Marriott Corporation Solution
Background
Marriott Corporation began in 1927 and in 1987 the companys profits were $223 million on sales of $6.5 billion. Marriott had three major lines of business: lodging, contract services, and restaurants. Lodging operations included 361 hotels with more than 100,000 rooms in total and generated 41% of 1987 sales and51% of profits. Contract services provided food and services management, and it also provided airline catering and airline services. Contract services generated 46% of 1987 sales and 33% of profits. Restaurants provided 13% of 1987 sales and 16% of profits.
Company goals, objective and strategies
As Marriotts 1987 annual report stated, the company intend to remain a premier growth company and our goal is to be the preferred employer, the preferred provider, and the most profitable company. Dan Cohrs, the vice president of project finance at Marriott Corporation, recognized that find the optimal divisional hurdle rates is important to achieve the companys goals.
There are four key elements of Marriotts financial strategies. First, manage rather than own hotel assets. The company operated about $7 billion worth of syndicated hotels, making it one of the tem largest commercial real estate developers in the United States. Second, invest in projects that increase shareholder value. The company used discounted cash flow techniques to evaluate potential investments. Third, optimize the use of debt in the capital structure. It used an interest-coverage target instead of a target debt-to equity ratio. Forth, repurchase undervalued shares. The company regularly calculated a “warranted equity value” for its common shares and repurchased its stock whenever the market price fell substantially below that value. Those four key financial strategies helped Marriott become the most profitable company.
SWOT Analysis
Strength
Marriott has high brand recognition over the United States.
Good management team keeps the company continuously grows for 10 years.
Multiple business sections including lodging, contract services and restaurant provide comprehensive high-quality services to customers.
Weakness
High debt capital structure may cause liquidity issues.
Opportunity
Based on good historical performance of Marriott, expand international market is a good opportunity for the company.
Merge and acquisition other hotels to help take more market share.
Develop more business sections to diversify companys