Porter’s 5 Five Forces Analysis of Marriott
|Travel and Leisure, Hotel and Hospitality Industry
|1927 -1st Opening,1957 Opened First Motor Hotel
|Bethesda , Maryland ,USA
|US $13.85billion,FY 2021
|US$ 1.09 billion,FY 2021
|Booking.com ,Airbnb, (Lodging Operations- Direct Digital Channels)
Hilton, Hyatt, (Franchising Operations – US Lodging)
Marriott is operating in 139 countries under 30 brands as operator, franchisor and licensor for hotel and lodging business, reporting under two business segments U.S. & Canada and International. Marriot was founded by John Willard Marriott and his wife in 1927 as root beer stand, later in 1957 they opened their first Hotel in Virginia.. Marriott International ranked on 611th in the Forbe’s World’s The Global 2000 Companies list.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis, defined by Professor Micheal E. Porter in 1979,at Harvard Business School for helping business to make their strategies better and take better collective decisions.
It guides companies in reference to their Industry how to better position themselves for making higher profits and less exposure to competition.
Marriott Rivalry among Existing Competitors
Marriot generated a recovery revenue of US$ 13.85 billion, in Year 2021, ranked 3rd by Forbes in ‘World’s Largest Hotels, Restaurants & Leisure Companies’.It’s net assets valued at US$ 25.53 billion as of December 31st, 2021, ranked 270 by Fortune 500.
- Marriott Business Operations – Business Segments & Brand Portfolio: Marriot International is operating globally with following business divisions U.S and Canada, Europe, Middle East & Africa, Asia Pacific and Caribbean & Latin America.
- Marriott’s Fees &Revenue Streams – FY 2021:Marriott International divided it’s revenue stream line 3 main types of fees and 2 types of revenues including the Base Management Fees reported revenue of US$ 0.66 billion increased by 51% compared to previous year, Franchise Fees reported revenue of US$ 1.79 billion, increased by 55% compared to prioryear and Incentive Management Fees reported revenue of US$ 0.23 billion increased by 170% respectively.
The revenue consist of Owned, leased and other revenue and cost reimbursement revenue with reported revenue of 0.79 billion and 10.44 billion US dollars in Year 2021.
- Brand Portfolio: Marriott operates under 30 brand names including the following famous brands Edition, The-Ritz Carlton, JW Marriott, Sheraton, Westin and others.Marriott International’s Brand Portfolio consist of three main categories with distinctive offers and services based customer’s requirements including the following ;
Luxury offers Luxury hotel brands for specially targeted group of customers with luxury amenities and services, Premium offers sophisticated premium amenities and services for classic experience and Select offers smart and long term stays with home like feeling.
- Competition in Lodging Operations: Marriott International is facing tough competition in lodging category from different international travelling companies with online booking services including in their business model like com, Booking.com and online platforms including Airbnb and Vrbo. This increase the competition from service to pricing, brand recognition, safety and many other important areas.
According to Lodging Industry data, Marriott International have the 16% market share of U.S. hotel industry and 4% market of global market, excluded USA.
- Competition in Franchising Operations: Brand affiliation is common in US for attracting the guests and franchisees. In 2021, almost 72% of the hotel rooms in USA were brand-affliated.In franchising business Marriott International is facing tough competition from Hilton, IHG Hotels & Resorts, Hyatt, Best Western Hotels &Resorts, mentioned by Marriott International, Annual Report, 2021.
- Hilton Hotels and Resorts declared one of the world’s leading hotel by Statista with record revenue generated of US$ 4.3 billion,with a brand value of 10.38 billion in Year 2020 while reported a decreased brand value of 7.61 billion in Year 2021.Other leading completive Hotel’s are Holiday Inn and Hyatt.
Marriott Threat of New Entrants
- High Initial Investment (Capital, Human Resources, Expertise): The Leisure and Hotel Industry consist of very heavy infrastructure from building, appliances, leisure equipment, playground equipment, facilities (pools, clubs) to services management from hospitality staff to catering. Launching such an extensive arrangement does not need only huge capital but also trained human resource and expertise to manage and plan all this, which is challenging for a new entrant.
Even in such crises timings COVID protocols were required to adopt, In a survey 25.3% hoteliers mentioned they adopted self-service check in technology in during COVID period, while 15% hoteliers mentioned they are doing to adopt mobile keys in 2022, mentioned by Statista.
- Discouraging Factors – B2B Dealings & Current Business Impacted – COVID 19: Marriott International serves 2 types of customers including individuals and corporate business clients (via large contracts). Due to COVID 19 business is impacted and hotel meetings, seminars are more happening digitally which adversely affected the hoteling business is an important discouraging factor for a new entrant.
Marriott Bargaining Power of Suppliers
- Large Pool of Various Supplies: Being a purchaser from large pool of supplies and suppliers, in such scenario suppliers do not hold substantial bargain power as suppliers are scattered and belong to different industries globally. Majority of products and raw material is identical and consist of not product differentiation also decrease and bargain power of suppliers.
- Efficient Supply Chain-Cost Cutting Measures (COVID-19 Effects): Due to COVID-19 lockdowns various cost cutting measures adopted by Marriott International with the efficient supply chain management to reduce the operational cost to maximum level for a better survival, which further reduces the supplier’s bargain power.
- Marriott as Established Brand: Marriott International is an established brand keep attracting suppliers to remain a Marriott supplier, also bulking buying from a trusted customer are the factors decreasing supplier bargain power.
Marriott Bargaining Power of Buyers
- Individual Customer Base- Excessive Knowledge of Alternates: The customer’s bargain power for individual customers is increasing due to digitalization, life style shifts and changing business model, easy and fast travel booking, more casual style of living is preferred in this era so customers may influence industry patterns significantly.
- Business and Corporate Customer Base: This customer base has less options or tied with the hotels via large contracts with a long term relationship but due to businesses are adversely affected costing cutting measures and economic conditions are pressing customers to indirectly influence such industry also.
- Increasing Buyer’s Bargain Power– Use Digital Mediums: Increasing Use of digital mediums and developing digital mediums expertise also increasing buyer’s bargain power.Digital Meetings via Zoom or Google Meet are more adoptable rather than big physical summits.
- Price Sensitivity – Switching Cost (Current Economic Scenario): Price sensitivity in this era, when internet offers excessive alternate options with prices and tight general economic conditions after COVID influence and increase the buyer’s bargain power.
- Changing Travelling and Life Style Patterns (Digitalization Influenced): It is also important to consider changing travelling and life style patterns influencing buying decision, when selection between a physical meeting or digital meeting is available also gives more power in the customer’s hand.
In a global survey hoteliers in Asia, Europe, North America respondent 70% in the favor to provide hotel services digitally while 57% said they are willing to digitize the check-in/check-out process, mentioned by Statista.
Marriott Threat of Substitute Products or Services
- COVID 19 Pandemic Effects & Economic Conditions (Recession – Ukraine Russia War): COVID 19 effects the general life style patterns, also affected the businesses and economic growth which are substituting the services offered by Hotel Industry. Currently global recession and increasing war trends may further impact the hotel industry which can be avoided by major business model changes.
- Shift in Life Style Patterns: Any new trending and excessively changing life style patterns which are continuously influenced by one and another factors in a series from increasing use of Social Media Channels (Facebook, Twitter), Digital Medium and Media Technologies (Zoom Meet, Google Call, Youth Tube Live Streaming), Android Phones and trends of using Apps can substantially offer substitution services and products for leisure to travel and stay possibilities.
- Statista (March, 22 2022).Topic Topic | Statista. [Online] .Availableat Statista.
- Forbes, (May 12, 2022) The World’s Largest Hotel, Restaurant And Leisure Companies in 2022, Available at Forbes
- Forbes, Profile Marriott International. Available at Forbes
- Fortune 500, Marriott International Company Profile, Rank 270.Available at Fortune 500
- Statista (Oct 18,2022) Marriott brand awareness, usage ,popularity, loyalty, and buzz among hotel customers in the United States in 2022.Available at Statista.
- Statista (February 18,2022) Leading hotel brands on brand value worldwide in 2021.Available atStatista
- Statista (September 13,2021 )Market size of the hospitality industry worldwide in 2020,with a forecast for 2021.Avaiable at. Statista.
- Marriott International Annual Report 2021 Available at Marriott.com
- Statista (June 10,2022 ) Leading technologies adopted in hotels worldwide as of November 2021,by period of implementation 2021.Avaiable at Statista
- Statista (September 13,2021 ) Main aspect of the guest experience hoteliers are looking to digitalize worldwide as of February 2021 .Available at Statista