Applied Strategic Hospitality Management in Marriott International - Case Study Example

Applied Strategic Hospitality Management in Marriott International Name: Course: Name: September 29, 2010 Declaration: Signed: Table of contents Table of contents 2 Background The Marriott Hotels and Resorts operate under the Marriott International Incorporated Flagship. The 482 hotels and resorts operating under the Marriott brand name are categorised as full-service providers and rated as five-star hotels. This means that the hotels and resorts have facilities such as restaurants, business centres, banquet halls, concierge services and room service on their premises. The 482 hotels and resorts are spread in different parts of the world. According to the Marriott News Centre (2009), the hotels target “the sophisticated, self-assured travellers who seek a hotel experience that embodies confident sophistication without pretence”. More to this, the brand’s business strategy seems to target expansion in established resort destinations, luxury markets and gateway cities in different locations in the world. Some of the distinctive attributes in the Marriott Hotels & Resorts include architectural features, spacious and luxurious rooms, and residential lounges that give guests a relaxing environment (Marriott News Centre, 2009). The financial performance of the Hotels looks impressive with sales in the 2009 fiscal year estimated at $11 billion (Marriott News Centre, 2010). If the ranking that the international platform is anything to go by, then Marriott Hotels International’s perceived performance is quite impressive. In 2010 for example, The Sunday Times (2010) ranked the hotels at number seven amongst the “best Green companies of the year”. The hotels’ management not only train staff members regarding eco-friendly practices, but also encourages their customers to embrace practices that have minimal negative effect on the environment (MultiVu Consumer News, 2009). More to this, the Sunday Times (2010) observes that the Marriott hotels has a re-use programme that conserves energy, water and minimises the amount of detergents released to the environment. According to the Entrepreneur (2008), the hotels, which were opened by J.W. Marriott in 1927, with an initial capital of $3,000, had grown to a $3.5 billion business empire by 1999, and were ranked as the second-largest providers of lodging facilities in the entire world. Competitor analysis Global presence In a study conducted by Strauss and Scoviak (2005, cited by Wood and Brotherton (2008, p. 69) on hotels with a global presence, Marriott International was ranked at position seven after Intercontinental Hotels, Starwood Hotel and Resorts, Accor, Best Western International, Hilton Group plc, and Carlson Hospitality World Wide. This ranking was however done on from a country presence perspective and Marriott’s position was attained because it operated in 66 countries compared to Intercontinental 100 countries, Starwood’s 95 countries, Accor’s 90 countries, best Western International’s and Hilton’s 80 countries, and Carlson Hospitality Worldwide’s 69 countries. According to Kim and Oh (2004, p. 66), this mode of gauging an organisation’s competitive advantage is resource based and assumes that the amount of resources (assets, knowledge, competencies, capabilities and information) a firm has equals its performance. Ranking based on performance and growth In 2007 and 2008, Marriot International was ranked at number three among the top ten largest hotel groups in the world. The ranking done by MKG hospitality (2008) considered the number of establishments and room facilities that a hotel brand operated. In 2007, Marriot International had 2775 hotels world wide, with 502,089 rooms. A year later, this number had gone up to 2,901 hotels and 517, 909 rooms thus registering a 3.2 percent growth. Marriott was rivalled by the IHG group of hotels, which was ranked in the first position with 3,741 hotels consisting of 556, 246 rooms in 2007 and 3949 hotels and 556, 246 rooms in 2008. Ranked second was Wyndham Worldwide which had 6,473 hotels and 543,234 rooms in 2007 and 6,544 hotels and 550,576 rooms in 2008. Other hotel brands ranked under Marriott International include Hilton, Accord, Choice International, Best Western, Starwood Hotels & Resorts, Carlson Hospitality and Global Hyatt (MKG Hospitality, 2008). Analysing Marriott International’s competition, the Hilton hotels, Accor, Choice international and Best Western remain the major competitive threats. This is especially so because Marriot International is less superior to the four based on the number of hotels they operate world wide. Figure 1: Top ten hotel groups in the world Source: http://www.hotel-online.com/News/PR2008_2nd/Apr08_ChainRanking.html Analysing Marriott International using Porter’s Five Forces Porter’s five forces have been identified as: “Threat of new market entrants; threat of substitute products or services; bargaining power of buyers; bargaining power of suppliers; and competitive intensity among industry incumbents” (Kim and Oh, 2004, p. 66). Weighing the threat of new market entrants The entry of new players in the market would not pose a major threat to the already established hotels and resorts. For starters, new entrants would face several entry barriers as identified by Powers (1997, p. 112). Such include high investment capital and a need to establish a service network of loyal staff members and customers. Notably however, the threat of new entrants is minimised by the fact that top ranking hotel brands (Marriott included) have enhanced entry barriers into the industry by patenting their proprietary know-how, restricting distribution channels and making it difficult for brand franchise holders to switch allegiances (Powers, 1997, p. 112). Weighing the threat posed by substitute services The threat of substitute services is however real not only for Marriott International, but for all its competitors. This is especially so as cheaper alternatives to conventional lodging facilities keep arising as travellers become more willing to try out new accommodation. Such alternatives include travellers opting to stay with friends or relatives, or opting for smaller bed and breakfast accommodation. Kim and Oh (2004, p. 66) also observe that technological advancement in the contemporary world, such as teleconferencing or virtual meetings via the Internet are making travel and physical meetings less important compared to the past. This means that business travellers who initially utilised services offered by players such as Marriott International in the past are declining. Buyer’s bargaining power In relation of the buyers’ bargaining power, it is noteworthy that Marriott International, just like other players in the hospitality industry is experiencing an increased threat in this area. This is especially so because consumers of hospitality services have more choices because of the increased number of hotels and resorts willing to serve them, new technologies that make negotiating hotel and lodging rates easier, and enhanced communication technologies that make booking reservations in any part of the world easy and fast. With the loyalty programme highlighted in the introductory part of this paper however, Marriott International may be able to mitigate some of their customers’ bargaining powers. Supplier’s bargaining powers The fact that Marriott International can get input materials from different suppliers means that no single specific supplier in the hospitality industry can pose a major threat to hospitality brands. According to Porter (1980), suppliers can influence an organisation by raising prices, limiting the provision of resources, or adjusting the quality of provided resources downward. If workers at Marriott International were to be classified as suppliers based on the fact that they provide services to the guests, they have bargaining powers based on the importance of their services to the customers. Luckily for Marriott International workers, the hotel brand seems to respect one of the mantras of management left by its founder J.W. Marriott stating “take care of your people, and they will take care of your customers” (Entrepreneur, 2008). Competitive intensity from other hotels In regard to competitive intensity as suggested by Porter, Marriott International is likely to face increased threat in this area especially if a report by the American Hotel & Lodging Association (2002) is anything to go by. In the report, AHLA observed that established hospitality players would face increased competition amongst themselves as each increased the capacity of their operating units. Morone (2003) also observed that non-tradition products being introduced in the hospitality industry would pose an extra challenge to established players such as Marriott International. Such products include corporate housing facilities intended to serve business travellers. Evaluation of Marriott International in the marketplace Technological use As part of enhancing its competitive advantage, Marriott International has employed the use of technological resources in order to manage customer services more effectively, expedite booking, checking-in and checking-out procedures and improve online reservations (Marriott International, 2010). In addition, the organisation adopted a culture that is intent on providing its associates with utmost opportunities while ensuring that customers get the best possible services (Marriot Core Values and Culture, n.d.). This approach to service provision has enabled the hotel brand to not only achieve competitive advantage over others, but it also creates customer and organisation value. Loyalty Program The loyalty programme is also an added advantage that places Marriott International in a good position compared to its competitors who do not have such programmes. According to Palmer (2000, p.55), the loyalty programmes “encourage customers to make return visits by offering incentives to repurchase. This ties the customer more closely to the hotel and, in theory, creates customer loyalty”. The loyalty programmes also enable Marriott International to understand its customers better through analysing their stay patterns, service usage patterns and room rates. This makes it easier for the hotel brand to make appealing hotel packages for their customers, something that would serve to improve their market position, which according to Kohli and Jaworski (1990, p. 2) is one of the main strategies in customer retention. Macro and task environments and their possible effect on Marriott International Like every other organisation, Marriott International may suffer influences from the political/legal, economic, socio-cultural, technological and ecological environments. This is especially so because the hotel brand operates in different countries and has to evaluate the macro-environment of each country before it invests in the same. This evaluation does not however mean that the macro-environment will remain static in future. As countries undergo social-cultural, economic and political changes, Marriott international may be affected either negatively or positively depending on the situation. Economic factors Economic factors that may affect the hotel brand include inflation, economic forth, unemployment rate, and government actions affecting economic growth. Currency exchange rates, interest rates, and cost of production are also economic factors that may affect the performance of Marriott International. Political legal factors Factors to be considered in the political legal environment include the type of government in a country, its influence on private businesses, tax rates, the judicial system, and availability of legal protection. Technological factors Technology considerations on the other hand include a country’s level of technological advancement, availability of qualified workforce, availability of information systems, and the state of basic infrastructure such as telephone services, Internet and roads. Social-Cultural factors Enz (2009, p. 413) also observes that an international organisation can be affected by socio-cultural forces such as management and labour issues that the host country may have, cultural barriers that may exist, the age of a its population, their spending habits and attitudes they may have towards foreign-owned organisations. Ecological factors Ecological and environment-related factors that may affect the operations of Marriott Hotels and Resorts internationally include the host countries’ laws of waste management, water and energy use. Gauging by its good ratings in environmental matters in Britain however, it is highly likely that ecological factors will not pose a major hurdle for Marriot Hotels. SWOT analysis Strengths Among the outstanding strengths of Marriot International is its management’s flexibility and forward-looking nature. For example, Wood and Brotherton (2008, p.78) observe that the hotel brand organised a pyjama party in Australia and Malaysia as a strategy of attracting generation X to the hotel and lodging industry. The party was also part of introducing new beds in the two countries. Having Partnered with IBM, the Information systems in Marriott International are also highly dependable. According to Wood and Brotherton (2008, p. 78), the systems are modelled like airline reservation systems and are therefore capable of handling high transaction volumes. The loyalty card is another strength which is intended to keep customers hooked to the services provided by Marriott International (Mariott Rewards Program, 2009). The loyalty scheme also keeps the hotel’s relationship with the customers healthy, which according to Lovelock (1983, p.11) prevents customers from pursuing new relationships with rivals or new providers. Weaknesses Among the major weaknesses of Marriot International as cited by Wood and Brotherton (2008, p.224) is its inability to master franchising. This in turn means that its international presence is not as deep-rooted as its competitors who have mastered the art of running the franchise businesses. Opportunities The fact that Marriott International has not taken full advantage of franchises may be an opportunity in waiting. With its profit making record, and close management, the hotel brand also has opportunities to invest in developing economies such as India and China as the spending capacity of the societies in those countries continues growing. Threats The major threat so far for Marriott International lies in its competitors, especially those that have a global presence and the capacity to run counter programmes to those that give Marriott Hotels and Resorts a competitive edge. The emergence of alternative service providers such as accommodation facilities from family and friends also poses a threat to Marriott by reducing the number of travellers who would otherwise seek accommodation in its facilities worldwide. Terrorism is also an ever present threat especially considering that the hotel has been a victim of the same three times now. Figure 2: The Burning Islamabad Marriott Hotel after a 2007 terrorist attack Source: Telegraph (online) References American Hotel & Lodging Association 2002, 2002 lodging industry profile, viewed 29 September 2010, Entrepreneur 2008, J. Willard Marriott- From root beer to riches, viewed 29 September 2010 < http://www.entrepreneur.com/growyourbusiness/radicalsandvisionaries/article197668.html> Enz, C. A 2009, Hospitality Strategic management: concepts and cases, John Wiley and Sons, Hoboken, NJ  Kim, B. Y & Oh, H 2004, ‘How do hotels attain a competitive advantage?’ International Journal of Contemporary Hospitality Management, vol.16, no.1, pp. 65-71. Kohli, K & Jaworski, J 1990, ‘Market orientation: the construct, research proposations, and managerial implications,’ Journal of Marketing, vol. 54, No. 2, pp. 1-18. Lovelock, H 1983, ‘classifying services to gain strategic marketing insights,’ journal of Marketing, vol. 47, no. 2, pp. 9-20. Marriott Core Values & Culture n.d., viewed 29 September 2010< http://www.marriott.com/corporateinfo/culture/coreValuesCulture.mi> Marriott International Inc., 2010, Marriott Rewards: Program Information, viewed 29 September 2010 < http://www.marriott.com/rewards/hotel-rewards.mi> Marriott News Centre 2009, JW Marriott Hotels & Resorts: Fact Sheet, viewed 1 October, 2010, < http://news.marriott.com/jw-marriott-hotel-and-resorts.html> Marriott News Centre 2010, Company Information, viewed 1 October, 2010, < http://www.news.marriott.com/company-information.html> Marriott Rewards Program 2009, Podcast, Viewed 1 October 2010, MKG Hospitality 2008, Top twenty hotel brands in the world at January 1, 2008, also top ten hotel groups in the world, Hotel online: news for the hospitality executive, viewed 29 September 2010, < http://www.hotel-online.com/News/PR2008_2nd/Apr08_ChainRanking.html> Morone, T 2003, ISHC’s top ten issues and challenges in the hospitality industry for 2004, Gaming industry wire, viewed 29 September 2010< http://www.gamingindustrywire.com/article8124ISHC_s_Top_Ten_Issues___Challenges_In_The_Hospitality_Industry_For_____.html> MultiVu Consumer News 2009, Green your Marriott Hotel Stay for $1/day: Help preserve the rainforest and com bat climate change-video, podcast.TV, viewed October 1, 2010, < http://www.podcast.tv/video-episodes/Green%20Your%20Marriott%20Hotel%20Stay%20for%20$1/Day:%20Help%20Preserve%20the%20Rainforest%20and%20Combat%20Climate%20Change%20-%20Video-4827253.html> Palmer, A 2000, ‘A structural analysis of hotel sector loyalty programmes,’ International Journal of Contemporary Hospitality Management, vol. 12, no.1, pp. 54-60. Porter, M. E 1980, Competitive strategy: techniques for analyzing industries and competitors, Free Press, New York. Powers, T 1997, Marketing hospitality, 2nd ed., John Wiley and Sons, NY. Telegraph (20 September 2008), Viewed 1 October 2010, http://www.telegraph.co.uk/news/worldnews/asia/pakistan/3023114/Islamabad-suicide-bombing-Scores-killed-at-Marriott-Hotel.html The Sunday Times, 2010, Marriott hotels International: Hotels and Catering, The Sunday Times Best Green Companies 2010, viewed 29 September 2010, < http://bestgreencompanies.thesundaytimes.co.uk/5/profile/307/Marriott-Hotels-International/> Wood, R. C & Brotherton, B 2008, The Sage Handbook of Hospitality Management, Sage Publications Ltd., London. Read More