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06/13/2012

Chapter 3 of a Case Study on Strategic Management of Marriott Hotels


III Recommendations

Based on the foregoing strategic analyses of Marriott International, specific strategies are clearly identified for the hospitality firm. In pursuing aggressive and rapid growth strategies, shall continue to invest on loans and other non-controlling equity so that it can support these strategies like that of property development. It is recommended for Marriott International to devise a policy of effective credit risk management. Further, Marriott International shall penetrate key markets in the Asian markets as Singapore and Hong Kong and then introduce new products in the domestic market.

Financial growth strategies

Investments on loans and other non-controlling equity

Present growth strategy that Marriott International is converging into is the development of new lodging facilities. Aside from limitations in terms of site availability, planning, zoning and other local approvals, financing of development activities is a challenge. Since Marriott International could not rely on existing capital that is used in the current operations and transactions, what it can do is to invest on new loans and other non-controlling equity. This is because the weakness of the capital market due to the financial crisis may limit the ability of the company to raise capital for the completion of the projects. When this happens, properties that Marriott International started to develop may become less attractive hence less profitable.

Today, the company devotes 90% of the loaned amount to developing new facilities in feasibly profitable areas. For the period of 2010 to 2012, if Marriott International could double the capital for development expenditure, it would be able to come up with new sources of profits. By 2012, new hotel establishments are operating and therefore can pay for at least 50% of the total loaned amount especially for the short-term debts. Investing on loans and other non-controlling would enable Marriott International to recycle the funds and hence maximize such by concentrating on profitable new hotel locations.    

Moreover, such financial investments have implications on why Marriott International should be selective and opportunistic when it comes to adding properties to the lodging business. Notably, Marriott International is making millions of capital expenditures in developing and constructing new hotels and acquisition of new hotels as well as renovating existing properties. Having said this, the corporation cannot afford to make a decision that may further jeopardize its financial condition.

Credit risk management   

Thereby, Marriott International should have an effective control measure which could be realized in terms of credit risk management. Credit risk refers to the risk of loss because of debtor’s non-payment of a loan or other forms of credit. As they default, delay in repayments, restructuring of borrower repayments and bankruptcy are also considered as additional risks. Marriott International is exposed to all of these risks as it involves itself in short- and long-term debts. Marriott International should set credit limits and security so that credit risk would be controlled. Control of credit risks shall apply from the period of 2010 to 2012 so that the company can recuperate from financial risks.

Expansion in key markets in Asia

Internationally, Marriott International should penetrate key market in the Asian region with high tourism rates but with low penetration of lodging properties. Among the countries in Asia with high tourism rates are Hong Kong and Singapore and with projection that both countries are boosting tourism to accumulate additional 20% in the current tourism rate. According to the Pacific Asia Travel Association (PATA), at the aggregate level, international arrivals are predicted to increase by an average of around 2.7% each year to 2012. Asia Pacific destinations are predicted to be marginal at just over one percent in 2010, rising to around 4.5 percent in 2011 and then stabilizing at around four percent in 2012 (PATA, 2010). Southeast Asian destinations, for instance, are forecast to grow the fastest at an average rate 4.8% per annum over the period to 2012.

In Hong Kong, mainland residents are the most frequent visitors. Capitalizing in the high population rate in the Mainland, China will serve as the driver for future growth as coupled with the ongoing Individual Visit Scheme (IVS). IVS currently covers 49 mainland cities with population of approximately 250 million mainland residents. Further, the implementation of IVS made a significant impact on Hong Kong tourism industry that is once tainted by the SARS epidemic (Euro monitor, 2009).

To cater for the Chinese arrivals, the hotel industry is also changing its landscape. The travel accommodation is now equipped with budget accommodation schemes where the industry had previously focused on four- and five-star hotels. Nevertheless, there have been major upgrades and renovations amongst the city’s premium hotels. This is where Marriott International can strategically fit itself. Marriott International, for instance, could ally with key airline companies in Hong Kong so that it can link the services of the airlines with that of the hotel services of Marriott International.   

Further, the Hong Kong tourism and hospitality industries can connive in aspects that tour packages is still the most common retail travel product although product portfolio remains to be limited and that the problem is that Hong Kong’s travel retail industry is faced with slow developments in full online purchasing. Marriott International can introduce new products and new ways to purchase hotel services via online although it should be first implemented in the US market.

In Singapore, tourism is considered to be an economic driver since it can welcome millions of arrivals on a yearly basis. This city-country is also being considered as a typical stop-over location. Singapore has a total of 10.3 million visitors, and growing annually at a rate of 3.4%. Based on the tourism statistics report, total visitors day had reached 33 million with occupancy rate of 1.4%, average room rate of 20% and room revenue of 24%. As such, Singapore contributes at least 73% of the total number of visitor arrivals in the Asian region (Annual Report on Tourism Statistics, 2009).

Tourism in Singapore is also deemed to be developed in the coming years as the government is eyeing for the rejuvenation of the city-country. This is to rival other Asian cities such as Hong Kong, Tokyo and Shanghai. Changes will be evident on the four main sections of the city such as Orchard Road, Singapore River, Bras Basah and Bugis and CBD and Marina Bay. Singaporean government also hopes to receive 17 million visitors per year by 2015. Such changes impose changes in the hospitality industry as well to which Marriott International could capitalize in by opening new lodging units, suites or hotel concepts. Marriott International, for instance, could ally new campaigns with that of the Singapore government’s tourism campaign as a key provider of hotel services.

Key domestic strategies

Introduction of new market/product segments

There is a clamor for Marriott International to introduce a low-cost lifestyle brand. Although this may seem distant from the brand portfolio of the company which is basically luxurious, this could definitely play an important role in the financial recovery of Marriott International. Marriott International should understand that the ultimate power rests in the hands of the people who will check-in or will potentially check-in in the hotels and other lodging units/residents owned by Marriott. As such, this is high time that the hospitality firm will design low-budgeted concepts or lodging residents. Although this may be low-budgeted, these shall not denigrate the core concept of luxury and pleasure. Marriott can make hotel and lodging units that are still stylist at an economical price.   

Marriott International can also extend the already diversified brand portfolio by introducing a corporate travelers’ hub in the hotels since they have different requirements than ordinary hotel consumers. Corporate travelers are very particular with privacy, efficiency and service delivery well. Corporate travelers are looking for suites/units that can provide them with more utility, better features and value on money. Corporate travelers need or are going to need a room that can equip them with working facilities such as telephone lines, laptop and extra and Wi-Fi connections. Technology-supported services are in-demand today and that embracing the use of modern technology enhances the services hotels offer while also gaining customer loyalty (Classifying tourists, 2009). This may form part of the renovation strategies and can also fortify the group bookings by 8% in 2010, escalating by 5% until the period of 2012.  

Other than the corporate travelers, Marriott International can create a niche market in backpackers. Backpackers are specifically interested in various cultures while also enjoying varying adventures and activities. They tend to travel independently or with a companion hence are generally cost-conscious. Backpackers prefer to stay in lower-cost accommodation, using lower-cost transport. The purpose of this is to afford the higher cost of the travel itself and the activities that come with it. Backpackers, also known as budget travelers and independent travelers, tend to stay for a longer period. Marriott International can offer discount room prices in packages with complimentary airport transfers and inclusive of all taxes and service charges (Classifying tourists, 2009). 

Further, the corporation could intensify green tourism domestically. Marriott International can also introduce an outdoors guide map aimed at promoting natural and environmental destinations in a specific area. In this way, Marriott International can introduce the company to a much wider audience particularly to those individuals who are interested in green discovery. With the help of Marriott International, green tourism can be intensified where, for example, the North America market can open opportunities of specific interest tourism in the form of green tourism as a niche market. This may be a campaign that could be launched in 2011 and beyond.

Mobile marketing and social media marketing

Lee, Baker and Kandampully (2003) noted that the technological developments have provided numerous opportunities in the hospitality industry. Having said this, Marriott International shall open mobile devices to market the hotel products and services and also book to this if they can but at a fee. Further, since the goal is to commercially diversify the market, Marriott should consider social network advertising to increase the web presence. One of the most used advertising medium in social networking sites is the creation of a commercial profile. Marriott International can create pages whereby users of the site can view, browse and even become fans of such a company and its products and services. This may be a marketing strategy that could be launched in 2011 and beyond.

Timeshare strategies

Since the Timeshare segment is no longer being profitable, Marriott International can either reduce the prices or convert the facilities into new ones that would be more profitable or better yet properties can be sold. If the company does not want to do this, they can conduct short-term promotion while deferring introduction of new products or deterring development initiatives. Since Timeshare is maturing in the US and even in the Europe market, Marriott International can try to promote it in other market like Asia. Roll-out of Timesharing concept in Asia may commence in 2011 onwards.

References

Classifying tourists 2009, Barcelona Field Studies Centre.

Euro monitor 2009, Travel and Tourism in Hong Kong, China, Euro monitor International.

Lane, H W, Mendenhall, M E & McNett, J 2004, The Blackwell handbook of management: a guide to managing complexity, Wiley-Blackwell.

Lee, S C, Barker, S & Kandampully, J 2003, Technology, service quality and customer loyalty: Australian managerial perspectives, Managing Service Quality, vol. 13, no. 5, pp. 423-432.

PATA 2010, Annual Forecasts Tip Growth for Asia Pacific Region, PATA Corporate Communications.

Ranchhod, A & Marandi, E 2007, Strategic Marketing in Practice, Butterworth-Heinemann Publishing.

Singapore Tourism Board 2009, Annual Report on Tourism Statistics, Research and Statistics Department, Planning Division.

Appendix

 

Segments

Percentage of 2009 Total Revenues

North American full-service lodging segment

44%

North American limited-service lodging segment

18%

International lodging segment

11%

Luxury lodging segment

13%

Timeshare segment

13%

Other unallocated corporate

1%

Table  SEQ Table \* ARABIC 13 Revenue Distribution by Segments in 2009

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