Financial Strategy of Marriott The four key elements of Marriott’s financial strategy were: manage rather than own hotel assets; invest in projects that increase shareholder value; optimize the use of debt in the capital structure; and repurchase undervalued shares
For the first strategy, Marriott not only identified markets, created development plans, attracted additional capital, and evaluated potential profitability, but also guaranteed a portion of the partnership’s debt. Managing hotels rather than owning them could help Marriott to decrease the assets on book, thus increasing the return on assets and also sharing the same risk with limited partners.
Investing in projects that increase shareholder value that Marriott can determine and choose the projects which would have a higher net present value by using the future cash flow, and eventually increase the shareholders’ value.
Optimize the use of debt in the capital structure which helps decreasing the debt to equity ratio, and thus attracts more new and existing shareholders, and an optimize structure lead to a higher shareholder value.
Repurchase undervalued shares will decrease the shares in the market, since they keep making profits, the profits per share is increasing based on the buyback. But comparing to the competitors of Marriott and the market, this element could not guarantee for increasing the stockholders’ value.
Overall, Marriott’s financial strategy followed the growth objective, although planning to repurchase undervalued shares may not be a good long-term plan.
In summary, financial strategy of Marriott followed the growth objective, although repurchasing undervalued shares may not be good when applying in a long term