Case Statement:

Marriott International, Inc. faces slowing growth in the hospitality industry in late 2019. Growth is still expected, but at a lesser rate than originally projected. Increasing pressure due to labor strikes and costs of the related to the data security incident from late 2018 are being realized.

Mission and Vision Evaluation:

Since so many of the key components were omitted from Marriott’s current mission statement, a suggested mission statement would be: Marriott’s mission is to provide quality lodgings to all men, women, children, families and businessmen who desire unsurpassed vacation and leisure experiences in countries all over the world. Our philosophy is to take care of associates and they will take care of our customers. We endeavor to put people first, pursue excellence, embrace change, and act with integrity. Our technology includes a state-of-the-art check-in app that allows our guests to save valuable time during their stay at our hotels. We strive to do our best for all our shareholders by expanding wisely and effectively using our resources. Sustainability is an integral part of our mission and we are actively reducing the environmental impact of our hotels.

Vision statements are best kept brief, approximately one sentence in length, and should answer the question, “What do we want to become?” Marriott has done an excellent job with its vision statement as it is brief, customer focused, and shows that the firm strives, in the long term, to be the premiere provider of leisure and vacations experiences in the entire world.

Milestones:

J.W. Marriott and his wife, Alice, laid the foundation for serving people in 1927 when they opened a 9-seat A&W root beer stand. After expanding their offerings to food and entering into the franchising business model, the world's first motor hotel was opened by the couple’s son, Bill Marriott, in Arlington, Virginia, in 1957. This kicked off a fierce new hospitality industry, cultivating the family value of serving people and changing the course of history. After 55 years of family leadership, the company welcomes its first CEO who is not a direct descendant of the founding couple. Arne Sorenson becomes president & CEO of Marriott International, Inc., and begins strategic acquisitions of competing brands in the travel and leisure experience business-scape.

The Marriott core values seem to have been preserved over more than 85 years. Putting people first, pursuing excellence, embracing change, acting with integrity and serving our world are at the very core of the business. The brand portfolio has a reputation for not negotiating customer experience in today’s market, that is becoming increasingly more important.

External Assessment:

From the external perspective, the company boasts opportunities to leverage the emergence of the travel ecosystem, an increase in global travel, new or emerging technologies, new geographical markets, and a healthy economic state. Threats to the Marriott business include intense hospitality competition, not keeping up with new or emerging technologies, rising raw material costs, new immigration policies that may hinder travel or employment, pressure to raise the minimum wage as well as all pay levels.

Internal Assessment:

The company strengths thus far include the strong brand recognition established in the portfolio, track record of performing well in new markets, global presence, a rich history of focus on innovation and good returns on capital expenditures. Weaknesses indicate opportunity to improve internally and include a low profitability ratio, lack of research and development, high rate of attrition for workforce, unpredictable financial planning/cash flow practices, and a lack of investment in new technologies. Internal factors indicate a strong business and an encouraging future potential to meet the needs of travel customers worldwide.

Industry Analysis:

The Porter’s Five Forces model identifies and analyzes five competitive forces that shape every industry and helps determine its weaknesses and strengths. Competition in the Industry-Marriott and its competitors such as Hyatt, Hilton and IHG, compete in virtually the same segments; therefore, a competitive advantage can be maintained by exceeding customer expectations and being able to provide them with amenities that competitors lack. Potential of New Entrants into the Industry- Some of the more common barriers to entry into the hotel industry include a large capital outlay, technology and specialized know-how, and lack of experience. However, the fact that global tourism and travel is increasing, makes its very possible that new entrants will be attracted to the hotel industry. Currently, the greatest threat of new entrants appears to be in emerging countries such as India, China, and Latin America. Power of Suppliers-There are many different types of suppliers in the hotel industry including food, housewares, and cleaning suppliers. Property owners, architects and marketing companies can also be considered suppliers. Since there are fewer marketing and technology firms with the expertise to give high-quality guidance to Marriott, suppliers can pose a moderate threat to Marriott. Power of Customers-Tour groups, convention organizers, and travel agencies give Marriott a large portion of their customers. Fear of losing a large booking of rooms because these large-scale buyers will check the prices of competitors, is a real danger. Marriott can combat this by giving these customers unique experiences and better amenities than the competition. Threat of Substitute Products- A few of the smaller substitutes for the hotel industry are motor home rentals, camping in tents, hostels, and even staying with family or friends when vacationing These substitutes are not a large threat to hotels. However, the home rental business, Airbnb, is a large threat and has already begun encroaching on hotel profits. This is the most important of Porter’s five forces that influence Marriott’s competitive position in the hotel industry. More and more customers like the uniqueness and customization of these home rentals as opposed to the standardization of hotel rooms.

Financial Analysis:

A few of the key statistics for Marriott International, Inc. include revenues of $20.76 billion and net income of $1.91 billion. in 2018. Areas of concern include gross margin of 17.7% while the industry average is 46.3%. Marriott will have to increase sales and lower its cost of goods sold in order to reach the industry average. Marriott’s debt/equity ratio of 8.21, its current ratio of .51, and its leverage ratio of 20.08 show Marriott’s vulnerability due to excessive debt and lack of liquidity. Marriott may have been a bit too aggressive in financing its growth through debt. Marriott is financially strong in a number of areas. The company’s return on equity is an amazing 70.72 as opposed to the industry average of 14.58. This will make it easier for Marriott to raise money for growth. Marriott’s 5-year average return on assets of 8.32 compared with the industry 5-year average of 5.10 indicates the company is using its assets efficiently. Both Marriott’s impressive return of capital of 7.76 and net profit margin of 8.99 tell us that Marriott’s accountants and management teams are doing a good job managing its capital and expenses. Marriott’s dividend payout ratio is 40.06, which is good news as it is substantially higher than the industry average. This is very attractive to investors who rely on dividends to supplement their income.

Competitive Strategies:

Two competitive strategies were evaluated for implementation at Marriott. A WO strategy to implement employee research and development initiatives engaging those closest to the customers to improve customer and employee experiences. This strategy enlisted current employees to participate in their own future through research and improvement initiatives. The other strategy evaluated was an SO strategy to invest in cognitive technologies to facilitate personalized global travel experiences. This strategy enlists the IT team heavily, in order to utilize cognitive technologies, specifically machine learning and artificial intelligence, to improve customer experience.

Recommended Strategy:

The strategic alternative with the best attractiveness score in the QSPM model is that of investing in cognitive technologies to facilitate personalized global travel experiences. This strategy utilizes the top internal strengths of Brand recognition, Global presence and focus on innovation as well as top external opportunities to leverage the organization's core competencies, current state of increased global travel and new/emerging technology. It is highly recommended that Marriott employ this strategy in order to remain competitive in slowing industry market.

Ethical and Social Responsibility Dimensions of the Recommended Strategy:

Marriott has a long history of being ethical and social responsibility stewards. In executing this strategy, there must be a heightened awareness and advocacy for customer privacy as some available technologies could collect information that could be used for ill intents. A specialized focus on GDPR (General Data Protection Regulation) compliance will be included in the implementation plan.

Implementation Plan:

Implementing the strategy will require coordination at all levels of the organization. The implementation plan includes communication, financial, HR and operational planning as well as a centralized involvement with IT. At the core of the strategy is the concept of reenvisioning the guest travel experience. All efforts in the Marriott business should have a clear and concise expectation to facilitate the best guest travel experience possible. The implementation will have three phases; Phase 1: Quarantine & Discovery, Phase 2: Proof of Concept and Phase 3: Rollout.

The guest travel experience journey should be seen as an infinity loop, where one side is dedicated to drawing in new customers and the other end is dedicated to retaining existing customers. The elements of the customer travel experience must be plotted as key moments along a journey. Key points of contact include travel destination(s) research, shopping and booking, pre-trip preparations, In-stay experience and post-stay impact, including sharing and reviews.

Estimated cost and duration for Phase 1: Quarantine & Discovery requires a $2.5M investment and a timeline of approximately 6 months. Beginning January 2020. Phase 2: Proof of concept will include and prototype development in the Aloft brand hotels, paired with a special edition Bonvoy App module to engage the customer at each step of the travel experience, beginning with idea. The estimated investment required for this phase is $25M with an approximate timeline of 1 year. The next phase of implementation will be the organizational restructuring to facilitate the scaling of cognitive customer experience technology and implementation of the new customer experience technology and app. The estimated investment for this final phase is $214M and an approximate timeline of 2.5 years to fully implement. Additional investments will be required from franchise owners in order for full functionality to be leveraged for customers.

The total cost for the entire strategy implementation is $241M and is expected to take 4 years. Funding for this strategy can be achieved by full common stock financing or full debt financing. The analysis indicates that the options are nearly the exact same value to the company. Return on investment will come primarily from the increased customer satisfaction and engagement, A Forrester study on customer experience investments suggested a compound average revenue growth of 17% for leaders in customer experience compared to companies who lagged in improving customer experience. Between cost savings and significant improvements in customer experience and service, it is predicted that this investment will have a minimum return of 1.75 over the 5 years after the initial implementation of the proof of concept, compounding thereafter.