

Eight feasible alternative strategies have been identified in the matrix below. The matrix

has revealed two strategies under each category. In the sections following the matrix, the

proposed strategies will be analyzed.

SWOT MATIX

Strengths Weaknesses
1. Largest hotel comapany 1. Lawsuits
2. Large product profile 2. Decrease in revenue
3. 16% U.S. marktet share 3. Over dependence on
4. High brand recognition luxury brand
5. Franchise 4. Growth & development
depended on 3rd party
5. Excess focus on expansion

Opportunities SO Strategies WO Strategies

1. Increase demand in 1. Expand making joint 1. Take advantage of growth
lodging ventures in other countries in middle class in Africa
2. Emerging Asian travel & using local names S1, by building budget
Tourism S4,O1, O2, O3,O5 friendly hotels W3, O3
3. Growing middle class in 2. Focus on innovation in 2. Take advatage of emerging
Africa U.S. to increase additoinal Asian travel by merging
4. Increase in add-on fees features to increase with local hotel chain to
5. Increase in disposable revenues associated with mitgate the growth and
income in China and India add-on fees S3, S4 development dependence
of the 3rd party W4,O2

Threats ST Strategies WT Strategies

1. COVID-19 1. Re-structure to cut costs 1. Venture into new
2. Economic downturns by reducing manpower partnetships food delivery,
3. Flucuating foreign postpone further expansion travel agencies, national
currency exchange rate projectsS1, T1, T2, T3 parks, airlines etc for
4. Airbnb 2. Focus on offering more additional streams of
5. Global expansion discounts via loyalty/credit revenueW2, W3, T1, T2
card programs S1 S2,T1, 2. Fortifying top brands to
T2 eliminate diltion globally
W3, T5

Matching Strategy to Internal and External Conditions

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Matching is a method of identifying competitive advantages by assessing key external

and internal environmental factors to help derive at feasible alternative strategies. The SWOT

matrix identifies key strengths, weaknesses, opportunities, and threats for Marriott. The SWOT

matrix establishes interrelationships among the key internal and external factors. By utilizing the

matching technique in the matrix for Marriott reveals the most prominent points to begin

strategic planning for the company. There are eight feasible strategies to consider for

implementation to assist in the continual growth and prosperity of Marriott.

SO Strategies

“The hotel industry is quite fragmented with only 51 percent of the total hotel market

being derived from the major brand’s properties. The top five hotel brand companies in the world

account for only 41 percent of all branded hotels, leaving many other brands (and “mom and

pop” hotels) divided among the remaining 59 percent of the branded hotel market” (David, 2016,

p.391).

Asia, Middle East, and Africa enjoyed an overall RevPAR of 6.1 percent. Despite this

region does not have comparable numbers of developed hotels as other regions; it is significant

to understand the increase in the growth and demand for lodging in these regions (David, 2016).

The long-term outlook for China’s hotel industry remains positive. China has the world’s

largest population combined with the largest growing middle class. China’s growing economy is

encouraging more internal business travel along with the Chinese government introducing the

five-day work week, offers more generous time for weekend getaways. The total contribution of

the Travel and Tourism sector in China to the nation’s GDP stood at 11% in 2017, which is more

than that of the world which stands at 10.4% in 2017 (The tourism & hotel, 2018). The strong

growth in the domestic and inbound tourism leads to the growth in the hospitality industry. The
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hotel market is predicted to significantly grow with the political and social stability, rapid

economic growth, and the vast population base and natural resources. With an estimated nearly

130 million of annual tourists’ arrival by 2020, the People’s of China will be the world’s number

one tourist destination (China hotel market, 2019). China’s own hotel companies are

comparatively small so for Marriott to make joint ventures or management agreements would

enhance brand recognition globally and increase profits.

It is anticipated the hospitality industry is expected to see modest gains, enhanced by

limited (but positive) supply growth, an improving economy, higher, room rates, and the

willingness for both businesses and individuals to travel in these untapped areas (David, 2016).

Considering the fragmentation in the hospitality industry, the emerging Asian tourism,

growing middle class in Africa, and the increase in disposable income in China; Marriott could

consider expansion by making joint ventures in those regions using the local’s name. Investing in

joint ventures continues to strengthen Marriott’s presence globally while decreasing the

fragmentation of the hotel industry. It would allow Marriot to take advantage of growth

opportunities in other countries while promoting development of the region and its people.

Fees and surcharges emerged as an industry practice in about 1997. There is a unique

opportunity for hotels to produce additional revenues from its asset. The customer’s choice to

purchase additional services is not encumberment by competition (CNN Travel, 2013). Marriott

could increase its revenue stream by investing in research and development to innovative service

offerings to enhance the customer’s experience while promoting financial growth. Marriott

could consider branded offerings which come with specified, distinguish well-defined privileges

to reinforce the consumers’ role in choosing what they want and strengthening the brand’s ability

to provide it (Palmquist, 2014).

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WO Strategies

The affluent make up less than 1% of the world’s population but now command over half

of the global wealth. Marriott International is the biggest player in the luxury hotel sector.

Africa now has the fastest-growing middle class in the world. Some 313 million people, 34% of

Africa’s population, spend USD 2.20 a day, a 100% rise in less than 20 years, according to the

African Development Bank. The bank’s definition of middle class in Africa is people who spend

the equivalent of USD 2 to USD 20 a day- an assessment based on the cost of living for Africa’s

near one billion people. Analysts predict the rate of return on foreign investment in Africa is

higher than any other developing region (The world’s fastest-growing, n.d).

The acquisition of Protea Hospitality Group makes Marriott the largest hotel company in

Africa. Marriott could possibly reduce its dependence on its luxury brands by building budget

friendly hotels to accommodate the economic growth in the middle class. The demand for

moderately price point hotels will gain momentum in this region.

Asia is one of the fastest-growing tourism markets due to the region’s tourism-friendly

policies, low-cost connectivity, and weak currencies. The region is home to six out of the top 10

cities in terms of international visitor arrivals for 2018, according to a new study from Global

Data, an analytics firm. “Visitors from China and European countries are driving the growth of

international arrivals to Asian cites,” said Aditi Dutta Chowdhury, an economic research analyst

for Global Data.

Asia’s growing economy is having a positive impact on the business travel. During the

first eight months of 2019, for the first-time foreign trips within Asia accounted for nearly 80

percent of the market (Asia remains the largest, 2019). The international trips within Asia are

the significant growth driver. There is also an upward trend in trips to destinations within Asia
MARRIOTT 23

attributing to the increase in travel. Per trip, Asian travelers spend considerably more than other

nationalities, despite the shorter stays (Asia remains the largest, 2019). By 2030, North East Asia

is expected to be the most visited destination in the world (Asia’s global travel, 2014). The most

popular destinations for Asian travelers are other Asian countries.

Given the factors of the immense emerging travel and growing economy in this region,

there is a great potential for Marriott to expand its brand by merging with local hotel chains to

mitigate the growth and development dependence of the third party. To leverage Marriott’s

power system, it should provide support through training and equipping the hotels to strengthen

its brand and gain loyalty in the new regions. Marriott is well positioned for this opportunity to

attract new guests and capture an increasing share of guests’ travel spending.

ST Strategies

Marriot is the largest hotel company, to experience continual growth and success in a

highly competitive industry which is currently facing uncertainty and fluidity due to the impact

of the coronavirus, the company needs to focus on re-structure to cut costs, postpone further

expansion projects, and reduce franchise/ managerial fees to support the owners of the hotels and

communities. The coronavirus pandemic has curbed global travel and led to a plunge in room

bookings.

Re-structuring consists of elimination of single-use plastic products, reduction in

operating expenses to offset the decline in revenues in these unprecedented times and expand

with current partners, i.e. credit card companies. The elimination of single-use products not only

reduces the environmental impact but would substantially reduce costs for the company. For

Marriott to remain competitive and profitable, change is inevitable.

MARRIOTT 24

To reduce operating costs, Marriott should re-structure or downsize its staff to improve

its bottom line to respond to the economic conditions. Reduction in operating costs will have a

direct impact on its profitably.

Suspension or delay of new development would decrease the investment spending. The

company could defer at least one-third of the $700-$800 million it anticipated to spend this year

(Marriott’s Sorenson, 2020).

Marriott offers a large product profile; an effective way to entice customers during these

unprecedented times would be to focus on offering deeper discounts, incentives through the

loyalty and credit card programs and implementing day stays. The loyalty program is a low cost

and high impact vehicle for revenue generation efforts. The loyalty program rewards members

with points toward free nights, experiences, and additional benefits with participating partners

such as airlines. The loyalty program generates substantial repeat business. In 2018, the loyalty

program members approximately purchased 50 percent of the company’s room nights. Marriott

has multi-year agreements with JP Morgan Chase and American Express for U.S. -issued, co-

brand credit cards associated with the loyalty program. Marriott also licensed credit cards

programs in Canada, the United Kingdom, United Arab Emirates, and Japan (Marriott, annual

report, 2018).

Capitalizing on its large product profile to increase occupancy rates through loyalty and

incentive programs would benefit Marriott as a long-term value-added advantage during

economic downturns. Consumers are always seeking more value for dollars spent.

WT Strategies

Marriott’s total revenue plunged 72.4% to $1.46 billion and reported an 84.4% decline in

revenue per available room (RevPAR)- a key performance measure for the hotel industry, as the
MARRIOTT 25

virus hits bookings (Marriott posts bigger, 2020). It may take a few years for the demand in the

hospitality sector to return to pre-COVID levels.

It is evident Marriott should formulate a strategy to increase revenue until demand levels

normalize. Marriott is currently in the customer service business with a large product profile and

many established partnerships, it should consider joint ventures/ partnerships with food delivery,

travel agencies, and national parks to enhance the customer’s experience. Growth in different

segments would generate revenue to offset the losses from the decline in demand in hotel rooms.

Financial Analysis

Growth Rates

Growth rates refer to the percentage change of a specific variable with a specific time

period. For investors, growth rates typically represent the compounded annualized rate of

growth of a company’s revenues, earnings, dividends or even macro concepts, such as gross

domestic product (GDP) and retail sales. Growth rates are used to express the annual change in

variable as a percentage, such as revenues or investments. Growth rates are utilized by analysts,

investors, and a company’s management to assess a firm’s growth periodically and make

predictions about the future performance (Investopedia, 2020).

Marriott’s current sales (revenue) growth rate is -72.40 meaning the company is in a

downward trend. Marriott is underperforming compared to the overall industry which is

experiencing an overall growth rate of 3.73% (MSN, 2020).

Net income is a useful number for investors to assess how much revenue exceeds the

expenses of an organization. It is an indicator of a company’s profitability. Business analysts

often refer to net income as the bottom line since it is at the bottom of the income statement once

all expenses, interest, and taxes have been subtracted from the revenues (Investopedia, 2020).
MARRIOTT 26

Marriot’s net income is -31.78 %, compared to the industry’s average of -210.66.

Marriott is performing better compared to the industry but the negative numbers indicate the

hospitality business is currently struggling to make remain profitable.

Price Ratios

Price ratios are associated with the stock market and provide management with an

indication of what investor’s think of a company’s future based on past performance (Besley &

Brigham). “The P/E ratio shows how much investors are willing to pay for the firm’s stock for

each dollar of reported profits” (Besley & Brigham, 2019, p.35). A high P/E ratio could mean

that a company’s is over-valued, or else that investors are expecting high growth rates in the

future (Investopedia, 2020).

Marriott’s current P/E ratio is 72.83, the industry’s average is reporting the same current

P/E ratio, 72.83 (MSN, 2020). This is representation that investors are not willing to pay more

or less than the industry average for Marriott’s stock. Potential growth for Marriott and the hotel

industry is questionable at this time.

“The price sales ratio (P/S) is a valuation ratio that compares a company’s stock price to

its revenues. It is an indicator of the value placed on each dollar of a company’s sales or

revenues” (Investopedia, 2019). Marriott’s price/sales ratio is currently 1.57; which is less than

the industry average of 2.46 (MSN, 2020). This indicates investors were not willing to pay as

much for Marriott’s stock per dollar of sales as compared to other hotel companies with in the

hospitality industry. “A low ratio could imply the stock is undervalued” (Investopedia, 2019).

The price/book ratio is another indicator how investors view a company; “relates the

firm’s stock price to its earnings and book value per share” (Besley &Brigham, 2019, p.35).

Marriott’s price/book value is currently 46.90 compared to the industry’s average of 2.46.
MARRIOTT 27

Marriott’s price/book value is much higher than the industry’s revealing investors are paying a

significantly more than for Marriott’s book value than any other competitor in the hotel industry.

Profitability Ratios / Profit Margins

Profitability ratios are a class of financial metrics that are used to assess a business’s

ability to generate earnings relative to its revenue, operating costs, balance sheet assets, or

shareholders’ equity over time, using data from a specific point in time (Investopedia, 2020).

Profitability ratios show how efficiently a company generates profit and value for a shareholder.

Higher profitably ratios are more favorable as it is an indication on how well the company is

performing.

Gross margin is one of the most used profitability ratios. It is the difference between

revenue and the cost of goods sold (Investopedia, 2020). It is the ability to turn sales into profit.

Marriott’s gross margin is 15.34, compared to the industry’s average of 45.44 (MSN, 2020). It is

obvious, Marriott is experiencing difficulties turning sales into a profit. Marriott has less money

from sales after COGS compared to other companies in the industry. Marriott is performing well

below the industry’s average.

Net profit margin shows how much of each dollar collected by a company as revenue

translates into profit (Investopedia, 2020). Net profit is referred to a company’s bottom line. It

is the amount of profit remains once all expenses have been accounted for. Net profit helps

investors assess if a company’s management is generating enough profit from its sales and

whether operating costs and overhead coast are being contained. It is one of the most important

indicators of a company’s financial health (Investopedia, 2020). Marriot’s net profit margin is

6.07, compared to the industry’s average of 7.37 (MSN, 2020). Marriott is performing below the
MARRIOTT 28

industry’s average, making less profits compared to other companies with respects to managing

expenses.

Financial Condition

The current ratio, leverage ratio, book value per share, and the debt/equity ratio can be

used in assessing the financial health of a company. To measure the financial condition of

Marriot the following ratios will be assessed: current ratio, debt/equity, and the book per share

ratio.

The current ratio is a liquidity ratio that measure’s a company’s ability to cover its short-

term obligations with its current assets. It tells investors how a company can maximize the

current assets on its balance sheet to satisfy its current debt and payables (Investopedia, 2020).

The current ratio is sometimes referred to as the “working capital” ratio and helps investors

understand more about a company’s ability to cover its short-term debt with its current assets

(Investopedia, 2020). Marriott’s current ratio is 0.67, compared to the industry’s average of 1.07

(MSN,2020). Marriott’s current ratio is lower than the industry average which indicates a higher

risk of distress or default. The ratio under 1 indicates that the company’s debts due in a year or

less are greater than its assets (cash or other short-term assets expected to be converted to cash

within a year) (Investopedia, 2020). The current ratio for Marriott indicates the possibility of

struggling to pay its bills.

The debt-to-equity ratio indicates how much debt a company is using to finance its assets

relative to the value of shareholders’ equity. It helps in measuring the financial health of a

company since it shows the proportion of equity and debt a company is using to finance its

business operations. It is also a signal to which shareholder’s equity can fulfill to creditors, in

the event a business declines (Investopedia, 2020). Marriott’s debt/equity ratio is -1,000
MARRIOTT 29

compared to the industry’s average of 1.27 (MSN, 2020). Marriott’s lower ratio indicates

Marriott has a lower amount of financing by debt. Marriott has a significant larger equity base in

comparison to the debt. Marriott is relying on its available equity to meet its operations.

Book value per share is another financial health assessment tool. Book value per share

indicates the dollar value remaining for common shareholders after all assets are liquidated and

all debtors are paid (Investopedia, 2020). Marriott’s book value per share is -0.24, compared to

the industry’s average of 0.60 (MSN, 2020). In the event Marriott were to dissolve operations

after all assets are liquidated and debts paid, shareholders would not receive compensation.

Investment Returns

Assessing investment return ratios such as return on equity, return on assets, and return

on capital assist measuring financial condition and how efficiently management is doing its job

of managing the capital entrusted to it to generate profits.

Return on equity is a measure of financial performance calculated by dividing net income

by shareholders’ equity. ROE is considered a measure of how effectively management is using a

company’s assets to create profits. Marriott’s return on equity is 79.76, compared to the

industry’s average of 12.86 (MSN, 2020). The first potential issue with a high ROE could be

inconsistent profits, second is excess debt, and third negative net income and negative

shareholder equity can create an artificially high ROE (Investopedia, 2020).

Return on assets is an indicator of how profitable a company is relative to its total assets.

ROA gives a manager investor, or analyst an idea as to how efficient a company’s management

is at using its assets to generate earnings. ROA is calculated by dividing a company’s net

income by total assets. It is the simplest of such corporate bang-for-the-buck-measures

(Investopedia, 2020). A higher ROA indicates mire asset efficiency. It helps give investors an
MARRIOTT 30

idea of how effective the company is in converting the money into net income. Marriott’s return

on assets is 1.83, compared to the industry’s average of 5.58 (MSN, 2020). Marriott’s

management is doing well converting its investment into profits compared to the industry as a

whole. For every dollar Marriott has invested in assets generates 1.83 cents of net income. It

appears that Marriott’s management is not allocating its resources efficiently.

Return on capital is used to assess a company’s profitability and capital efficiency. It

helps provide an understanding of how well a company is generating profits from its capital

(Investopedia, 2020). Marriott’s return on capital is 2.38, compared to the industry average of

5.84 (MSN, 2020). Marriott’s lower return on capital is indicating a weaker profitability

compared to other hotels in the industry.

Management Efficiency

According to MSN, Marriott’s income per employee is $7.27k. The industry’s average is

reported as $-20.45k (MSN, 2020). The revenue per employee measures how much money each

employee generates for the company. Revenue per employee also suggests that a company is

using its resources wisely by developing workers who are very productive. Increased efficiency

in managing its revenue per employee should lead to a company’s expanding margins and

improved profitability (Investopedia, 2020). It can be determined that Marriott’s employees are

more productive, lower employee turnover, and Marriott is efficiently utilizing its employees.

Marriott is standing my its core values of putting people first “take care of the associate and they

will take care of the customer and the customer will come back again and again” (Marriott,

2020).

Five-Year Summary
MARRIOTT 31

Marriott’s current average gross margin 5-year annual average is 16.83 compared to the

industry’s average of 45.19 (MSN, 2020). Over a last five-year period, Marriott has less money

left over from sales after COGS compared to other companies in the hospitality industry.

Marriott’s total revenue between 2016-2019 ($15,407M, $20,452, $20,758, $20,972) has

continued to rise (MSN, 2020). Looking at the company’s financial report there was a significant

rise in operating income between 2016 and 2017 from $1,424 to $2,504 but in the years

following there was a constant decrease (MSN, 2020). Operating income measures the amount

of profit realized from a business’s operations, after deducting operating expenses such as wages,

depreciation, and cost of goods sold (Investopedia, 2020). Operating income reveals how much

of a company’s revenue will eventually become profits. Between 2016 and 2017, Marriott was

seen as favorable because the company’s management is generation more revenue while

controlling expenses and overhead. Since Marriot in the past few years has experienced a

continuous decline in operating income the assumption can be made that management is not

doing as well as it was in previous years controlling expenses to generate a profit.

Marriott’s net income from 2016-2019 has a very similar trend as the operating income.

From 2016-2017, there was a significant increase from $808M to $1,459M (MSN,2020). In the

years following 2018-2019, the net income declined from $1,907M to $1,273M (MSN,2020).

Companies that increase net income have more cash to invest in the company’s future, pay

dividends, and buyback stock (Investopedia, 2020).

Marriott’s revenues continue to increase but the its income continues to decrease which is

an indication that the profit margin is decreasing as well. Marriott’s management needs to

control expenses better to improve its financial position in the future.

QSPM Matrix
 MARRIOTT 32

QSPM STRATEGIC ALTERNATIVES

 MARRIOTT 33

Expansion
by
Merge with building Re-
local hotels budget structure
in other friendly to cut
countries hotel in costs
other
countries

Key Factors Weight AS TAS AS TAS AS TAS

Opportunitie
s        

1 The increase in demand for lodging supply 0.15 3 0.45 3 0.45 - -

2 Emerging Asian travel / tourism markets 0.10 3 0.30 3 0.30 - -

3 Growing middle class in Africa 0.08 3 0.24 2 0.16 - -

4 4.4% overall RevPAR growth 0.06 2 0.12 4 0.24 - -

5 Add-on fees 0.05 - - - - 0..20

6 Emerging markets 0.05 2 0.10 2 0.10 - -

7
Increase in disposable income in China and Indi 0.04 3 0.12 3 0.12 - -

Threats  

1 COVID-19 0.07 - - - - 4 0.28

2 Fluctuating foreign currency exchange rate 0.06 2 0.12 2 0.12 4 0.24

3 Fragmented and competitive industry 0.06 3 0.18 3 0.18 4 0.24

4 Global expansion 0.04 2 0.08 2 0.08 - -

 MARRIOTT 34

5 Changes in privacy/data security laws 0.04 - - - - - -

6 Terrorism/ political unrest 0.03 2 0.06 2 0.06 - -

7 Economic downturns 0.03 - - 2 0.12 4 0.12

8 Environmental regulations 0.02 2 0.04 2 0.04 - -

9 Labor regulations/ negotiations 0.02 2 0.04 2 0.04 4 0.08

10 A new source of lodging supply (Airbnb) 0.02 2 0.04 2 0.04 - -

Strengths  

1 The largest hotel company in the world 0.10 3 0.30 3 0.30 4 0.40

2 Large product profile 0.08 2 0.16 2 0.16 3 0.24

3 16% market share in the U.S. 0.06 - - - - 2 0.12

4 High brand recognition 0.06 2 0.12 2 0.12 - -

5 New cancellation policy 0.05 - - - - 3 0.15
6 Majority of properties franchised 0.05 - - - - 2 0.10

7 RevPAR increase 6.6% 0.04 2 0.08 2 0.08 - -

8 Strong luxury brand 0.04 2 0.08 - - - -

9 Strong global presence (3% market share) 0.03 2 0.06 2 0.06 - -

10 Owns less than 1% of its 1.4M rooms 0.02 2 0.04 2 0.04 3 0.06

Weakness  

1 Revenues fell 6.6% to 4.68B 0.08 - - - - 4 0.32

2 Excessive focus on expansion 0.07 - - - - 3 0.21

3 Stock price down 30% 0.06 - - - - 3 0.18

4 Data breach lawsuit 0.05 - - - - 2 0.10

5 Low current ratio 1.83 compared to industry 5.58 0.05 - - - - 2 0.10

MARRIOTT 35

6 Overdependence on luxury brands 0.04 - 2 0.08 2 0.08

7 Management agreements 0.04 1 0.04 1 0.04 - -

8 1/3 rooms located outside U.S. 0.03 - - - - -

9 Growth and development depended upon 3rd parties 0.03 - - - - - -

10 Majority of revenues comes from U.S. 0.02 2 0.08 4 0.08 - -

TOTAL 2.85 3.01 3.32

Strategic Alternatives

The Quantitative Strategic Planning Matrix (QSPM) objectively determines the relative

attractiveness of each strategy considered for implementation. The QPSM uses the key external

opportunities and threats and internal strengths and weaknesses, and assigns an attractiveness

score based on if it enables the firm to either capitalize on the strength, improve on the weakness,

exploit the opportunity, or avoid the threat (David, 2016). The QSPM provides a total

attractiveness score for each strategy considered for implementation. The strategy with the

highest attractiveness score determines represents the most effective strategy for implementation.

The QSPM model evaluated three strategies. The three strategies evaluated were merge

with local hoteliers in other countries using local names, expansion by building budget friendly

hotels in growing countries, and re-structure to cut costs to remain the largest hotel company in

world.

The first strategic alterative presented in the QSPM is the opportunity for Marriott to

continue global expansion by merging with local hoteliers by using local names. With the surge

in disposable income, foreign countries become more affluent, and an increase in travel the

demand for lodging has expanded. The hotel fragmentation is more pronounced in foreign
MARRIOTT 36

markets than the U.S. (David, 2016). Marriot could potentially use its large product profile and

its brand loyalty to penetrate the foreign market. It would benefit Marriott to use the local names

to alleviate growth and dependence of the Marriott brand on a third party. Merging with the

locals would limit the possibilities of being subject to terrorism and anti-corruption laws.

Marriott could increase its global market share, competitive advantage, and increase profits. The

total attractiveness score for this alternative strategy was 2.85. Porter’s Type 5 focus generic

strategy of best-value would be applied to this strategy. This strategy provides growth potential

and Marriott continues to focus on its hotel businesses by announcing plans to double its

presence globally (David, 2016).

The second alternative strategy evaluated in the QSPM is expansion by building budget-

friendly hotels in emerging markets. The total attractiveness score for this strategy is 3.01. New

budget-friendly developments in emerging markets would cater to lodging demands for the

incomes in the particular areas. Marriott primarily focuses on the luxury brand products but

there is a large population which cannot afford the luxurious products Marriott has to offer. To

take advantage of the emerging markets, Marriott could introduce a low-cost brand to cater to the

income level of the area’s population. The hospitality industry is a highly competitive industry,

this strategy creates an opportunity to concentrate on a particular niche group of customers and

geographic markets. This strategy focuses on Marriott’s continual expansion using Porter’s

Type 4 low-cost generic strategy.

Restructure to reduce costs and increase efficiency is the third alternative strategy

presented for evaluation in the QSPM matrix. For Marriott to remain the largest hotel company

in world, it must respond quickly to the current economic conditions presented due to the

COVID-19 pandemic. “The pandemic has negatively affected global economic growth beyond
MARRIOTT 37

anything experienced in nearly a century. In the months since COVID-19 outbreak was first

diagnosed, it has spread to over 200 countries and all the U.S. states. Estimates so far indicate

the virus could reduce the global economic growth rate of -4.5% to 6.0% in 2020”

(Congressional research, 2020, para 1). To reduce the impacts and to survive beyond the

pandemic, Marriott needs to restructure to reduce costs and to increase efficiency. Of all the

prospective strategies, this strategy has the highest total attractiveness score of 3.32. This

alternative strategy would encompass Porter's Type 2 generic strategy of cost leadership.

Marriott could extend co-brand deals with its co-brand credit cards to issue more points to the

customers to increase its occupancy rate and encourage travel. This would allow Marriott to raise

additional cash to support operations during the current pause in travel due to the coronavirus

(Clark, P & Surane, J, 2020). This strategy allows Marriott to extend services to a broader

customer base at the best-value in comparison to the competition while revamping the

company’s value chain to eliminate cost-producing activities (David, 2016).

Recommendation

According to the QSPM, the alternative strategy with the highest total attractiveness

score should be the strategy for implementation. The strategy recommended for implementation

for Marriott is to restructure to reduce costs and increase efficiency to adhere to the current state

of the global economy. This strategy comprises factors which were determined in the EFE, IFE,

and SWOT matrices.

Devising a strategy for restructuring is a long-term objective which should be

implemented and assessed at all levels of the business; corporate, divisional, and managerial.

The strategy to restructure includes to extend deals with co-brand credit cards, delaying all

regular cycle renovations, evaluate which hotels may need to be closed temporarily or
MARRIOTT 38

permanently, elimination of single use products, ease the burdens of owners by postponing fees

associated with management and franchise agreements, halt all share repurchases, investment

spending, reduce marketing costs, operating expenses, postponed any new developments,

suspension or reduction in executed salaries, and furlough of employees. Marriott must cut costs

to match the lowered expected revenues. These are aggressive measures to manage costs and

balance sheets but necessary for survival during and beyond the pandemic.

Ethical and Social Responsibility

Today, business plays an increasingly critical role in social, environmental, and economic

issues. Marriott has a “responsibility, a unique opportunity to be a force for good, and to uphold

ethical and legal standards” (Marriott, 2020). Marriott believes in making the communities in

which it operates a better place to live, work, and visit. Marriott with the support of credit card

partner, American Express and JPMorgan committed to provide $10 million worth of hotel stays

for healthcare professionals leading the fight against COVID-19 in the United States. The

initiative, called Rooms for Responders, will provide free rooms in some of the areas most

impacted. In a separate effort for frontline healthcare workers, Marriott has joined with a number

of hotel owners and franchisee partners to launch the Community Caregiver Program. This

initiative provides significantly discounted rates for first responders and health care professionals

who want to book rooms at hotels in close proximity to the hospitals where they’re working

(Marriott, 2020). As hotels were closing due to the decline in travel many Marriott’s donated

unused produce and food products to local children’s charities, along with providing needed

supplies like cleaning products etc. to assist the local communities (Marriott, 2020).

Restructuring is now a periodic necessity to enhance shareholder’s value. However, the

plan to restructure may present some ethical issues because it goes against Marriott’s core value
MARRIOTT 39

of “putting the people first.” The ethical dilemma is the rights and obligations of the different

stakeholders involved. The employees who may be furloughed, dismissed, the remaining

employees, as well as the effects on the local communities are all factors contributing to the

ethical responsibility of Marriott. Departures and severance packages must be delicately

managed.

The use of Utilitarianism is active in Marriott’s ethical system. “The utilitarian approach

to ethical reasoning emphasizes the utility, or the overall amount of good, that might be produced

by an action or a decision” (Ethics, n.d. para 13). Utilitarianism focuses on the actions which

will produce the greatest good for the greatest number of people. This approach encompasses

the cost-benefit analysis. Marriott is focused on the benefits out weighing the costs in its strategic

plan to restructure. Since Marriott is concerned with the how the strategy will benefit the mass

majority, it is willing to sacrifice the rights of those in the minority. “Utilitarianism is attractive

to many business people, since the philosophy acknowledges that many actions result in good

consequences for some, but bad consequences for others” (Ethics, n. d, para 14).

The Markkula app is an essential tool for ethical decision making. Marriott’s strategic

plan for restructuring was rated a 46 on the Markkula Center for Applied Ethics. Stating the

option is questionable and possibly needs modification (Markkula Center, n.d.).

Implementation Plan

Marriott’s implementation plan will require a shift in responsibilities from strategist to

divisional and functional managers. Marriott will have a strong implementation plan which will

involve all top executives globally to adhere to the strategic restructuring to survive beyond the

pandemic. The implementation plan will consist of global communication meetings to discuss

and establish the details of the restructure plan, operational impacts, and financial implications.
MARRIOTT 40

Open communication and transparency are vital in tough times to preserving morale. The global

meetings will be headed by J. W. Marriott, the Executive Chairman and Chairman of the Board.

Marriott’s main objective will focus primarily on establishing the implementation of the re-

structure plan to sustain viability during and beyond the ramifications of the pandemic. This is

essential for setting the tone for the company to adhere to the structural changes necessary for

survival.

Preceding Marriott’s initial address, the President and Chief Executive Officer, Arene

Sorenson will provide the operational details of the implementation plan to global team members

and announce him announcing his suspension of his salary for the rest of the year along with

50% reduction in senior executives’ salaries to cut costs and amid global hotel closings and low

occupancies due to the coronavirus pandemic. Leeny Oberg, Executive Vice President and Chief

Financial Officer will provide additional financial aspects of the plan to offset the revenue losses

due to the pandemic such as voluntary separation agreements, furlough of employees, shortening

work weeks, and reduction in all non-essential spending. Oberg estimates cost-cutting measures

will reduce costs by $140 million. The hospitality business is running 75% below normal levels.

Marriott will follow a divisional organizational structure to assist with maximizing results

while reducing costs and managing resistance to change. Tasks will be divided among the

following departments: Operations, Finance, Human Resources, and Marketing.

Executives:

 Present clear objectives to employees and partners globally, enable open lines of

communication and maintain complete transparency.

 Ensure all team members are on board and fully comprehend the goals and objectives.
MARRIOTT 41

 Maintain accuracy and progression of timeline and budget as the implementation of the

plan proceeds.

 Keep team members update on a continuous basis especially with any changes.

Finance:

 Obtain funding required to maintain sustainability during pandemic.

 Maintain financial progression measurements to monitor status throughout the restructure

plan.

Marketing:

 Develop cost efficient marketing strategies to sustain brand awareness. Utilize all rewards

and loyalty programs to promote occupancy rates.

 Minimize marketing spending and expansion projects.

Research & Development:

 Develop cost reduction strategies.

 Study and draw conclusions concerning the effects of eliminating the plastic single use

products.

 Investigate the rewards programs, and incentive packages.

 Conduct research on underperforming divisions and competitors.

Human Resources:

 Ensure the work force employed is skilled and educated in the necessary scopes of the

restructuring plan.

 Maintain progression measurements to monitor status throughout the implantation stages

as well as post-formation of the strategic implementation plan.

MARRIOTT 42

Restructuring involves reducing the size of the firm in terms of number of employees,

number of divisions or units, and number of hierarchical levels in the firm’s organizational

structure. The reduction in size is intended to improve both efficiency and effectiveness.

The primary benefit sought from restructuring is cost reduction (David, 2016, p. 222).

Timely, open, and clear communication is vital to preserving the morale and success of

the implementation plan. Open lines of communication will ease the resistance to change

during the strategic-implantation process. It is estimated Marriott will not return to pre-

pandemic levels of business for three years. The costs incurred to ensure increase efficiency,

retrenchment packages, voluntary transition packages, accrued vacation and sick pay,

supplemental unemployment benefits, increase in unemployment tax rate, potential lawsuits

from aggrieved employees, pension and benefit payouts, administration processing costs,

mergers with competitors, the cost of rehiring former employees, and increase liquidity are

estimated at $1 billion.

Sorenson and Oberg will perform vital roles in these tasks assisted by Liam Brown;

Group President of Europe, Middle East and Africa, Anthony Capuano; Group President,

Global Development, Design and Operation Services, David J. Grissen; Group President of

the Americas, Stephanie Linnartz; Group President-Consumer Operations, Technology and

Emerging Business, Tricia Primrose; Executive Vice President and Global Chief

Communications and Public Affairs, Rena H. Reiss; Executive Vice President and General

Counsel, and David A. Rodriguez; Executive Vice President and Global Chief Human

Resources Officer, and Craig Smith; Group President Asia Pacific.

Marriott will sustain a sizeable financial requirement in order to successfully implement

the restructuring plan. This portion of the project will be overseen by Leeny Oberg, Chief
MARRIOTT 43

Financial Officer of Marriott. Leen Oberg will conduct extensive financial research to

provide Marriott with the best financial alternatives to obtain liquidity and while offering

employees voluntary severance packages. Oberg’s main objective is to increase liquidity.

Marriott has experienced a significant decline in management and franchise fees due to the

reduction in lower net house profits at many hotels related to low occupancy rates due to the

pandemic. Marriott has an “asset-lite” approach, it owns very few properties.

The majority of the tasks will be performed by the Human Resources department which

is headed by David A. Rodriguez, Executive Vice President and Global Chief Human

Resources Officer. HR plays a vital role in the implementation of plan. Human resources

will distribute the majority of the communications and transition packages to employees

while addressing issues and concerns.

Financing

Marriott has three alternatives to raise capital: equity, debt, or a combination of debt and

equity. To consider the financing options for restructuring for Marriott, the following

options have been considered in the EPS/EBIT analysis:

 Amount required: 1 Billion

 EBIT Range: $1 - $3 Billion

 Interest Rate: 3.95%

 Tax Rate: 20.39%

 Stock Price: $115.34

 Shares Outstanding: 324.33 Million

EPS/EBIT Analysis

  Common Stock Financing   Debt Financing

  Recession Normal Boom   Recession Normal Boom
 MARRIOTT 44

$1,000,000,00 $2,000,000,00 $3,000,000,00 $1,000,000,00 $2,000,000,00

EBIT 0 0 0   0 0 $3,000,000,000
Interest 0 0 0   39,500,000 39,500,000 39,500,000
EBT 1,000,000,000 2,000,000,000 3,000,000,000   960,500,000 1,960,500,000 2,960,500,000
Taxes 203,900,000 407,800,000 611,700,000   195,845,950 399,745,950 603,645,950
EAT 796,100,000 1,592,200,000 2,388,300,000   764,654,050 1,560,754,050 2,356,854,050
# Shares 333,000,019 333,000,019 333,000,019   324,330,000 324,330,000 324,330,000
EPS $2.39 $4.78 $7.17   $2.36 $4.81 $7.27

Stock 70% Debt 30%

  Recession Normal Boom
$3,000,000,00
EBIT $1,000,000,000 $2,000,000,000 0
Interest 11,850,000 11,850,000 11,850,000
EBT 988,150,000 1,988,150,000 2,988,150,000
Taxes 201,483,785 405,383,785 609,283,785
EAT 786,666,215 1,582,766,215 2,378,866,215
# Shares 330,399,013 330,399,013 330,399,013
EPS $2.38 $4.79 $7.20

Stock 30% Debt 70%

  Recession Normal Boom
EBIT $1,000,000,000 $2,000,000,000 $3,000,000,000
Interest 27,650,000 27,650,000 27,650,000
EBT 972,350,000 1,972,350,000 2,972,350,000
Taxes 198,262,165 402,162,165 606,062,165
EAT 774,087,835 1,570,187,835 2,366,287,835
# Shares 326,931,006 326,931,006 326,931,006
EPS $2.37 $4.80 $7.24

The analysis displays each of four financing options produce very close EPS results.

Based on the analysis to can be determined Marriott should capitalize on the debt financing

strategy. The debt financing is the most attractive financing alternative revealing the highest

EPS values for the company. Earnings per share is perhaps the best measure of a company’s

success.
MARRIOTT 45

Projected Income Statement

Marriott Pro Forma Projected Income Statement

Projected Income Statement 12/31/2021 12/31/2022 12/31/2023

Revenues $21,101,850,000 $22,789,998,000 $25,068,997,800
Cost of Goods Sold 16,881,480,000 18,231,998,400 20,055,198,240
Gross Profit 4,220,370,000 4,557,999,600 5,013,799,560
Operating Expenses (1,055,092,500) (1,823,199,840) (2,506,899,780)
EBIT 5,275,462,500 6,381,199,440 7,520,699,340
Interest Expense 0 0 0
EBT 5,275,462,500 6,381,199,440 7,520,699,340
Tax 105,509,250 191,435,983 150,413,987
Non-Recurring Events 0 0 0
Net Income 5,169,953,250 6,189,763,457 7,370,285,353

The projected Income Statement shows data ranging over the next three consecutive

years. The first year displays a projected 5% increase in revenue due to the cost cutting

measures implemented. The second year exhibits potential growth of 8% in revenues due to the

suggested restructuring strategy. The third year show a projected growth of 10% providing there

has been vaccine to fight the pandemic, the economy is beginning to recover, and the cost-

effective measures are implemented and continued to be monitored.

Conclusion

In conclusion, Marriott’s suggested strategy, restructure, is necessary to sustain viability

during these unprecedented times. The strategy is achievable with clear communication, focus,

and commitment to reducing operating expenses. Marriott’s strategy must improve its liquidity
MARRIOTT 46

position. The restructuring plan allows Marriott to survive beyond the pandemic but ensures the

company maintains its position as the largest hotel company in the world.

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MARRIOTT 50

Appendix A

Marriott Projected Balance Sheet

Projected Balance Sheet 12/31/2018 12/31/2019 12/31/2020

Assets      
Cash and Equivalents $5,178,533,250 $11,368,296,707 $18,738,582,060
Accounts Receivable 1,973,000 1,973,000 1,973,000
Inventory 0 0 0
Other Current Assets 1,398,000 1,398,000 1,398,000
Total Current Assets 5,181,904,250 11,371,667,707 18,741,953,060
Property Plant & Equipment 2,740,000 2,740,000 2,740,000
Goodwill 9,207,000 9,207,000 9,207,000
Intangibles 8,544,000 8,544,000 8,544,000
Other Long-Term Assets 876,000 876,000 876,000
Total Assets 5,203,271,250 11,393,034,707 18,763,320,060
       
Liabilities      
Accounts Payable 783,000 783,000 783,000
Other Current Liabilities 5,024,000 5,024,000 5,024,000
Total Current Liabilities 5,807,000 5,807,000 5,807,000
Long-Term Debt 0 0 0
Other Long-Term Liabilities 20,264,000 20,264,000 20,264,000
Total Liabilities 26,071,000 26,071,000 26,071,000
       
Equity      
Common Stock 5,000 5,000 5,000
Retained Earnings 5,177,195,250 11,366,958,707 18,737,244,060
Treasury Stock 0 0 0
Paid in Capital & Other 0 0 0
Total Equity 5,177,200,250 11,366,963,707 18,737,249,060
       
Total Liabilities and Equity 5,203,271,250 11,393,034,707 18,763,320,060
MARRIOTT 51