Strategic Hospitality Management - Assignment Example

 Strategic Hospitality Management Part 1 Marriott International Marriott international, Inc. is an American based firm that entirely deals with hospitality services by management and franchise of hotels and lodgings (Marriott, 2014). How huge is its Coverage? As per the 2012 analysis, the company had about 127,000 employees. It has more than 4000 assets in over 80 countries around the world (Marriott, 2014). It’s Growth During its foundation, Marriott first opened a root beer stand in the United States after discovering that people required a cold drink during the humid summer season. Later the firm expanded to chain restaurants and hotels that spread all over the world continents (Marriott, 2014). Promotions Marriot international has developed a strategy of winning more customers by awarding them with gold, silver and platinum depending on the number of nights spent in their premises. Moreover, other forms of benefits such as gifts, bonuses and upgrades are awarded to their loyal customers (Marriott, 2014). Trends The companying is improving its services each and then. More hotels and resorts are being opened to cater for the increasing guests numbers. Vast areas are being occupied to slow competition and increase market dominance. Customer-tailored services are being offered depending on the customer’s requests and claims (Marriott, 2014). Accommodation In 2013, the company increased 26,000 more rooms signing a total of 67,000 rooms by the end of 2013. 20 million shares were purchased for $829 million. The company’s worldwide pipeline development increased to 195,000 rooms’ inclusive of 30,000 rooms that were approved but awaiting contracts signature (MNC. 2014). Critical and Analytical Assessment of the Marriott The company has its headquarters in Bethesda, Maryland in United States. The company serves at a worldwide scene with Arne Sorenson as its current president and CEO. The company has targeted all classes of lives from upper class, families, corporate and honeymooners in provision of premium, business and leisure travelers. The firm was founded on May 15th 1927 by Willard Marriott hence derivation of its name. The first hotel was opened in twin bridges in 1957 at Arlington Virginia and the second hotel in key bridge Arlington Virginia which is their longest operating hotel. However, in 1993, Marriott Corporation split into two companies namely Marriott host and Marriott international (Reuters, 2010). In 2002, Marriott international started restructuring some of its senior living services community that is part of sunrise senior living and Marriott distribution. The purpose was for the company to solely manage hotels, and the project was complete one year later in 2003To increase it shares, the company has plans to own over 600 hotels in Asian countries such as Southeast Asia and China before the end of 2015. The firm uses the focused differentiation strategy to increase its profit margins in that it is concentrated in America (Reuters. 2010). The company owns less than 1% of its hotels in that it has ventured in leasing as a strategy. Therefore, it is less vulnerable to real estate price fluctuations. Moreover construction of structures is more expensive compared to leasing. Therefore, the resources that could have been used in construction can be used in leasing more hotels. The pipeline development has enabled the firm to expand even in the foreign countries. The firm is consolidating and enlarging its presence in foreign countries as a way of capitalizing on the tourism and travel industries. IT technologies in the firm are very modern and complex providing its customers with the leisure needed. Guests are able to work and socialize on the latest designs, technology and food offering (Robert, 2013). Strategic accounting management is a strategy that the company has adopted as a means of successfully developing and implanting its accounts. It deploys pro-active sales against top accounts in delivering corporate travel, and non-traditional business solutions. Use of e-commerce has enabled the firm to grow very fast. Guests book their reservation online within shortest time. In fact a room can be booked 5 days before the actual arrival. Advertisements and communications are targeted to specific segments to capture and crate market share in increment of revenues. To understand its customer’s satisfaction, Marriott conducts Guest Satisfaction Surveys that help in determination of the hotels staff by evaluating their strengths and weaknesses. Te results obtained are used in upgrading of their brands and services. Multicultural workforce is maintained within Marriott with about 26% positions being held by the minorities. 47% of the positions are held by women hence promoting the women and the minority within the global society. Future Plans To increase its growth, Marriott international has plans to open several hotels within the globe. Early this year, Marriott celebrated opening a new Cali Marriott hotel in Columbia. The hotel was developed under an agreement with the real hotels and resorts and it will hold 170 guest rooms. Moreover, another 34 storey hotel in Eastern Europe will be opened soon. According to Marriott News Center (2014), the hotel is to be named Istanbul Marriott hotel Sisli and it will hold 259 spacious guest rooms. The five-star hotel will be a first class addition in Istanbul. Its Sisli cosmopolitan location is strategically in a site with several historical sites and popular culture that will attract many guests especially the tourists (Marriott, 2014). In the coming years, Marriott is venturing in the new markets such as the sub-Saharan areas of Africa. The company has plans to open the biggest hotel in the Rwandan country as a means of fueling the Rwandan tourism and travel industry besides training young women in attainment of jobs. Te hotel will be completed by the end of this year 2014. Moreover, an additional hotel in Haiti is to be completed early 2015 making it the fourth four star brand in the region. The hotel is targeted to offer hospitality training and offer more then 200 jobs (Hotel News, 2014). Ethics in Marriott On July 19th 2006, the company announced enactment of new by-laws that prohibited any smoking in their buildings inclusive of restaurants, meeting rooms, public space, lounges and working areas. . On January 11th 2011, all forms of pornography would be unavailable in their hotels via the internet based video on demand as a means of upholding moral ethics. Books of Mormon and the Holy bible are the common literatures in their premises (Barbara, 2011). Transparency and integrity Marriott international is a very transparent firm that is committed to integrity of corporate governance practices. Its shareholders are the sole electors’ of the board of directors who oversees the general operations of the firm. This means that the shareholders have the power to elects persons whom they know very well with good ethics and management skills. The shareholders have the power to dismiss any non-performing staff hence maintenance of an active firm. The board of directors is the representatives of the shareholders. The board members evaluates, appointments and reviews the company’ finances and strategic plans. Moreover, customers and the shareholders have the capacity to report to the independent directors on any burning issue of misconduct, abuse of power and mismanagement of funds. Such information is confidential hence appropriate actions will be taken. Therefore, this is a sign that transparency is strictly adhered in that there are several watchdogs of the company (Marriott. 2012). Strategies Cost leadership is a term that Marriott international is very familiar with. The company has become a leader in the global market while still calculating the costs of its services being offered to its customers. The company’s cooking and highly skilled chefs are the best in the world satisfying their customers to their maximum. Its managers are very experienced in that before one joins any position in the firm, the person should have worked in a similar position ago. Similarly, the firm has adopted several strategic alliances such as American foundation of blind, human rights campaign and women presidents’ education organization among others as a way of sowing responsibility. Market segmentation whereby the company has identifies its niche in leisure demand is a strategy the firm has identified. The company has identified the gulf and Asia as its individual markets niche. In Asia, India and China are the niche countries. Matters of hiring and training their workforce are a no-compromise program. A tough criterion for employees’ recruitment is observed. Whoever who joins the firm has a mandate to go regular trainings with the changing technologies (Rasheed, 2012). Marriott Finances In 20123 fiscal year, Marriott recorded a $ 12 billion profit Full year EPS had a 16% increase with a 22% annual increase every year. North America operated Revenue per Available Room (REVPAR) gave $5billion a 5.4% rise for the 2013 year end. The 2014 REVPAR target is approximated to increase within the range of between 4 and 6 %. Room rates are expected to rise with 5% in due course of 2014 (MNC. 2014). 3.4million new members were signed contributing to about 50% growth in membership within the 5 past years. Mobile room booking increased with 67% with the website recording a 25% booking in 2013. More rooms are to be built in Africa to reach the 6% REVPAR growth. 2013 year recorded a $1billion return dividends and share repurchases to their shareholders. Currently, 5million shares have been repurchased for $246million with a reduction of fully diluted shares at 17%. The 2013 fourth quarter had a $200million cost on general administration a value that was higher than the previous due to new unit’s development since the company was expanding (Bloomberge.2014). Interest expense recorded $32 million, $9million less than the previous year due to debts and low capitalized interests. Capitalized interest was $7million compared to $10 million of the previous 20112 year. Income tax was lower with a recording of $12million as compared to 2012. Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) totaled $1,325 million a 9% increase compared to 2012. This indicates that the company’s incomes are increasing every year. Balance sheet gave a $3,199million total debt and cash balances of $126million compared to $2,935 debt and $88million cash in 2012. The cash balance increased but the debt increased too. This shows that the firm is borrowing more and more as the years goes as a way of improving its services. Common stock Recorded $307.5 million (MNC. 2014). Conclusion Investment in Marriott international will be of great importance in that the company is financially stable and has great potential. Since it is opening new hotels every year, which is an indication that it has proper management and sufficient funds to run its projects. Its REVPARs are so high and sufficient proves of the company’s revenue generation. Its strategic plans are based on market dominance, customer satisfaction and profit maximization with low production cost. Its management is held under transparency, integrity and results oriented in achievement of its goals. In 2012, the Guinness book of records recognized the Marriott marquis 5-Star hotel in Dubai is the tallest hotel (Dubai Chronicle. 2012). There is no other hotel that has ever attained such an achievement. Therefore, investment in the company will be of great profit. Part 2 Comparison of the hotels Intercontinental Hotel Group Coverage IHG group is a British multinational company that has its headquarters in Denham, in the United Kingdom. It deals with hospitality by operation of hotels across the globe. It franchises, owns and leases over 46,000 hotels in America, Middle East, Asia, Europe and Africa. However, more than 4000 of its hotels operate under the franchise hotel owned by different groups but managed by the IHG group. Staffing As per 2012 report, it had 120,000 employees. Brands Its brands are Candlewood Suites, Crown Plaza, Even Holiday Inn express and Intercontinental among others (Jones, 2014). Strategy IHG is primarily involved in management of hotels owned by external parties in its franchising its brands. This means that the firm sells its expertise skills in management, system and marketing to its partners who deal with real property investment which requires huge capital inputs (IHG. 2013). Future plans In 2012, the firm announced introduction of even hotels and Hualuxe luxury hotels in China. The firm has a business advantage in that it is made large and small scale businesses. It provides an easy way of book keeping and payment for hotel accommodation hence dominating its potential in UK, China and Northern Ireland. Finances In 2013, $21.6billion was the total gross revenue with a REVPAR growth of 3.8%. IHG recorded revenue of $1903 million a rise from the 2012 value of $1835 million. Total assets amounts to $2139 million as compared to $2069million in 2012 (IHG. 2013). Operating profit was at $668million with a net debt of $1153 million compared to $1074million in 2012. Rooms’ number was increased with 1.6%. Use of internet for all its customers has raised the brand with 10%. A debt of $1153 million was recorded with a 295 tax. 35, 467 rooms were opened giving a rise of 4.6%. Financial expenses increased from $19million to $73 million. (IHG, 2014) Wyndham Coverage Wyndham Worldwide Corporation is the sole manager for Wyndham hotels and resorts besides other lodging brands. It was founded in July 2006 with its headquarters New Jersey in the United States. It operates several hotel brands across the globe. In fact it has 7,490 franchised hotels all under 15 different brands in more than 100 countries in six continents. Brands Its brands are Wyndham hotels, Ramada Days Inn, Novasol, Hoseasons and Landal Green Parks among others (WWC. 2014). Its rooms are over 645,400 accommodating more than 5million families in a year. Staffing In 2007, it had more than 33,000 employees a figure that is expected to have risen since the years. Over the years, the firm has purchased several properties such as Wisconsin and Tryp hotel all which have been rebranded Wyndham brands. Strategies Wyndham vacation ownership develops markets and sells vocational ownerships and financing of its owners through its global 190 ownership resorts (WWC. 2014). The company has introduced an awarding scheme to its regular travelers to attract them. Finances 2013 total revenues were $5 billion recording a 10% rise. Every diluted share ran at $3.83. Net income was $432million. Free cash flow was $770 million compared to $796 million in 2012 an implication that capital expenditure was increasing. Lodgings gave a 10% increase in the last quarter of as compared to that of 2012. Domestic REVPAR increased with 4.7% with a system wide REVPAR of 3.8%. A debt of $2.9 billion was recorded an amount higher than the 2012 debt of $2.6 billion. Starwood Coverage Starwood hotels and resorts worldwide, Inc. is an American based hotel and Leisure Company with its headquarters in Stamford Connecticut (Dominic, 2008). It owns manages and franchises resorts, hotels, spas and vacation ownership. It offers its services directly and through its subsidiaries. Statistics shows that the company has 57% of its rooms in America (Bloomberg Businessweek. 2013). Staffing Currently, it has more than181, 400 employees as per the 2013 report. Of the number, 275 are employed in United States only. Brands Among its major brands are Sheraton, Four Points by Sheraton, Westin, St. Regis and the Luxury Collection (The Economic Times, 2013). Strategies The company applies differentiation strategy to cope with competition. They offer temporary property ownership from other firms and homes that are on vacation (Richard, 2006). Currently, the firm has introduced another strategy of selling its hotels as a way of reducing investment costs on self-owned property (Starwood Capital Group. 2013). It has signed several contracts besides offering vacation ownership resorts. The location of the rooms is an economic advantage that allows the company to increase its revenues in other countries once weather conditions are not favorable in America. Therefore, it has majorly ventured in management and franchises business (ABC News. 2013). The company has partnerships with American express Canada bank and several affiliated airlines that allow regular customers to redeem their points for flights under the SPG flights program (Lee, R. 2014). The program has over 17 million members. Future Trends In January 2014, they made announcement that it will open a new Sheraton Zurich hotel in Switzerland that will harbor 197 guest rooms inclusive of 32 suites (PRNewswire, 2014). The company has opened over 20 new hotels in China that were launched in 2013. In fact China is the second country after United States that has the highest number of hotels market (Investor’s Business Daily. 2010: Investor Relations. 2013). Finances In 2013, Net income was $635 million recording$3.28 per share. The EBITDA was $1.263 billion inclusive of $119 million from SDT inclusive of special items the income was $579 million. The worldwide system REVPAR increased with 4.9% with management and franchise fees increasing with 8.7%. 152 franchise contacts were signed with a capacity of 32,000 rooms. Moreover, 74 new resorts and hotels were opened to handle a capacity of 16,200 rooms. Year end income tax rate was 32.4% (Yahoo Finance, 2014). Choice Hotels International Coverage Choice Hotels International, Inc. is a hospitality corporation that is based in Rockville Maryland in the United States. Among its brands are Cambria suites, Suburban Extended Stay, Econo Lodge, Roadway Inn, Quality Inn, Sleep Inn and comfort inn among others. It was founded in 1939 and it serves worldwide with over 700 locations (Morningstar, 2014). Services It provides full service restaurants, lounges conference centers and banquet. Future strategies The company focuses on a low cost strategy that can accommodate many customers depending on their financial capabilities as a means of delivering value for their money. In fact they are shifting to new technologies that will help in lowering operation cost to increase the profits margins. They have adopted the franchised mode of hospitality (Morningstar, 2014). Finances In 2013, revenue of $724 million was recorded. Gross margin recorded 43.8% with a net income of $113 million. Single earnings per share was at $1.91b with dividends of %$0.74. Free cash flow was at $121 million and a working capital of 84 million. Payout ratio was at 38.3% with 2012 recording 35.4%. Books value per share increased from $-9.44 in 2012 to $-7.92 in 2013. The year recorded no significant change in the number of shares in that in both 2012 and 2013, the records were at 58 million. Tax rate was at 28.24% with interest coverage of 4.69 (Morningstar, 2014). Accor Hotels Coverage It is a French hotel group that operates in over 92 countries. . It was founded in 1967 and it has its headquarters in Paris, France. It manages and franchises over 3,600 hotels in 5 continents. Staffing As per the 2013 report, it had over 160,000 employees. In 2011, the Accor hotels introduced its new brand using the slogan ‘open New Frontiers in Hospitality.’ Strategy Currently, the firm has the largest number of hotels all suited for both low medium and high range pricing. About 50% discount is offered to all participants who dine in Accor hotels and restaurants. Moreover, 15% discount on all beverages purchased in Asia is an added advantage. Finally, points that are redeemable are awarded to all customers who visit their hotels. Finances Currently the company has suffered some decrease in revenue in that foreign exchange has affected it so much since most of it is located within Europe. This means that once economic conditions deteriorate in Europe, the company will suffer huge loses. In 2013, the company recorded €5,536 million with a gross profit of €865 million a figure that was high compared to 2012 which had €850 million. In the same year it recorded a revenue value of €5.5 billion with a profit of €126 million and a total asset of €7 billion. Cost of goods sold amounted to 4671 million. Operating income was at €536 million with 2012 having recorded €526 million. Net interest expense was at -78 two points addition compared to 2012. Income tax expense was at €121 with the net income common including extra items was at €126million (Bloomberg, 2014). Recommendations for the Best Hotel Company From our analysis, IHG was the best company to invest in. IHG has the highest room portfolio compared to its other hotels with specific segmentation in North America. The Company has the largest number of rooms with more than 687,000 of them in over 100 countries as per the 2014 report. It is growing so fast in that it has increased it rooms with 1.9%. Within the year, 2013, 237 hotels were opened besides signing 444 of them as contracts (IHG, 2014). Dividends rose by 9%. Its brands portfolio caters for all classes of lives from luxury, upper upscale, upscale, upper midscale and midscale. It has only 74.1%b franchised hotel implying that it has about25% as managed and joint ventures. Its global REVPAR was the highest with 5.3% when compared to its competitors. Comparison of its EBIDTA and net debts showed that it is among the few companies with the least debts since it recorded only $368 million as debt. It has 7.7% shareholders in comparison with its competitors besides having paid more than $1000million as dividends returns to its shareholders (IHG, 2014). In future, the company should improve on Development of Mobile Technology & Social Media to enhance awareness. Moreover, it should engage in Cooperate Social Responsibility in form of jobs creation and Green Engage program will be a way of giving back to the society hence attracting many customers. That will lead to growth of the economy and improve lives. References ABC News. 2013. Starwood Hotels 3Q Profit Falls More than 7 Pct. Accessed on 2014 March from http://abcnews.go.com/Business/wireStory/starwood-hotels-3q-profit-falls-pct-20666479. Barbara, D. 2011 January. "Marriott says no to adult movies in new hotels". USA Today. Accessed On 2014 March From http://www.usatoday.com/money/industries/travel/2011-01-21-hotelporn21_ST_N.htm Bloomberg Business Week. 2013. Starwood Hotels & Resorts (HOT: New York). Accessed on 2014 March from http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=HOT. Bloomberg. 2014. Accor hotels. Accessed on 2014 March from http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=AC:FP Bloomberge.2014. Marriott international. Accessed on 2014 march 20th from http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=MAR DeLollis, Barbara 2011, January. "Marriott says no to adult movies in new hotels". U.SA Today. 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Accessed on 2014 march 20th from http://finance.yahoo.com/news/starwood-reports-fourth-quarter-2013-110000030.html Appendix Marriot Finances First Quarter 2014 Full Year 2014  Total fee revenue         $380 million to $395 million $1,650 million to $1,700 million  Owned, leased, corporate housing and other revenue, net of direct expenses Approx. $45 million $210 million to $220 million Depreciation and amortization Approx. $30 million     Approx. $120 million  General, administrative and other expenses     $155 million to $160 million $640 million to $650 million  Operating income     $235 million to $255 million     $1,090 million to $1,160 million  Gains and other income     Approx. $5 million  Approx. $10 million  Net interest expense1 Approx. $30 million  Approx. $110 million  Equity in earnings (losses) Approx. $0 million Approx. $0 million  Earnings per share     $0.47 to $0.52  $2.29 to $2.45  Tax rate   32.0% Read More