An analysis of the Hotel Industry from the Point of View of Marriott International. This project outlines the threat the company faces from Airbnb, & recommends next steps Marriott International can take in order to survive & thrive in the face of lodging platforms threatening the hotel industry.
2. Agenda
● Marriott Company Background
● Industry Analysis
○ Five Forces
○ Complementors
● Diagnosis of Problem Marriott is Facing
○ Airbnb by the Numbers
○ Airbnb Focuses on New Market
● Analytical Tools and Frameworks
○ Modified McKinsey’s Value Chain
○ Marriott Diversification Analysis
○ Value Curve Analysis
● Four Action Framework and Recommendations
Agenda
2
3. Vision – To become the premiere provider and facilitator of leisure &
vacation experiences in the world.
Mission – To enhance the lives of our customers by creating and
enabling unsurpassed vacation and leisure experiences.
Marriott’s Competencies:
● “Customers associate quality
with Marriott. They expect it and
will pay for it. Managers must see
customers receive that quality in
every area” - J.W. Marriott
● Earned ethics awards
● Training of staff
Sources: Marriott’s Website and Annual Report
3
Company Background
4. Marriott’s acquisition of Starwood has resulted in dominant market share
Marriott become world’s
largest hotel chain after
$13.6 billion acquisition of
Starwood’s 1,200+
properties and 11 brands
on Sept 23, 2016.
Source: IbisWorld
4
Company Background
5. ● Majority of travel is fairly price elastic
● Staying Home
● Skype/phone/zoom
● Many Buyers
● Differentiated Product
● Buyers can’t integrate
backwards
● Little to no switching costs
● Barriers to entry drastically decreased
with market entry of peer-to-peer
platforms like airbnb
● Limited ability to retaliate to peer to peer
platforms
● Razor-thin profit margins limit ability to
compete with prices of peer-to-peer
platforms
● Highly Perishable Product
● High exit barriers
● Rivals highly committed to business
● High fixed costs
● Numerous competitors
● Modest growth rate
● Strong price-based rivalry
Threat of entry - MEDIUM
Threat of Substitutes - LOW
Buyer power - HIGH
Supplier power - LOW
5
● Less concentrated than hotel industry
● Hoteliers face low switching costs
● Undifferentiated Products
Rivalry - HIGH
Five Forces Analysis of Lodging Industry = Unattractive
Source: Porter, Michael. Five Competitive Forces that Shape Strategy.
HBR:
6. UNWTO Tourism Towards 2030: Actual trend and
forecast 1950-2030
Travel and TourismTransportation
Source: Global Air Transport Outlook To 2032 And Trends To 2042 ICAO Source:UNWTO Tourism Towards 2030: Actual trend and forecast 1950-2030 6
Impact of Complements on Industry
7. Government
7
Impact of Complements on Industry
Local jurisdictions that
support hotel development
also benefit from local
room tax rates, increased
spending and job creation.
8. Marriott is facing competition from Airbnb and other home sharing sites
Why People Choose Airbnb Over Hotels:
● More household amenities
● More convenient location
● Authentic, local experience and interaction
● Fit more people together, larger space
● Platform’s ease of use
Consumers’ Preference of Staying at HotelsWhat Consumers Want from Their Stay Anywhere:
● Local experience
● Health and Safety
● More space, less money
● Pampering
● Amenities
Sources: Journal of Travel Research, FORTUNE Magazine, and Social Tables
8
Diagnosis of Problem Marriott is Facing
9. Airbnb projected to continue to grow
Source: Vizlly
9
Competitor Airbnb by the Numbers
10. Airbnb sets its sights on Corporate Travel
250
250,000
14,000
companies used Airbnb
to book and manage
business travel in 2015
companies use Airbnb
to book and manage
business travel today
new companies sign up
for Airbnb business
travel services per week
Market Segments - Leisure vs. Business Travel
Sources: IbisWorld and Vizlly
10
Competitor Airbnb Focuses on New Market
11. Unique Activities:
Marriott offers 6500 properties in 30 brands divided into 5 categories::
Luxury, Premium, Select, Longer Stays and Collections
Lower Cost:
Integration with Starwood has created cost savings in HR, financial
systems, and procurement programs. $250 million of administrative
cost savings projected for 2018.
Differentiation:
Having 30 brands enables unique and CONSISTENT experiences.
Airbnb has ONLY one brand and offers “homes” and “experiences” .
Airbnb markets verified homes as “Airbnb Plus” since there are
customer concerns for quality and consistency.
Brands
Management 11
Modified McKinsey’s Value Chain
12. Unique Activities:
6500+ Properties in 127 countries: 4839 properties in N. America
~2000 are company-operated vs. ~4500 franchised, licensed, etc.
1.3 million rooms at end of 2017: Annual increase ~5.5-6%
460,000 new rooms to come; make up 22% of industry construction.
Lower Cost:
Marriott saves money staying out of real estate and will benefit from
selling off real estate acquired through the Starwood merger.
Differentiation:
Excels in high end market segment vs. Airbnb originating in low end.
Large #s of rooms at each property enable ease of booking for
preferred dates and for group travel.
Location/Inventory
Management 12
Modified McKinsey’s Value Chain
13. Unique Activities:
Marriott loyalty programs have 110 million members across 29 brands
“Look no Further” Best Rate Guarantee -attempts to keep guests
from booking and giving money to middle-men such as Expedia,
Priceline.
Lower Cost:
Operate 23 hotel reservation centers, 8 are in the US.
Benefits when guests book direct.
Differentiation:
Marriott offers loyalty programs and will be merging them in August
vs. Airbnb is developing a loyalty program for launch in 2018
Airbnb hosts are not as skilled at pricing/occupancy analysis
Sales Channels/Rates
Management 13
Modified McKinsey’s Value Chain
14. Unique Activities:
177,000 employees of which 23,000 are in unions.
Marriott has many awards and recognitions as an employer.
Lower Cost:
This costs Marriott more through training, benefits, salaries, and brand
management, but this investment pays off in service quality.
Differentiation:
From The Ritz-Carlton’s “Ladies and Gentlemen serving Ladies and
Gentlemen” to Sheraton’s “Service Promise” staff provide service.
Marriott has the ability to self-audit and improve staff training.
Marriott’s property Security is a HUGE advantage to Airbnb.
Marriott should build social media presence to compete w/ Airbnb
Hotel Ops/Service Quality
Management 14
Modified McKinsey’s Value Chain
15. Unique Activities:
Include on property dining to fitness centers to concierge to spas.
Services can operate 24 hours a day, 7 days a week.
Entertainment amenities are rated best at hotels vs. Airbnb.
Lower Cost:
Food & Beverage and other amenities augment room rate revenue.
Hotels engage their local communities to pay to use amenities for
additional non in-house guest profits - from dining to spa.
Differentiation:
This is a HUGE area that Marriott has a scale advantage over Airbnb.
Airbnb’s “experiences” are limited and not spontaneous.
Marriott also differentiates on meeting rooms & conference features.
Marriott offers unique bespoke experiences to rewards members.
Amenities
Management 15
Modified McKinsey’s Value Chain
16. 16
Location/Inventory
Split
Sales Channels/Rates
Split
Hotel Operations/Service
Yes
Amenities
Yes
• Strengths:Ease of
booking & consistent
Weakness: Loses
more than Airbnb
when low occupancy.
• Needs to identify
ways to meet small
residence “homestay”
feel.
• Strengths: Offers
rewards program with
1.1 million users for
29 brands.
Weakness: Airbnb
offers elegant homes
for inexpensive rates.
• Strengths: Marriott
offers safety and 24-7
operations with
flexibility of timing of
use and high staff
service levels. Guests
have ability to remain
anonymous, be
messy and
demanding without
worrying about their
reviews in the Airbnb
community.
• Strength: Marriott has
more amenities than
Airbnb, and excels at
in-room
entertainment, but
many amenities are
shared (pools, fitness
centers, restaurants)
• Keep building meeting
segment that use
ballrooms
• Weakness: Airbnb
offers ‘authentic’
hosts.
• Strengths: 30 brands
with infinite variation
in offerings! Consider
merging “Classic
Select” brands.
Yes
Brands
Value Chain Analysis Summary
18. Diversification
Analysis
Justification:
Industry
Attractiveness
(Low =1, High =10)
Business Unit
Resource-Based
Advantage
(Low =1, High =10)
Notes
LUXURY: High End Resorts (Ritz-Carlton,
St. Regis, JW Marriott, Luxury Collection)
Average Price $330
3 8
Industry Attractiveness: Low due to increasing competition from Airbnb.
Business Unit (BU) Resource-Based Adv.: Bespoke and superb amenities and
service (Spas, In Room Dining), fine dining, luxury amenities.
COLLECTIONS:(Autograph Collection,
Design Hotels, Tribute Portfolio)
Average Price $200
3 7
Industry Attractiveness: Low due to increasing competition from Airbnb.
BU Resource-Based Adv.: Uniquely designed, each offering distinctive to
luxurious experiences.
PREMIUM: Mid-Range Properties
(Marriott, Westin, Sheraton)
Average Price $190
3 5
Industry Attractiveness: Low due to increasing competition from Airbnb.
BU Resource-Based Adv.: Sophisticated and thoughtful amenities and services:
Family & Corporate Travel Friendly (balance week/weekend business).
SELECT: Low Range Properties
(Courtyard, Four Points, SpringHill Suites,
aLoft, Fairfield Inn & Suites, TownePlace)
Average Price: $120
3 2
Industry Attractiveness: Low due to increasing competition from Airbnb.
BU Resource-Based Adv.:Smart and easy amenities and services. Some have
free breakfasts. Inexpensive. Consistent service for price. 72% of properties
operate in select-service agreement; relies heavily on franchise model.
LONGER STAYS:
(Marriott Executive Apartments, element)
Average Price: $95
3 3
Industry Attractiveness: Low due to increasing competition from Airbnb.
BU Resource-Based Adv.: Amenities & services mirror comforts of home. Long
term room availability and ease of booking.. 18
20. 20
Competitive Factor Marriott Airbnb
Reliability 10. If you book a room you are
guaranteed that room
3. Hosts can cancel without warning.
Must arrive at a certain time to get key
from host. Flight delays, etc can greatly
affect this
Independence from government
restrictions
10. Operates in 127 countries: locations
in all major cities in these countries
2. Subject to Municipal restrictions (ie
NYC).
In-Room Service 8: From housekeeping to food delivery,
Marriott takes care of the guests while
they stay in their rooms
1: Airbnb guests are expected to take
care of themselves
Authentic local experience 3: Marriott hotels are large properties that
generally stand in tourist locations.
Guests have to make an effort to
experience authentic local culture.
10: Airbnb guests will be staying in
someone else’s home and can fully
experience what it is like living as a local
of the city
Value Curve Highlights
21. 21
Eliminate
● Price-based competition w/ Airbnb
Raise
● In room service and amenities
● Emphasize security & safety
● Luxury property portfolio
● Catering to business travellers who need
reliability and length of stay flexibility
Reduce
● Consolidate brands in the “Classic Select”
section of the portfolio ( Courtyard by
Marriott, Residence Inn, Fairfield by Marriott,
Springhill Suites, Four Points by Sheraton,
Towneplace Suites, and Protea Hotels.
These are the least differentiated due to
minimal amenities.
Create
● Authentic local experiences
● Earn guest buy-in to Rewards Program
merger through increased loyalty incentives
● Develop curated “Rental Residence”
program. Target inventory of nearby off
property home rentals that hotels can
service; guests can stay and use amenities.
Four Action Framework
22. 22
Source: Forbes Infographic: Is Airbnb Really Cheaper Than A Hotel Room In The World's Major Cities?
Recommendation: Do Not Compete on Price
23. Source: IMPACT ANALYSIS REPORT Airbnb and Impacts on the New York City Lodging Market and Economy
23
Recommendation: Pursue Gov’t Regulation of Airbnb
24. Strategies to Protect Business
Travel Market:
● Focus on strengths of
reliability & availability
● Focus on service
● Retaliate against Airbnb with
Ad Campaign
24
Recommendation: Protect Business Travel Market
Source: Alphawise, Morgan Stanley Research
25. Create a local and customized, culture-infused environment
Source: Micrometrics
25
Recommendation: Enhance Local Experiences
27. 27
Location/Inventory
Purse Gov’t
Regulation of Airbnb
Sales Channels/Rates
Do not compete
on $
Hotel Operations/Service
Protect Business
Travel Market
Amenities
Enhance Local
Experiences
Yes
Brands
Recommendation Summary - Where/How to Compete
Market Segments - Leisure vs. Business Travel
28. 28
Location/Inventory
Purse Gov’t
Regulation of Airbnb
Sales Channels/Rates
Do not compete
on $
Hotel Operations/Service
Protect Business
Travel Market
Amenities
Enhance Local
Experiences
Yes
Brands
Recommendation Summary - Where/How to Compete
31. Projections for Airbnb vs. Marriott 20202017
Global Services
By the Numbers...
Airbnb vs. Marriott
Marriott needs to identify its
strengths to compete.
Airbnb is rapidly
gaining market share.
Airbnb Rev:
$2.8B
Marriott Rev:
$22.9B
Airbnb Profit
$.45B
Airbnb Listings
3 Mil
Marriott Profit:
$3.2B
Airbnb Rev:
$8.5B
Airbnb Profit
$3.5B
Airbnb Listings
XX Mil
Airbnb projected to continue to grow (DRAFT NEEDS TO BE COMPLETED)
Competitor Airbnb vs. Marriott by the Numbers
Source: Vizlly
Marriott Rev:
$xx.x B
Marriott Profit:
$xx.x B
Marriott Listings:
1.3 M
33. 33
Location/Inventory
Purse Gov’t
Regulation of Airbnb
Sales Channels/Rates
Do not compete
on $
Hotel Operations/Service
Protect Business
Travel Market
Amenities
Enhance Local
Experiences
• Strengths:Ease of
booking & consistent
Weakness: Loses more
than Airbnb when low
occupancy.
• Identify ways to meet
“home”” feel.
• Based on what is
happening in NYC,
educate governments on
the potential economic
loss from allowing Airbnb
to operate unfettered in
their municipalities.
• Strengths: Offers
rewards program with
1.1 million users for 29
brands. Emphasize.
• Weakness: Airbnb
offers elegant homes
for less.
• Due to having much
lower operation costs,
Airbnb can afford to be
much cheaper than
hotels and pricing is set
by individual owners.
• Strengths: Marriott
offers safety and 24-7
operations and service.
• Guests can remain
anonymous & be
messy without worrying
about their Airbnb
reviews.
• Keep building meeting
segment that uses
meeting rooms
• Focus on reliability and
availability
• Focus on meeting
rooms / corporate
• Strength: Marriott has
more amenities than
Airbnb, and excels at
in-room entertainment,
but many amenities are
shared
• Weakness: Airbnb
offers ‘authentic’ hosts.
• Offer curated residence
rental program for
properties in proximity
to hotels that have
access to hotel
amenities.
• Strengths: 30 brands
with infinite variation in
offerings!
• Maintain high end
brands, but consider
consolidating low end
“Classic Select” brands
that are less
differentiated with less
amenities.
• Build Ad Campaign
against Airbnb brand.
Yes
Brands
Recommendation Summary - Where/How to Compete
