Marriott International’s mission is to be the #1 hospitality company in the world.
Marriott International is an operator, franchisor, and licensor of hotels and timeshare properties. The company operates three reportable business segments:
In 1927 Alice and J. Willard (Bill) Marriott moved to Washington, D.C., where they opened a root beer stand. Over the next few decades they significantly expanded their scope. This began with the launch of Hot Shoppes, a chain of restaurants. Then in 1937, the couple started an in-flight catering business for airlines. In 1957, they opened their first hotel, the Twin Bridges Marriott Motor Hotel.
In 1964, the couples‘ son Bill Marriott, Jr. took over the company, now called Marriott-Hot Shoppes. He made it his goal to accelerate growth, both through new business and acquisitions. Within six years it quadrupled in size, surpassing Hilton Hotels and Howard Johnson. In 1967, the firm’s name was changed to Marriott Corporation, and in 1968 it completed an intial public offering.
By 1971 Marriott was touted as the most diversified company in the away-from-home sector, divided into three main groups: food operations, in-flight services, and hotels/specialty restaurants. Its hotel division focused on businesspeople and upscale travelers, and thus its facilities included banquet and meeting rooms. In 1982 it purchased Host International, an airport product provider.
A 1986 tax law made Marriott‘s existing business model less lucrative and left it with a large debt, so in 1993 the company devised a plan. It split into two public firms, Host Marriott Corporation, which would own properties, and Marriott International, which would manage them. Host absorbed most of the debt, enabling Marriott International to expand significantly moving forward.
Business model of Marriott
Marriott has a segmented market business model, with customers who have slightly different needs. The company targets its offerings at consumers of varying economic backgrounds through hotel brands that offer different price points and service levels.
Marriott offers four primary value propositions: accessibility, customization, cost reduction, and brand/status.
The company creates accessibility by providing a broad range of options. It maintains a wide variety of hotel brands offering different price points – ranging from the Fairfield Inn & Suites, a moderately-priced brand that offers limited frills, to the Ritz-Carlton, a luxury brand with numerous amenities.
The company enables customiztion by offering vacation packages that emphasize specific qualities of interest, such as family-friendliness or adventurous food options. The names of these packages are Culinary Getaway, Attractions & Adventures, Couples Only, Kids Eat Free, Family Fun, Inclusive Getaway, Ultimate Golf, Honeymoon Bliss, Retail Therapy, and Spa Getaway.
The company reduces costs by offering various initiatives. It maintains Marriott Rewards, a guest loyalty program through which travelers can earn points. Specified amounts of accumulated points can be used towards free merchandise, vacations, and frequent flyer miles, as well as other benefits such as room upgrades and gifts. The company also provides savings by operating “Deals” and “Packages” sections on its website that provide discounts for various types of trips.
The company has established a powerful brand as a result of its success. It was the first motor hotel, first drive-in hotel, and first hotel chain targeted at business travelers on the U.S.’s East Coast. It operates almost 4,500 properties in 87 countries and territories and generated revenues of over $14 billion in 2015. It maintains a number of well-known brands, including the famed Ritz-Carlton. Lastly, it has won many honors, including the following in 2016 alone:
- “Best Loyalty Program“ at the Freddie Awards
- Recognition as one of the “Top Travel and Leisure Companies“ by Forbes
- Recognition as one of the “World’s Most Ethical Companies“ by Ethisphere
- Recognition as one of the “Best Companies to Work For“ by Fortune
- Recognition as one of the “World’s Most Innovative Companies in Travel“ by Fast Company
Marriott’s main channel is its website, through which it acquires most customers. The company promotes its offering through its social media pages, e-mail marketing, online advertising, direct mail, sponsorships, its guest loyalty program, and participation in summits, trade shows, and conferences.
Marriott’s customer relationship is primarily of a self-service nature. Customers utilize its service (lodging) while having limited interaction with employees.
That said, there is a personal assistance component in the form of foodservice, housekeeping services, and general customer support.
Marriott’s business model entails providing quality service for its customers.
Marriott maintains the Marriott Affiliate Program, through which it partners with third parties to extend its reach. These parties promote the Marriott brand on their platforms (websites, mobile apps, etc.) and earn commissions every time their visitors click on a relevant link, complete a hotel stay, or purchase a vacation package.
The commission rate is 4-6% for hotel stays and 3% for vacation packages. Partner benefits include access to product catalogs, an affiliate newsletter, a dedicated affiliate team, and Marriott’s “Look No Further, Best Rate Guarantee.“
Marriott’s main resources are its human resources, who include its customer support, foodservice, and housekeeping staff.
Marriott has a value-driven structure, aiming to provide a premium proposition through significant personal service and frequent product enhancements.
Its biggest cost driver is cost of services. Other major drivers are in the areas of customer support/operations and sales/marketing, both fixed costs.
Under Marriott’s business model, it franchises or manages hotels, rather than own them outright. The company has two revenue streams:
- Management Fee Revenues – Revenues Marriott earns through managing/franchising properties; they include base management fees, franchise fees, license fees, and incentive management fees.
- Other Revenues – Revenues Marriott earns through third-party licensing fees, land rental income, branding fees for third-party residential sales and credit card licensing, and other revenue.