...Marriot case Analysis 1, financial strategy According to the case, we noticed that Marriott Corporation intends to remain a premier growth company, to be the preferred employer, the preferred provider and the most profitable company. And in order to achieve these goals, it incorporated four main elements into its financial strategy. In our opinion, these elements are consistent with the financial strategy. First, Marriot sold its own hotel assets to limited partners but retain the operating control as the general partner. In other words, Marriot tried to reduce the assets it owns. According to ROA, which is calculated by dividing a company’s annual earnings by its total assets, we can know that, ROA will increase as asset reduced, which gives us a sign that Marriott’s profitability is increasing. At the same time, by diversifying the owners of the hotel assets, it may also reduce the risk to invest Marriott, which will also attract more investors to enter this Corporation and helps the company to have more capital to develop. Also, Marriot is able to retain the operating control as the general partner under a long-term management contract, so it might reduce the possibility for someone to take over the whole hotel assets and make changes about the current operating control right. Thus Marriot will operate in a growing and profitable way. Second, Marriot used discounted cash flow techniques to evaluate the projects and invest in projects that increase shareholder value...
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...Marriot case Analysis Lodging Division 1) Finding beta for Lodging: The nearest business that could be considered for calculating the beta is the Holiday Inn Corporation which has a beta of 1.35. In order to unlevered the beta of Holiday Inn Corp using; 1.35/(1+(1-t)*D/E); where t is the tax rate; D/E is debt to equity ratio. Therefore; 1.35/(1+0.56(0.74/0.26)) The unlevered Beta for Lodging is 0.435 which is approx. to 0.44. We can use the Holiday Inn Corp’s unlevered beta as an estimate for Lodging business unlevered beta. Therefore; levered beta of lodging will be, 0.44 (1+(1-t)D/E) =0.44(1+ 0.56(0.74/0.26)) =1.128 2) Finding cost of debt for lodging business; = long term government bond + risk premium =8.95 % + 1.10 % = 10.05% 3) Finding cost of equity of the lodging division; Re=Rf + (Rpm)*beta =8.95% + (7.43%) * 1.128 = 17.33% Using spread of S&P 500 and Govt. bond as the premium. 4) WACC for the lodging division; =0.74 * (10.05%) + 0.26 (17.33%) = 11.94% Restaurants Division 1) Finding beta The more comparable business in restaurants industry to the restaurants division of Marriot is Wendy’s International, where levered beta is 1.32. Converting it into unlevered beta; 1.32/(1+0.56(0.21/.79)) =1.1489 We can use the unlevered beta of Wendy’s International as our estimate of unlevered beta for the Restaurant’s division. To find the levered restaurants division beta; 1.1489 (1+0.56(.42/.58)) =1.61 2)...
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...------------------------------------------------- Marriott Case Analysis This print version free essay Marriott Case Analysis. Category: Business Autor: reviewessays 03 December 2010 Words: 2449 | Pages: 10 Marriott Corporation and Project Chariot The Marriott Corporation (MC), had seen a long, successful reign in the hospitality industry until the late 1980s. An economic downturn and the 1990 real estate crash resulted in MC owning newly developed hotel properties with no potential buyers in sight and a mound of debt. During the late 1980s, MC had promised in their annual reports to sell off some of their hotel properties and reduce their burden of debt. However, the company made little progress toward fulfilling that promise. During 1992, MC realized that financial results were only slightly up from the previous year and their ability to raise funds in the capital market was severely limited. MC was left with little choice, as they had to consider some major changes within the company if they wished to remain a successful business. Thus, J.W. Marriott, Jr., Chairman of the board and president of MC, turned to Stephen Bollenbach, the new chief financial officer, for ideas and guidance. Bollenbach, who had a reputation for creating innovative financial structures in the hotel industry, proposed a radical restructuring for MC. Bollenbach’s proposal included breaking MC into two separate entities. The new company would retain the service businesses of MC and have the...
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...arriott Corporation: The Cost of Capital (Abridged) Executive Summary: The case "Marriott Corporation: The Cost of Capital (Abridged)" focuses on an ideal opportunity to review the capital asset pricing model and the weighted average cost of capital through calculation of the cost of capital for Marriott as a whole. Dan Cohrs is faced with making recommendations for the hurdle rates at Marriott Corporation and its three divisions utilizing CAPM and WACC. This case illustrates how to calculate beta based on comparable companies and to lever betas to adjust for capital structure; the appropriate risk-less rate and market risk premium; the choice of time period to estimate expected returns and the difference between the geometric and the arithmetic average as a measure of expected returns. SYNOPSIS Marriott Corporation began in 1927, and over the next 60 years, the company grew into one of the leading lodging and food service companies in the US. In 1987, the Marriott's annual report stated, "We intend to remain a premier growth company. Our goal is to be the preferred employer and provider, and the most profitable company". Marriott's profits were $223 million on sales of $6.5 billion. In April 1988, vice president of project finance at the Marriott Corporation, Dan Cohrs, must prepare annual recommendations for the hurdle rates at each of the firm's three divisions, including restaurant, lodging, and contract services, as well as...
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...Corporate Financial Management BA 7020 – Section 200 Fall 2012 Marriot Corporation [pic] Group 9 Timothy Muer Adnan Qureshi Valerie Schmidt Joshua Swartz December 16th, 2012 December 16th, 2012 Dan Cohrs Marriot Corporation Vice President of Project Finance RE: Marriott Corporation Consultant Summary Dear Mr. Cohrs, We are pleased to offer our consulting opinion in regards to the cost of capital, debt, and equity. We have reviewed and analyzed the industry and market data provided as well as heavily researched your industry to understand trends, risks, growth potential, etc. The attached report is a detailed summary of problems and decisions faced based on the method of calculating the cost of capital, cost of equity, and the cost of debt. We have focused our efforts to specifically outline the correct risk free rate, risk premium, hurdle rate, and beta to be used in those calculations. In addition to analysis of the problems, we have also outlined recommendations for the future. These recommendations include a 8.72% risk free rate, 7.92% risk premium, and 1.135 beta for the Marriot Corporate as a whole as well as individual risk free rate, risk premium, and beta for each division. Additional in depth analysis is provided within the report. Also included are detailed explanations for the recommendations referenced above. We look forward to witnessing your continued growth and wish you success in the future! Sincerely...
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...Chapter 1: INTRODUCTION 1.1 Introduction Marriott International is a multinational hospitality company. It is a leading lodging company based in United States of America. The company was founded by J W Marriott in 1927, which is now headed by his son. Marriott International employs close to 200,000 employees. Marriott International boasts of 4087 properties spanning over 80 countries, with 697,000 rooms and another 197,000 in the making. The hotels or lodgings are either self operated or franchises. Throughout the 88 years of its operation, Marriott International has built a reputation of immeasurable quality, service excellence, integrity and being pioneers in innovation. 1.2 Objectives of the Study The objective is to study the organizations structure, internal and external environment, carry out an analysis of the strengths and weaknesses, discovering new opportunities and finding out the threats faced by Marriott International. Furthermore, we would also be assessing whether the organizational structure implemented by the company is apt for today’s volatile, unpredictable and fast moving environment. 1.3 Scope of the study In this report we intend to focus majorly on the organizational structure and the assessment of the internal and external environment. This report would not cover the competitor analsysis in depth and would be limited to the study on Marriott International as a whole. Moreover, we have not taken into account the different...
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...Case Questions Case #5 – Marriott Corporation: The Cost of Capital 1. Are the four components of Marriott’s financial strategy consistent with its growth objective? 2. How does Marriott use its estimate of its cost of capital? Does this make sense? 3. What is the weighted average cost of capital for Marriott Corporation? a. What risk free rate and risk premium did you use to calculate the cost of equity? b. How did you measure Marriott’s cost of debt? 4. If Marriott used a single corporate hurdle rate for evaluating investment opportunities in each of its lines of business, what would happen to the company over time? 5. What is the cost of capital for the lodging and restaurant divisions of Marriott? a. What risk free rate and risk premium did you use in calculating the cost of equity for each division? Why did you choose these numbers? b. How did you measure the cost of debt for each division? Should the debt cost differ across divisions? Why? c. How did you measure the beta of each division? Case Hints and Suggestions The primary objective of this case is to show students how the CAPM is used to compute the cost of capital. Students learn to calculate beta based on comparable companies and to lever betas to adjust for capital structure. Students are asked to determine the appropriate risk-less rate and market risk premium. This case also encourages students to focus on the choice of time period to estimate expected returns and the difference between...
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...interest rate that a company pays on its debt. Cost of debt is usually calculated after the interest expenses are deducted Cost of debt = Cost of Debt before tax (i.e. Interest rate) * (1-Tax Rate) WACC: Weighted average cost of capital is one of the measures to calculate the cost of capital of the firm. Weighted Average Cost of Capital is the minimum return a firm must earn on existing assets to keep its stock price constant and satisfy its creditors and owners. [pic] c = weighted average cost of capital y = Expected rate of return on equity (cost of equity) b = Expected rate of return on debt (cost of debt) E = Total market value of equity D = Total debt and leases K = E+D = Total capital invested Tc = Corporate Tax Rate Capital Asset Pricing Model (CAPM) • Asset Pricing Equation: E(ri) = rrf + bi[E(rm)-rrf] , where E(ri) is the expected return on the security. rrf is the risk free rate...
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...Case 9 & 10 Analysis Seagate Technology Buyout The Hertz Corporation Advanced Corporate Finance MW 2:00-3:15 PM Question 1 On page 1, the “value-gap” is two-fold. It signifies an under-valuation of Seagate’s core disk drive operating assets due to unfavorable public market investor preferences. Furthermore, the value of the Veritas share price has caused the Veritas stake to far outweigh the value of Seagate’s stand-alone market capitalization. Since Seagate does not own at least 80% of the voting stock in Veritas, distributing the wealth intrinsic in that stake to Seagate shareholders would prove difficult due to the hefty corporate tax rate of 34% that would erode its full-value. From a sum of the parts perspective, it seems that since the Veritas shares held by Seagate appreciated by more than 200%, while Seagate’s shares only increased by 25%, the market assigned relatively no value to Seagate’s market leading position in the disk drive business. This lack of market recognition for the true value of Seagate’s assets forced management to seek action. The management believed that the value of Seagate should be attributed to the value of its operating assets. Since the market was attributing such a high value to its Veritas stake, the market made it appear that Seagate was an investment holding company, rather than being in the disk drives business. There also seemed to be a “value-gap” in the sense that the Veritas stake is attached to business risk in the software...
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...(TX) and serves as a consultation for Valhalla Partners to consider its investment in TX. Art Mark’s Vote and Appropriate Valuation for Telco Exchange Art Marks should vote to make an investment in Telco Exchange because the company possesses many of the components which could make it a potential 67 million dollar company (from our valuation by DCF method using WACC -Appendix A). Telco has a product that solves large company high cost issues revolving around telecom equipment and telecom services (makes around $250,000 per software licensing deal). They have been profitable in 2002 and the potential to have a revenue of a 50 million annual revenue in four years time. They have sold their solutions to big companies including IKON and Marriot and currently have working relationship with AT&T for which some of their past, current and future customer references are coming from. So far Telco has the first mover advantage offering a more complete solution package than any other competitors at the current time. Valhalla had completed the valuation of ROI on a 3.75 million investment to Telco resulting in a 6.8 to 12.1 times their capital investment with the company valuation of 170 to 343 million. A conservative valuation of Telco resulted in a 115 to 140 million company valuation and a 4.6 to 6.1 times return on capital. Telco needed a total investment of 10 million, and Valhalla along with Columbia capital would be investing 2.5 million each resulting in an ownership for...
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...Marriott International (Marriott) is global chain of hotels and lodging accommodations that are designed to fit varying needs and budgets. Marriott has operation in six main hotel and lodging segments: Luxury, collections, lifestyle/boutique, signature, select services and extended stay. Marriott own chains such as Marriott Hotels & Resorts, Courtyard by Marriott, Residents Inn, Fairfield Inn, and Marriott Vacation Club International, BVLGARI, The Ritz Carlton just to name a few. The commonality between all of the properties that Marriott International owns is that they all have a clear business-level strategy that allows them to focus on particular customer groups. Analyze the business strategies for the corporation you chose to determine the business level strategy you think is most important to the long –term success of the firm and whether or not you judge this to be a good choice. Justify your opinion. Marriott business strategies vary depending on the lodging segment. Examples include the Residents Inn is focused on customers that need amenities that go beyond the average but allow the traveler to have a sense of freedom, like they are at home or the Marriott Vacation Club International, which is classified as a luxury timeshare operation. The Fairfield Inn chain is currently using a focused cost leadership business-level strategy. In Fairfield Inns, there are several things that allow the Marriott Company to control cost and offer accommodations at a reduced rate...
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...Corporate Responsibility From a business perspective, working under government contracts can be a very lucrative proposition. In general, a stream of orders keep coming in, revenue increases and the company grows in the aggregate. The obvious downfalls to working in this manner is both higher quality expected as well as the extensive research and documentation required for government contracts. If a part fails to perform correctly it can cause minor glitches as well as problems that can carry serious repercussions, such as in the National Semiconductor case. When both the culpable component and company are found, the question arises of how extensive these repercussions should be. Is the company as an entity liable or do you look into individual employees within that company? From an ethical perspective one would have to look at the mitigating factors of both the employees and their superiors along with the role of others in the failure of these components. Next you would have to analyze the final ruling from a corporate perspective and then we must examine the macro issue of corporate responsibility in order to attempt to find a resolution for cases like these. The first mitigating factor involved in the National Semiconductor case is the uncertainty, on the part of the employees, on the duties that they were assigned. It is plausible that during the testing procedure, an employee couldnt distinguish which parts they were to test under government standards and commercial standards...
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...A Financial Ratio Quarterly Trend Analysis of Marriott International, Inc. Stock symbol: MAR Listed on the New York Stock Exchange By: 1.0 Introduction This report provides a financial quarterly trend analysis for Marriott International, Inc. The U.S.-based company has been in the lodging business since 1957 1 and currently operates in more than 70 countries worldwide 2, making it one of the oldest and largest hotel corporations in the world 3. Marriott International’s stock is publicly traded on the New York Stock Exchange (NYSE) under the symbol “MAR”, which we will use to reference the company throughout this report. Our team chose to analyze MAR for the following reasons: • In our Organizational Behavior class, we completed the “Work Preferences Indicator” and discovered that the field of hospitality management was recommended for everyone on our team. • The hotel industry is booming in Panama (with over 12,000 new rooms currently under construction for delivery by 2013). 4 Marriott has had a strong market presence over the last decade and currently commands one of the highest room rates in Panama City.5 It is also undergoing an aggressive expansion and remodeling of its two properties at this time. 6 • Most of us are frequent business travelers and often stay in Marriott-flagged properties. • One of our team members was a former sales and marketing director for a luxury resort anchored by a Marriott hotel, Los Sueños Resort & Marina in Costa...
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...International Journal of Hospitality Management 29 (2010) 72–82 Contents lists available at ScienceDirect International Journal of Hospitality Management journal homepage: www.elsevier.com/locate/ijhosman Impacts of positive and negative corporate social responsibility activities on company performance in the hospitality industry Kyung Ho Kang a,*, Seoki Lee b,1, Chang Huh c,2 a School of Tourism and Hospitality Management, Temple University, 1700 North Broad St., Suite 201, Philadelphia, PA 19122, United States School of Tourism and Hospitality Management, Temple University, 1700 North Broad St., Suite 201-F, Philadelphia, PA 19122, United States c College of Hospitality and Tourism Management, Niagara University, St. Vincent’s Hall, Room 304, NY 14109, United States b A R T I C L E I N F O A B S T R A C T Keywords: Corporate social responsibility Hospitality industry Financial performance In spite of growing concern for corporate social responsibility (CSR) in various industries including the hospitality industry, the relationship between CSR activities and financial performance is a rarely examined subject in the hospitality context. Especially, research measuring the separate impacts of positive and negative CSR activities on companies’ financial performances remains, as yet, unconsidered. Thus, this study examines different impacts of positive and negative CSR activities on financial performance of hotel, casino, restaurant and airline companies,...
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...MAJoR ITSDI ASSIGNMENT MARRIOTT HOTEL | Group 11 Section –‘X’ | MAJoR ITSDI ASSIGNMENT MARRIOTT HOTEL | Group 11 Section –‘X’ | XAVIER INSTITUTE OF MANAGEMENT,BHUBANESWAR XAVIER INSTITUTE OF MANAGEMENT,BHUBANESWAR MAJOR ITSDI ASSIGNMENT MARRIOTT HOTEL Contents EXECUTIVE SUMMARY 3 Industry Analysis 7 OLC (Organization life cycle): 9 FUNCTIONS 12 APPLICATION INTEGRATION 18 Technological Integration 19 DEPARTMENT SCORECARD 29 CHANGE MANAGEMENT FOR CLOUD STRATEGY 35 Managerial Implication for cloud Strategy (what does the cloud strategy mean for stakeholders) 43 RISK MANAGEMENT 44 CONCLUSION: 45 EXECUTIVE SUMMARY Hotel industry is an essential part of tourism. Expansion of hotel industry inevitably depends on the development of tourism which in turn is responsible for around 40-45% forex earning. Recently initiatives have been taken to boost travel and tourism by the Government. Marriott Hotels: Complete brand portfolio is the most important strategy for Marriott. The company operates in five business segments with each segment having several brands targeting different customer bases (luxury, upper moderate, moderate and lower moderate). This gives it high brand recognition and diversified revenue resources. IT in Marriott (Real Scenario): IT solutions are a large way to...
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