Marriott team presentation_for_linked_in

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  • REV par = the same
  • Increase # of HotelsLower ongoing cost Burden of Owner
  • The chart on the left indicates Marriott’s number of hotel holding of different segments (luxury, midscale, and economy). We can see from the chart that Marriott depends heavily on its luxury hotel business segment. The chart on the right demonstrates that these luxury hotels are the most profitable segment for Marriott’s brand hotel holding. However, the mid-scale hotels are underperforming. In this way, Marriott should sell three of its midscale hotel brands - Courtyard, Fairfield, and Spring Hill. These hotels inhibitMarriott’s potential to reach maximum profitability. Source: Marriott 2011 10K
  • Focusing on the mid-scale hotel market this graph displays Marriott’s return on assets relative to its competitors. As one can see Accor has a large mid-scale holding as well as a high return on assets. An acquisition of Marriott’s mid-scale hotels by Accor would provide both Accor and Marriott benefits for the future. Source: Star(Websites), Each Company’s 10K
  • The minimum sale price of the mid-scale hotels is equal to the combined market value of the 3 hotels listed above in addition to the goodwill of about 2%. Usually, the acquirer would pay a 20%-30% premium on top of the total market value.Source: Annual Report
  • Cash inflow = $4560 Million
  • The global hotels and resorts industry is a low growth, and low concentration industry. There are both external and internal competitors of the global hotels and resorts industry that pose a threat to Marriott International’s competitive position.External competitors, though they are not technically part of this industry, can take business away from those firms that do compete in the industry.They include motels, bed and breakfasts, caravan parks, camp grounds, and hostelsInternal competitors are those other hotel and resort firms that compete for the global hotel and resort industry market shareMarriott International has the greatest market share at 2%, followed by Hilton with 1.7%The top four players in this industry are expected to account for 6-7% of the market share, demonstrating the low market concentrationSource: IBISWorld Industry Report G4611-GL Global Hotels & Resorts
  • Always a substitute for food and drink suppliers for hotels, these companies have minimal bargaining power with Marriott because they can leverage the potential of another supplier at a lower cost.Airlines that overbook a flight have no option but to provide lodging to those customers that will not be able to travel and need a place to stay overnight. Key Buying IndustriesGlobal AirlinesFlight crews demand industry services.Global Travel Agency ServicesOperators in this industry book hotel and resort accommodation on behalf of customers.Global ConsumersConsumers require accommodation when traveling, whether for business or pleasure. Key Selling IndustriesGlobal Milk & Cream ManufacturingThis industry supplies dairy products to hotels.Global Fruit & Vegetables ProcessingThis industry supplies fruits and vegetables to hotels.Global Beer ManufacturingThis industry supplies beer to hotels.Global Spirits ManufacturingThis industry supplies alcohol to hotels.Global Horse Betting & LotteriesHotels and resorts accommodate visitors to casinos.Key Success FactorsThe key success factors in the Global Hotels & Resorts industry are:Access to multiskilled and flexible workforceAccess to multi-skilled and well trained staff is vital to ensure high levels of guest service and satisfaction.Being part of a franchising chainIt is important for companies in the industry to closely evaluate the benefits of being part of a chain orfranchised group, particularly in areas such as marketing and promotion.Receiving the benefit of word-of-mouth recommendationsGood word-of-mouth recommendations are often the most successful promotional tool in the Hospitalitydivision.Proximity to key marketsIt is important for companies in the industry to be located close to other businesses that offer services andproducts for those in the same market.Ability to quickly adopt new technologyOperators need to be aware of the new technology available in this industry for information, promotions,bookings and reservations and general management control systems.Ability to control stock on handIt is imperative for operators to understand the various room availability and tariff mechanisms used inthis industry.Source: IBISWorld Industry Report G4611-GL Global Hotels & Resorts
  • A: Marriott International dictates all of its business decisions through its set of core values. Consistent leadership supports the employment of these core values, as JW Marriott has led the company since 1965.Set of core values:1. Put people first2. Pursue excellence3. Embrace change4. Act with integrity and serve our worldDemonstrates the value of this resource through global partnershipsHabitat for HumanityFeeding AmericaB: Marriott’s brand has been atop the the industry in excellence and brand recognition for years.The company ranked 37th in the Fortune's 2011 rating of World's Most Admired Companies after ruling the list as the number one for ten consecutive years. The 'Most Admired' list is made up of companies that are ranked by Executives, Directors, and Analysts in their own industry on eight criteria, including innovation, people management, uses of corporate assets, social responsibility, quality of management, financial soundness, long-term investment, and products/services quality.Marriott International continues to improve its brand image through partnershipsFor example, Marriott partnered with the Tampa Bay Buccaneers, an NFL franchise, this past MondayC: Marriott International maintains focused on improving its lodging in developed nations and providing new lodging in emerging marketsIts widespread global presence will continue to grow as they will have hotels in over 70 countries by the end of 2012D:Marriott International prides itself on incorporating advanced technology into the hotel experience of its customers.For example: One of the frontrunners of the technical success has been the Marriott's Automated Reservation System for Hotel Accommodations (MARSH), a well known reservation system being used by the Marriott. This system encompasses the entire database of all its customers visiting anywhere in any part of the world.The MARSH system differentiates Marriott from its competitors in that it offers customers more personal attention during their stayThis strategy demonstrates Marriott’s refreshing commitment to its customers. They now focus on the statistic of revenue per customer rather than revenue per property.Technical innovations to ease the business process and increase hassle-free experience for thecustomersMarriott had adopted several innovative technical programs to suit its business requirements and supportthe customer related problems. These programs have been developed either in-house or with the externalsupport. One of the frontrunners of the technical success has been the Marriott's Automated ReservationSystem for Hotel Accommodations (MARSH), a well known reservation system being used by the Marriott.This system encompasses the entire database of all its customers visiting anywhere in any part of theworld. Thus, the information of a customer visiting Courtyard, London would already be available throughMARSH as that customer had once visited Ritz-Carlton, Millenia Singapore. The MARSH, hence, gives theMarriott an edge over its competitors, in providing personalized attention to each of its customer. TheMARSH success led to the implementation of the e-business strategy which transformed Marriott from aproperty-focused to a customer- focused company. The main aspect of this strategy was the moreimportance given to revenue earned per customer than the revenue earned per property and to providebetter customer service through the use of information technology proactively and through facilities onoffer through websites.Higher brand recognition and recall makes the company priority choice for clientsMarriott is one of the leading hotel and leisure companies known for its strong brand portfolio in all themajor segments and market. The company operates in most major markets and segments around theworld through its luxury brands such as Marriott Hotels & Resorts, JW Marriott Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels & Resorts, Grand Residences and mid-priced brands like Courtyard, and FairfieldInn. At a corporate level, Marriott has a high brand recall. The company ranked 37 in the Fortune's 2011rating of World's Most Admired Companies after ruling the list as the number one for ten consecutiveyears. The 'Most Admired' list is made up of companies that are ranked by Executives, Directors, andAnalysts in their own industry on eight criteria, including innovation, people management, uses ofcorporate assets, social responsibility, quality of management, financial soundness, long-term investment,and products/services quality.Global presence and strong brand portfolio diversifies the revenue sourcesMarriott is one of the key players in lodging and hospitality industry with operations spanning 70 countriesaround the globe. It earns revenues from both matured and emerging markets. The established presencein matured markets like the US and Canada drives the value growth while the presence in emergingmarkets drives the volume growth. Besides, a global presence shields the country from risks specific to aparticular economy.Source: IBISWorld Industry Report G4611-GL Global Hotels & Resorts
  • As for improving customer loyalty, every hotel is investing in their customer's experience in order to attract more customers. Marriott is doing really good in their loyalty program except not having a more complicated data system that provides more convenient and automatic check-in. However, this system cost money.Hotel utility costs represent about 6 percent of all operating costs. Plus, 60%-70% of the cost is energy. 34% of consumers would be willing to pay more to stay in green hotel. Through a strategic approach to energy efficiency, a 10 percent reduction in energy consumption would have the same financial effect as increasing the average daily room rate (ADR) by $0.62 in limited-service hotels and by $1.35 in full-service hotels. However, this requires huge investment in green energy and generators.All in all, the ability to finance is the most important issue. We are currently in debt: 1% of our revenue is cash and our debt to equity ratio is 16, while the industry average is around 6. In order to have the cash to finance, we can:1. Sell underperforming hotels -- best choice2. Exit economy hotel market(+) Increase resources to improve underperforming hotels(-) Marriott’s low-scale hotels are growing profitable3. Third party financing (PE/Shares/Bonds)(+) Quick cash inflow(-) Hard to find/Dilute share price/High cost of the debtSource: University of Michigan – High Performance Hospitality, Efficiency Partnership, Marriott's 10-K
  • Total Debt: 6 billion dollars, Debt to Equity Ratio: 16. If we decrease the debt to 3 billion dollars, then debt to equity ratio = 8 (industry average DE ratio = 6)Given the recommended plan to sell off the mid-scale hotels, one way that Marriott can utilize the new cash includes investing into leading “green practices” that can essentially set them a part from their competitors. These “green practices” have been segmented into 3 categories including energy, water and waste. EnergyAccording data from energy star hotels on average in America spend around $2,196 per room per year which calculated is about 6% of operating costsBy using some of the cash inflow and installing an onsite co-generator, the Marriott can save enough energy to light 240 homes a day Energy savings improve the operation of capital equipment, enhances the bottom line and improves customer experience34% of consumers would be willing to pay more to stay in a hotel that has an emphasis on being green 2. WaterInstalling Low-flow shower head that save on average 2 gallonsper minute Dual-flush toiletsThese changes will cause 50% less water3. WasteFocusing energy on compost waste as the cost to remove compost waste is 50% less than the cost to remove trashThe improvements in these areas will in turn augment customer loyalty which is one of the underlining goals for many Hotel chains. Source: University of Michigan – High Performance Hospitality, Efficiency Partnership
  • Marriott team presentation_for_linked_in

    1. 1. Improving MarriottNaian (Tim) Chang ● Marie Iannone ● Kelsey Merlo Joshua Bridges ● Thomas Shane 12/16/2012 1
    2. 2. Executive SummaryOBJECTIVEHow can Marriott exceed consensus expectations of earnings, $1.17 billion, over the next twoyears?RECOMMENDATIONMarriott can improve upon its existing operations and sell off units to exceed earningsexpectations by $200 million. Sustainable Operations Improve Loyalty Program Sell Underperforming Units• Lack of sustainable operations • Little differentiation • Sell off Mid-tier hotel• Reduce energy, water, and between loyalty programs portfolio waste usage • Automatic check-in • Accor as buyer• Increase operating • Refer-a-Friend program • Generate $4.6 billion efficiencyFinancial Impact: Marriott will increase its Net Income to $1.3 billion plus $4.6 billion one timecash inflow from selling underperforming hotels 12/16/2012 2
    3. 3. SustainableOperations 12/16/2012 3
    4. 4. Post-recession, Marriott’s failure to implement sustainable operatingpractices has led it’s operating margins to lag behind competitors Operating Margins for the Luxury Hotel Segment Competitors 0.25 Competitors’ Ave: 17.2% • 50% of Intercontinental Hotels 0.2 have converted to “Green 0.15 Engage” program Operating • Starwood “Sustainable Margin 0.1 Initiative” for better Marriott Ave: 2.9% 0.05 energy, water, waste practices 0 Marriott 2009 2010 2011 -0.05 • 0.2% of Hotels are certified by LEED (Leadership in Energy Environmental Design) 10% deduction in energy consumption would have • Energy Star Program has been the same financial impact as increasing ADR by $2 deployed almost exclusively in mid-tier offerings like Fairfield Inn Source: Marriott, Starwood, Intercontinental, Wyndham 10k reports, Deloitte Sustainability Loyalty Program Sell Hotels 12/16/2012 4
    5. 5. Marriot will generate costs savings for a minimal increase in investmentby implementing sustainable energy, water, and waste practices LEED certified hotel’s average percent savings • Onsite co-generator 80%  Saves enough 70% Energy electricity to light 240 homes a day 60% • Green windows, and roof 40% 38% 35% 40% • DuLow-flow shower head  Saves 2 gal. per minute 20% Water • al-flush toilets  Uses 50% less water 0% Solid Waste Water Energy Usage Carbon Emissions Emissions • Compost waste  Cost to remove Waste compost is 50% less The initial investment premium for than cost to remove Sustainable Practices has fallen from 15% in trash 2001 to 2-5% in 2012Source: University of Michigan – High Performance Hospitality, Efficiency Partnership Sustainability Loyalty Program Sell Hotels 12/16/2012 5
    6. 6. Investing in sustainable initiatives will increase Marriott’s key revenue drivers and operating efficiency Revenue per available Improve Brand Operating Efficiency room • Leading “Green • Attract more • Lower operating Practices” as hotel clientele costs and differentiator • 34% of customers commodity • Internal controls willing to pay more exposure increase ease of to stay in “Green” • Mitigate future risk change hotel of regulation and implementation litigationSource: University of Michigan – High Performance Hospitality Sustainability Loyalty Program Sell Hotels 12/16/2012 6
    7. 7. Improve customerexperience 12/16/2012 7
    8. 8. Marriott currently competes closely with Hilton for business travelers, but does little to differentiate Hilton usage increases steadily 30% affluent Americans say loyalty membership while Marriott flounders % of people who stayed in a affects what hotel brand they patronize 25% hotel past 12 months Hilton 23% Brands Criterias Marriott Hilton 21% Marriott 4 Membership Levels   Brands Frequent Flyer Miles   19% 2006 2007 2008 2009 2010 2011 Vacation Packages   Patrons primarily use Bonus Points   Marriot and Hilton Hotels Priority Late Checkout   for business travel 29% Marriott Brand Hilton Brand eFolio   25% 28% 29% 21% No Blackout Dates   18% 21% 17% Loyalty Program benefits are Personal Business extremely similar and easy to replicateSource: (Mintel Hotel Accommodations), (Hilton Honors, Marriott Rewards) Sustainability Loyalty Program Sell Hotels 12/16/2012 8
    9. 9. Marriott should implement an automatic check-in system to cater to business travelers’ demands for efficient and fast service Other travel services 76% of men and 79% of women provide time-conscious services value express check-in / check-out • Airline Services How does it work? • Check in using phone  Baggage Delivery • Receive room number  Security Screening • Hotel desk programs  Check-In & Boarding room to match your permanent card • Car Rentals • Skip the desk and go to your room  Skip the counter Differentiates Marriot from other  E-receipts hotels to attract frequent business travelersSource: (Research Alert; Business Websites; Advanstar Communications, Inc.) Sustainability Loyalty Program Sell Hotels 12/16/2012 9
    10. 10. Implementing a refer-a-friend program will continue to drive demandfor Marriott hotelsPeople who are referred by friends are 3 Recommended Implementationtimes more likely to buy in than others • Refer a friend using Marriott website • Referred receives 2500 points • Referee receives 1000 points • 5 referrals = one free upgrade!Companies using loyalty programs haveexperienced up to an 800% return onreferred patronsSource: J. Alsever, 2011 Sustainability Loyalty Program Sell Hotels 12/16/2012 10
    11. 11. SellUnderperformingHotels 12/16/2012 11
    12. 12. Marriott should sell three of its midscale hotel brands - Courtyard, Fairfield, and SpringHill Marriott Brands by Market Value and Desire to Sell Marriott Hotel Courtyard Brand Holding by Marriott Fairfield Courtyard Inn and Fairfield by Marriott International Suites Marriot Hotels Inn and Suites SpringHill Spring TownPlace Residence Hill Bulgari Luxury Inn AC Ritz Residence Midscale Town Renaissance Inn Economy Place JW Profitable Underperforming EDITION • Midscale brands do not perform well in comparison to luxury brands • Marriott still offers brands similar to Courtyard, Fairfield, and SpringHillSource: Marriott 2011 10K Sustainability Loyalty Program Sell Hotels 12/16/2012 12
    13. 13. Acquisition by Accor with greater focus on mid-scale hotel brands, willbenefit both Marriott and Accor Midscale Hotel Brand Holding Profitability % of Midscale Brand Holding 60% 40% 20% 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% Return on Assets (Measure of Profitability)Source: Star(Websites), Each Company’s 10K Benefits Marriott will gain: Benefits Accor will gain:▪ More budget for luxury hotel brands ▪ Increase market share for midscale hotels▪ Eliminate weak brands ▪ Consolidate into one successful network▪ Increase luxury identity of Marriott ▪ Larger customer base Sustainability Loyalty Program Sell Hotels 12/16/2012 13
    14. 14. The strategic sale of Courtyard, Fairfield, and SpringHill to Accor willprovide at least $4.6 billion cash inflow Brand Total Market Value Per Brand Lowest Sale Price Courtyard $ 2,160 $ 2,210 Fairfield Inn & Suites $ 1,600 $ 1,650 SpringHill Suites $ 680 $ 700 $ 4560 (millions) Brand Contribution to Total Cash Inflow from Sale Key Assumptions • Total market value equals the future value of the brand $4.6 • Sale price is Billion calculated based on 2% goodwill goodwill of 2% (indicated in green) SpringHill Suites Fairfield Inn & Suites Courtyard Total Revenue Sustainability Loyalty Program Sell Hotels 12/16/2012 14
    15. 15. Financials and Risk 12/16/2012 15
    16. 16. Implementing our 3 recommendations leads to Marriott surpassingmarket forecasts Net Income Growth $1,545 Cash Inflow from $1,373 Best Selling Base Underperforming $1,202 $375 Hotels: Worst $203 Forecasted Total $32 $4.6 Billion NI for 2012-2013: $1170M Sustainable Operations Improve Customer Experience 2 Years’ Total NI (Millions) Increase in Rev Increase in cost Increase in Rev Increase in cost Best Case $1,545 1% 1.5% 0.5% 1% Base Case $1,373 0.75% 1.75% 0.3% 1.5% Worst Case $1,202 0.5% 2% 0.1% 2% Source: JPMorgan Forecast 12/16/2012 16
    17. 17. Level of Impact X Risk and Mitigation StrategiesProbability of Occurrence Risk Rating Risk Mitigation Strategy Initial investment to switch to Prioritize implementation sustainable practices offsets X schedule to introduce high ROI decrease in costs practices first Loyalty program does not induce Ensure best practices when new sales and increase repeat marketing new program X business Marriott is unable to find a X Be willing to negotiate on price buyer for its mid-tier portfolio and hotel brands that we are willing to sell Lack of mid-tier hotel options Effectively deploy increased X lowers Marriott’s future revenue cash for sale to improve potential current portfolio. 12/16/2012 17
    18. 18. Executive SummaryOBJECTIVEHow can Marriott exceed consensus expectations of earnings, $1.17 billion, over the next twoyears?RECOMMENDATIONMarriott can improve upon its existing operations and sell off units to exceed earningsexpectations by $200 million. Sustainable Operations Improve Loyalty Program Sell Underperforming Units• Lack of sustainable operations • Little differentiation • Sell off Mid-tier hotel• Reduce energy, water, and between loyalty programs portfolio waste usage • Automatic check-in • Accor as buyer• Increase operating • Refer-a-Friend program • Generate $4.6 billion efficiencyFinancial Impact: Marriott will increase its Net Income to $1.3 billion plus $4.6 billion one timecash inflow from selling underperforming hotels 12/16/2012 18
    19. 19. Thank you 12/16/2012 19
    20. 20. Appendix 12/16/2012 20
    21. 21. Team Members Naian (Tim) Chang, Marie Iannone, ’13 ’13 BSBA BSBA Kelsey Merlo, ‘12 Joshua Bridges, ‘12 BSBA BSBA Thomas Shane, ’12 BSBA 12/16/2012 21
    22. 22. Appendix – Table of Contents• Marriott’s industry and • A plan for diversity • Market Revenue Forecast competitors • Starwood franchising fees 10K • Marriott & Accor’s• Porter’s Five Forces • Data and facts for going green Liquidity/Financial Health• Marriott’s competitive part 1 • Marriott’s Income Statement advantage • Data and facts for going green • Marriott’s Balance Sheet:• Marriott’s challenges part 2 Asset• One way Marriott can invest • Data and facts for LEED and • Marriott’s Balance Sheet: new cash Marriott’s LEED certified Liability and Equity• Strategically increase hotels • Accor’s Balance Sheet: Asset advertising in feeder • Starwood management fees • Accor’s Balance Sheet: demographics • Calculating brand market Liability and Equity• Loyalty programs are not that value and desire to sell loyal • Marriott brands by category• 2-year Implementation Plan • Marriott category percentages• Hotel capacity in the world – before and after sale• LEED’s success • Comparable Marriott brands• Financial impact calculations • Calculating sale price for• The 2006 sale underperforming brands 12/16/2012 22
    23. 23. Marriott’s industry and its major competitorsIndustry Marriott competes in the global hotels and resorts industry (lifecycle: mature) The industry expects to generate close to $580 billion (growing at 1.6%) in revenue in 2012Competitive Landscape Low industry concentration The top four players in 2012 account for less than 7% of the market share Competitors include:External Competitors Internal Competitors Compete for some of the same customers but are not in the same Revenue Growth industry as Marriott Motels Bed and breakfast establishments Caravan parks Camping grounds Hostels Market ShareSource: IBISWorld Industry Report G4611-GLGlobal Hotels & Resorts Go Back to Appendix – Table of Content 12/16/2012 23
    24. 24. Porter’s Five Forces Analysis: some challenges for Marriott Suppliers Partnership with airlines Key Success Factors Partnership with travel agencies Large base of food supply • Access to multiskilled (Low bargaining power) and flexible workforce Entrants Substitutes • Being part of a Rivals franchising chain High barriers to No direct substitute entry Oligopoly Luxury • Receiving the benefit Hotels for luxury hotels High initial cost Local Hotels In-house activities of word-of-mouth Unattractive for Competitive Pricing One-day travel recommendations entry (Moderate (Moderate • Proximity to key (High bar) Competition) variety) markets • Ability to quickly adopt new Buyers technology Price sensitive vs. quality seeking • Ability to control Well-informed stock on hand Exhibit brand loyalty (Moderately high bargaining power)Source: IBISWorld Industry Report G4611-GLGlobal Hotels & Resorts Go Back to Appendix – Table of Content 12/16/2012 24
    25. 25. Marriott’s competitive advantage (core resources & capabilities) andcompetitive position Core Values Brand Image Diversification Technology (Resource) (Resource) (Capability) (Capability)1. Put people first Higher brand recognition Global presence and Technical innovations to2. Pursue excellence and recall makes the strong brand portfolio ease the business process3. Embrace change company priority choice diversifies the revenue & increase hassle-free4. Act with integrity and for clients sources experience for the serve our world customers Source: DATAMONITORMarriott has3,362 properties globally and a total of 586,515 guest rooms (about 175rooms in each property) across 68 countries and territories. Marriott accounts for a 2% marketshare.Source: IBISWorld Industry Report G4611-GLGlobal Hotels & Resorts Go Back to Appendix – Table of Content 12/16/2012 25
    26. 26. Marriott’s challengesChallenges Recommendations Financing Sell underperforming hotels ability Exit economy hotel market (+) Increase resources to improve underperforming hotels ( -) Marriott’s low-scale hotels are growing profitable Improving Sustainable customer operations Third party financing (PE/Shares/Bonds) loyalty (+) Quick cash inflow ( -) Hard to find/Dilute share price/High cost of the debt Go Back to Appendix – Table of Content 12/16/2012 26
    27. 27. One way Marriott can invest new cash Sell underperforming hotels (cash inflow) Leading “Green Practices” as hotel differentiator Energy Water Waste • Onsite co-generator • Low-flow shower head – saves 2 • Compost waste • Saves enough electricity to light gal. per minute • Cost to remove compost is 50% 240 homes a day • Dual-flush toilets less than cost to remove trash • Green windows, and roof • Uses 50% less water Improving customer loyaltySource: University of Michigan – High PerformanceHospitality, Efficiency Partnership Go Back to Appendix – Table of Content 12/16/2012 27
    28. 28. Strategically increase advertising in feeder demographics Strategic increases Feeder demographic: • Sponsorships • Business class travelers • Universities • Age 22-28 • Increase • University students • Appearances • Business professions • Universities • Other Majors (economics, Political • Major business Science etc) Go Back to Appendix – Table of Content 12/16/2012 28
    29. 29. Loyalty programs are not that loyal Percentage of respondents who belong to a loyalty program and patronized another hotel chain. 36% 33% 33% 30% 27% 26% 27% 23% 23% 21% 18% 18% Marriott Hilton InterContintal Wyndham Marriott Hilton InterContinetal Wyndham(Mintel Hotel Accommodations) Go Back to Appendix – Table of Content 12/16/2012 29
    30. 30. 2-year Implementation Plan Q1, Q2 Q3, Q4 Q5, Q6 Q7, Q8 •Automatic check-in trials •Automatic check-in national launch •International Launch •Automatic check-in international •Large markets •Referral program trials •Automatic check-in international Launch •NY, Charlotte, DMV, Atlanta •Large markets trials •Referral Program international trials •Large markets: the (Q7), Launch (Q8) Americas, Asia, Europe(Spain, Italy Germany) •Referral program national launch Go Back to Appendix – Table of Content 12/16/2012 30
    31. 31. Hotel capacity in the world Go Back to Appendix – Table of Content 12/16/2012 31
    32. 32. LEED’s success • As mentioned above, hotels lose up to 25% and more of the price of an overnight when they deal with merchant sites. • Mintel LEED-certified buildings, typically save: • 30% to 50% in energy usage • 35% in carbon emissions • 40% in water emissions • 70% in solid waste Go Back to Appendix – Table of Content 12/16/2012 32
    33. 33. Financial impact calculations Go Back to Appendix – Table of Content 12/16/2012 33
    34. 34. The 2006 sale • 2006, we have sold 65 hotels for approximately $5.6 billion • Starwood 10K Go Back to Appendix – Table of Content 12/16/2012 34
    35. 35. A plan for diversity • Successfully tailoring MAR’s brands to specific regions. MAR has tailored its • Fairfield, Courtyard, and Residence Inn brands to suit customer preferences in India, • China, and Latin America, which has greatly improved its ability to win development • contracts internationally. In China, development will continue to be driven by the • dramatic infrastructure development across the country, and the increased propensity • for Chinese intra-country domestic leisure travel.Source: JP Morgan report Go Back to Appendix – Table of Content 12/16/2012 35
    36. 36. Starwood franchising fees 10K Go Back to Appendix – Table of Content 12/16/2012 36
    37. 37. Data and facts for going green • 12% of consumers will pay extra for green building • Costs 2-5% more to build green • per ton charge to remove compost is half of what it costs to remove trash • 40% lower water costs throw better toilets, 1.3 gallon per flush to .7 or .9 • Low flow shower head saves water at 2 gallons per minute. Which tested best out of 4 • Co-generator allows units motor to go from 60 mhz to 42 mhz. Using 100 watts instead of 200 watss for 50% decrease in power consumed Go Back to Appendix – Table of Content 12/16/2012 37
    38. 38. Data and facts for going green • Hotel utility costs 60-70 is energy. • 34% of consumers would be willing to pay more to stay in green hotel • 51% of hotels are green • Low emittance windows that reflect radiant heat • Marriott already has CFLs and good washers • Saved $6 million in 2006 http://www.energystar.gov/ia/business/challenge /learn_more/Hotel.pdf Go Back to Appendix – Table of Content 12/16/2012 38
    39. 39. Data and facts for LEED and Marriott’s LEED certified hotels LEED-certified buildings, typically save: • 30% to 50% in energy usage • 35% in carbon emissions • 40% in water emissions • 70% in solid waste http://www.fypower.org/pdf/BPG_hotels.pdf Marriott currently has 11 LEED certified hotels, 3,718 50% of intercontinental hotels have been converted to green engage for average of 10% energy savings Go Back to Appendix – Table of Content 12/16/2012 39
    40. 40. Starwood management fees Go Back to Appendix – Table of Content 12/16/2012 40
    41. 41. Calculating brand market value and desire to sellSource: Marriott 2011 10K Go Back to Appendix – Table of Content 12/16/2012 41
    42. 42. Marriott brands by category Luxury Midscale Economy• Marriott Hotels • Courtyard • Marriott Executive and Resorts • Fairfield Inn and Apartments• Renaissance Hotels Suites• JW Marriott • Marriott ExecuStay• Autograph • SpringHill Suites Collection (AC) • Residence Inn• Bulgari Hotels and • TownePlace Suites Resorts• The Ritz-Carlton• EDITION Go Back to Appendix – Table of Content 12/16/2012 42
    43. 43. Marriott category percentages – before and after sale Before Sale After Sale Economy Economy 5% 5% 0% Midscale Midscale 17% 28% Luxury Luxury 67% 78% 0% Go Back to Appendix – Table of Content 12/16/2012 43
    44. 44. Comparable Marriott brands• Courtyard – Marriott• Fairfield – Residence Inn Go Back to Appendix – Table of Content 12/16/2012 44
    45. 45. Calculating sale price for underperforming brands North American International Total MV Per Brand Selling Price MV MV Brand Courtyard by Marriott® ("Courtyard") $ 1,951,275,528.63 $ 216,017,120.57 $ 2,167,292,649.19 $ 2,210,638,502.18 Fairfield Inn & Suites by Marriott® ("Fairfield Inn & $ 1,609,446,238.94 $ 4,747,629.02 $ 1,614,193,867.96 $ 1,646,477,745.32 Suites") SpringHill Suites by Marriott® ("SpringHill Suites") $ 681,284,764.86 $ - $ 681,284,764.86 $ 694,910,460.16 $ 4,552,026,707.66 Selling Price = Total MV x (1 + Goodwill) *Goodwill = 2% Go Back to Appendix – Table of Content 12/16/2012 45
    46. 46. Market Revenue Forecast 2012NI:$530M 2013NI:$640M Forecasted Total 2 yrs’ NI: $1170M Source: JPMorgan Forecast Go Back to Appendix – Table of Content 12/16/2012 46
    47. 47. Marriott & Accor’s Liquidity/Financial Health Marriott Accor Source: MorningStar Go Back to Appendix – Table of Content 12/16/2012 47
    48. 48. Marriott’s Income Statement Fiscal Years ($ in Millions) 2009 2010 2011 REVENUES: Base management fees (1) $ 530 $ 562 $ 602 Franchise fees (1) 400 441 506 Incentive management fees (1) 154 182 195 Owned, leased, corporate housing, and other revenue 1,019 1,046 1,083 Timeshare sales and services (including net note securitization gains of $37 in 2009) 1,123 1,221 1,088 Cost reimbursements (1) 7,682 8,239 8,843 Revenue from sale of brands Total Revenues 10,908 11,691 12,317 OPERATING COSTS AND EXPENSES Owned, leased, and corporate housing-direct 951 955 943 Timeshare-direct 1,040 1,022 929 Timeshare strategy-impairment charges 614 - 324 Reimbursed costs (1) 7,682 8,239 8,843 Restructuring costs 51 - - General, administrative, and other (1) 722 780 752 Total cost of sales 11,060 10,996 11,791 Income (loss) from operations (152) 695 526 (Losses) gains and other income (including gain on debt extinguishment of $21 in 2009) (1) 31 35 (7) Interest expense (1) (118) (180) (164) Interest income (1) 25 19 14 Equity in losses (1) (66) (18) (13) Timeshare strategy - impairment charges (non-operating) (1) (138) - - INCOME BEFORE PROVISION FOR INCOME TAXES (418) 551 356 Provision for income taxes 65 (93) (158) NET INCOME (353) 458 198 Source: 10K Go Back to Appendix – Table of Content 12/16/2012 48
    49. 49. Marriott’s Balance Sheet: Asset 2011 2010 ASSETS Current assets Cash and equivalents $ 102 $ 505 Accounts and notes receivable (1) (including from VIEs of $0 and $125, respectively) 875 938 Inventory 11 1,489 Current deferred taxes, net 282 246 Prepaid expenses 54 81 Other (including from VIEs of $0 and $31, respectively) - 123 1,324 3,382 Property and equipment 1,168 1,307 Intangible assets Goodwill 875 875 Contract acquisition costs and other (1) 846 768 1,721 1,643 Equity and cost method investments (1) 265 250 Notes receivable (1) (including from VIEs of $0 and $910, respectively) 298 1,264 Deferred taxes, net (1) 873 932 Other (including from VIEs of $0 and $14, respectively) (1) 261 205 $ 5,910 $ 8,983 Source: 10K Go Back to Appendix – Table of Content 12/16/2012 49
    50. 50. Marriott’s Balance Sheet: Liability and Equity LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Current portion of long-term debt (including from VIEs of $0 and $126, respectively) $ 355 $ 138 Accounts payable (1) 548 634 Accrued payroll and benefits 650 692 Liability for guest loyalty program 514 486 Other (1) (including from VIEs of $0 and $3, respectively) 491 551 2,558 2,501 Long-term debt (including from VIEs of $0 and $890, respectively) 1,816 2,691 Liability for guest loyalty program 1,434 1,313 Other long-term liabilities (1) 883 893 Marriott shareholders equity Class A Common Stock 5 5 Additional paid-in-capital 2,513 3,644 Retained earnings 3,212 3,286 Treasury stock, at cost (6,463) (5,348) Accumulated other comprehensive loss (48) (2) (781) 1,585 $ 5,910 $ 8,983 Source: 10K Go Back to Appendix – Table of Content 12/16/2012 50
    51. 51. Accor’s Balance Sheet: Asset Source: 10K Go Back to Appendix – Table of Content 12/16/2012 51
    52. 52. Accor’s Balance Sheet: Liability and Equity Source: 10K Go Back to Appendix – Table of Content 12/16/2012 52

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