Marriott Corporation 02/11/15
BUS 590: Innovative Business Models for the ‘Next’ Economy
Team A: Congying Ling | Devon Nobles | Sai Prashant Boy Reddy | Snehal Ramtekkar
J.W. Marriot founded the Marriot Corporation (MC) in the year 1927. The main business of this corporation was developing hotel properties around the world and selling them to outside investors while retaining lucrative long-term management contracts. By 1991, MC had around 202,000 employees ranking it as the 12th largest employer in the United States. The 1986 tax reform act ended ...view middle of the document...
Because HMC would be valued more on the basis of the chance of appreciation in its property holdings than on expected income, the company would be under less pressure from investors to sell off hotels at distressed prices. As they are separate entities, MII’s losses (if any) will not impact MII’s positive earnings. Unburdened by debt, MII would have the ability to raise additional capital to finance growth, perhaps to participate in the consolidation of the hotel industry by purchasing the assets of competitors in financial difficulty.
The stock holders will be given equal value stocks in HMC, and while they would benefit from Project Chariot, the situation was quite different for bondholders. Although MC management was confident that HMC would have the financial strength to make all payments of interest and principal on long-term obligations when due, the separation of the two companies would affect the security of MC debt holders. This is currently the biggest concern for MC as their decision could hurt their current bond holders dearly and this might even result in bad press in the eyes of the future potential investors in either of the companies.
Each country has a different set of politics, rules and regulations which effects every business. In the case of Marriott policy on health, non-smoking rooms, the tourism policies also have a huge effect.
Also hotel development means stable taxes for the government, hence, easy for foreign investors to get approval for investment.
An increase in inflation rate would have an adverse effect on customers’ purchasing power and would reduce the overall sales in the hotel industry causing difficulties at Marriott. This would have a significant effect on sales, since customers may seek to satisfy their physiological needs before any other.
Customers have a fixed budget when they plan their vacations, thus, if force to spend more on airfare their ability to spend on hotel room declines, also, business travelers are slowing down, because is cheaper to conduct meeting via the web and conference calls.
As mentioned in the case, The Economic Recovery tax act of 1981 ($9 for every invested $1) aided the sales of Marriott. But during the 1990 the real estate market collapsed having an adverse effect on the Marriott’s real estate business. End of boom in 1988 lead to stagnant business.
Attaining a distinctive atmosphere has become a pivotal concern for hospitality managers, where workers render personal services to customers and try to retain them. Thus, demand for products is not brought about by the quality of services, but, psychosocial factors that motivate individuals towards life. Therefore, Marriott’s attributes is to get customers satisfied in order for a return visit.
The lodging industries continue to demand the use of sophisticated technology and...