Marriott Corporation Cost Of Capital

Bethesda, Maryland is the headquarters of Marriott International Incorporate. This unique organization transpired from a root beer stand in 1927 into a world-renowned hospitality hotel chain in 1957. Information provided will focus on the evolution of the root beer stand into the Marriott International Incorporate vast hospitality empire. Today, the Marriott hospitality industry has 5,756 hotels with 30 brands in 118 countries with 1.1 million rooms. Additionally, the Marriott generated $14 billion in revenue during 2016 and had over 85 million combined loyalty members between the Marriott and Starwood Preferred Guest reward programs. Furthermore, Marriott partnered with Universal Music Group to bring their rewards member’s additional

Marriott’s flagship brand continues to target customers needing fine restaurants, meeting rooms, athletic facilities, and other upscale amenities. But Marriott added seven additional brands according to its view on market segments — Courtyard by Marriott, Fairfield Inn, Residence Inn, TownePlace Suites, SpringHill Suites,

By 1980, more than 23,000 rooms were offered through 55 hotels and resorts located primarily in the U.S. Approximately 70% of company-operated rooms were owned by outside investors and managed by Marriott under agreements averaging 70 years in length. These management agreements contributed approximately $40 million to operating profits in 1979—profits that tended to rise with inflation. Contract Food Service (32% of sales)—Marriott operated almost 300 contract food units, providing a wide range of food service capabilities to a variety of clients. It was the world 's leading supplier of catering services to airlines, with 62 flight kitchens serving domestic and international air travelers. The Food Service Management Division also managed restaurants, cafeterias, conference centers and other facilities for over 200 clients, including business, health care, and educational institutions. Restaurants (25% of sales)—Marriott 's Restaurant Group consisted of 476 company-owned units offering a variety of popularly priced food in 46 states. Roy Rogers fast food restaurants and Big Boy coffee shops accounted for 92% of the total units. Theme Parks and Cruise Ships (8% of sales)—The two Great America theme parks, located in Gurnee, Illinois, between Chicago and, Milwaukee, and in Santa Clara, California, were opened in 1976. Both parks combined a wide variety of thrill and

The compensation plan then reflects hurdle rates, which makes managers more sensitive to Marriott’s financial strategy and capital market conditions. Thirdly, Marriott could modify its hurdle rate to change its projected growth. A lower hurdle rate would expand the company faster than a higher one would.

For the risk-free rate, we decided to use the 30-year old Treasury yield, which is currently 4.6%. We believe it is important to match the time horizon when comparing financial assets. Given that stocks have essentially an endless time horizon, the 30-year Treasury seems a more reasonable asset by which to compare stocks. 1-month Treasury Bills, for instance, are comparable to safety-deposit boxes, which are completely safe, but cannot ever yield a return. It’s highly likely that no financial analyst would ever compare a stock to a deposit box; hence, it also doesn’t make sense to compare stocks with very short-term Treasury Bills.

The hotel chain, Astor Lodge and Suites, Inc., operates 250 properties in 10 western and Rocky Mountain states. The company’s customer base primarily comprises business travelers. In addition, the locations of the properties surround airports, large regional shopping centers, and major highways close to suburban industrial sites as well as office complexes. Projections of 2005 fiscal year forecast a fifth consecutive year of a gross loss for the firm. The estimates include an anticipated $422.6 million in company lodging revenues but a net loss of $15.7 million for 2005. As a result, Joseph James, president and CEO of Astor Lodge and Suites, Inc., initiated a challenging goal for executive management to devise a strategy achieving net profits in two years and sustaining positive growth in the future.

Since its foundation in 1927 Marriott Corporation grew into one of the leading lodging and food services in the US. With three major business lines: lodging, contract services and related business, Marriott has the intention to remain a premier growth company. To achieve this goal the corporation’s strategy is to develop aggressively appropriate opportunities within their business lines. Marriott would like to be the preferred employer, the preferred provider and the most profitable company in each of the operating areas. The financial strategy includes four key elements:

Marriott International, Inc. is one of the world's leading lodging and contract services companies. The company has its roots in the restaurant industry, beginning with a chain of 'Hot Shoppes' begun by J. Willard (Bill) and Alice S. Marriott in 1927. In 1957, "another business segment made its debut when Marriott's first hotel, the Twin Bridges Marriott Motor Hotel, opened in Arlington, Virginia" (History of Marriott International, 2012, Funding Universe). After its restructuring during the 1980s, "Marriott's three core businesses became lodging; food and services management; and food, beverage, and merchandise operations at airports and on turnpikes" (History of Marriott International, 2012, Funding Universe). Today, Marriott is heavily diversified within the hospitality industry: "Marriott International has two operating groups: Marriott Lodging, which generates about 60 percent of company revenue, and the Marriott Service Group, its contract services operation" which operates contract services such as food and facilities management and senior living facilities (History of Marriott International, 2012, Funding Universe).

The Marriott family owns approximately 30% of MI, controlling roughly 14% of MI’s outstanding stock (Rosenwald, 2011). MI’s executive council is fairly similar to many other companies. Their executive council consists of 17 people, with a recent change due to J.W. Marriott stepping down from his CEO position. (Appendix 1.2) J.W. Marriott Jr. was CEO of MI from 1972 up until March 2012; though he has stepped down as CEO he is still an active and vocal contributor to MI. The new President and CEO of the company Arne M. Sorenson, is the first person without the Marriott name to take on a large role in the company. MI has nearly 3,800 properties in 74 countries and territories, 3,100 properties being in North America. There are over 275 properties in Europe, 65 in the Caribbean and Latin America, 40 in the Middle East and Africa and 29 in the Asia-Pacific. MI made up 4.8% of the market share in 2011, making it the number one ranked hotel globally (Marriott, 2013). Currently, MI has approximately 300,000 employees (Marriott, 2013).

In 2011, noteworthy endeavors included Global Growth which caused an increase in revenues and increase in franchises. Marriott opened 210 properties with nearly 32000 new rooms around the world. Their brand portfolio which consists of urban centers to resorts has something for everyone. Each brand has been designed to deliver a unique travel experience across a range of customer segments.

In 2004, Majestica had a market capitalization of $1.7 billion1 and generated revenue of more than $2.3 billion (see Exhibit 2). Majestica earned revenue both from hotel management and hotel ownership operations. In the past five years, Majestica shifted away from owning hotels and focused on managing hotels. In 2004, 80 per cent of Majestica’s earnings before other

c) There is not a lot of incentive in areas where minimal business takes place. Marriott chooses to keep businesses where it is less likely to have repeat visitors because it keeps them marketable and maintenance is minimal. However, where there is a lot of repeat business, such as downtown in cities, there is a lot of incentives for

When most people think of Marriot, they will often associate it with a large hotel chain. While this is true, the reality is that the firm is actively involved in managing different hospitality related properties. A few of the most notable include: Renaissance Hotels, Autograph Collection, Courtyard, Fairfield Inn & Suites, Spring Hill Suites, Residence Inn, Towne Place Suites, the Ritz-Carlton, Bulgari Hotels & Resorts and EDITION. However, to fully understand the firm's business model requires focusing on: the chairman / CEO's reports, the mission statement, the financial health of the organization and projecting the future performance of the company. Together, these different elements will highlight Marriot's underlying strengths and weaknesses. ("About Marriot," 2012)

With a philosophy of hard work, clean living, and commitment to perfection, J. Willard Marriott turned a nine-stool root beer stand into one of the fastest-growing and most profitable companies in the highly competitive food and lodging business.

In the case of Marriott it started evaluating using a controlled group of customers up to the stage of acquiring an enterprise tool known as One Yield to automate business processes and make better decision [12]. Lastly analytics takes a devoted group of people and infrastructure, according to Davenport the “most successful analytical competitors take an enterprise approach to analytics” [7]