What could be the main motives for Mariott in using franchising, compared to other entry modes and operation forms

2–CASE 3-MARİOTT HOTELS

 

Mariott (www.mariott.com) is a worldwide operator and franchisor of 2,741 hotels and related facilities in 67 countries.

Mariott is a diversified service and hospitality company with operations in five business segments:

  • Full-Service, which includes following brands: Marriott Hotels & Resorts, The Ritz-

Carlton, Renaissance Hotels & Resorts and Bulgari Hotels & Resorts (65 per cent to

total 2005 sales);

  • Select-Service, which includes following brands: Courtyard, Fairfield Inn and

SpringHill Suites (11 per cent to total 2005 sales)

  • Extended-Stay, which includes following brands: Residence Inn, TownePlace Suites,

Marriott ExecuStay and Marriott Executive Apartments (5 per cent to total 2005 sales);

  • Timeshare, which includes the development, marketing, operation and sale of

timeshare, fractional and whole ownership properties under the following brands:

Marriott Vacation Club International, The Ritz-Carlton Club and Grand Residences (15

per cent to total 2005 sales)

  • Synthetic Fuel, which includes the operation of coal-based synthetic fuel production

facilities (4 per cent of total 2005 sales).

Mariott earns base, incentive and franchise fees based upon the terms of their management and franchise agreements. Revenues are also generated from the following sources associated with their Timeshare segment: (1) selling timeshare intervals and personal residences, (2) operating the resorts and (3) financing customer purchases of timesharing intervals. In addition, they earn revenues from the limited number of hotels they own and lease to others.

Mariott has franchising programs that permits the use of certain of the brand names and the Mariott lodging systems by other hotel owners and operators. Under these programs, Mariott generally receives an initial application fee and continuing royalty fees, which typically range from 4 – 6 per cent of room revenues for all brands, plus 2 –3 per cent of food and beverage revenues for certain full-service hotels. In addition, franchisees contribute to the national marketing and advertising programs, and pay fees for use of the Mariott centralized reservation systems. At year-end 2005, Mariott had 1,707 franchised properties (232,048 rooms).Revenues increased 14 per cent to $11,550 million in 2005 from $10,099 million in 2004. Net profits increased $78 million to $555 million in 2005 from $477 million in 2004.

At year-end 2005, Mariott had approximately 143,000 employees.

Quality and consistent service is Marriott’s main focus and keeps the company in the top

position in its industry. The company is responsible for pioneering segmentation in the

hospitality industry. With a wide array of hotels, Marriott meets the needs of various customer segments. Before developing any additional hotel chains and their respective brands, the company always tests properties first. Marriott is active in soliciting feedback from its customer base and focuses on really understanding its customer targets.

A few of Marriott’s brand extensions are the Fairfield Courtyard for the business traveller,Residence Inn and Townplace Suitor for extended stay, and the Renaissance line overseas.Marriott’s newest line is Springhill Suites, which was developed based on feedback from extended-stay clients. In business for 75 years and with over 2,500 properties worldwide,Marriott carefully manages the different communication messages about each brand. By focusing on differentiating each property, Marriott feels it does not create confusion in the customer’s mind. Each brand has its own loyal following, with some crossover. What is most important to Marriott is to meet the customer’s travel need, which may vary over time.

 

Questions:

  1. What could be the main motives for Mariott in using franchising, compared to other entry modes and operation forms?

 

  1. Identify several major categories of segmentation used by Marriott. For each, relate specific examples of hotel services tailored to various target markets. www.marriott.com offers a brief description of 13 brands of various Marriott hotels catering to different types of customers.

 

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