Economic Analysis of the United States Hotel Industry
Background Information Our team chose the hotel industry in the United States for our economic analysis. The hotel business has existed since the earliest times, and has influenced the development of the economy since the founding of this country. According to the American Hotel and Lodging Association, in the year 1900, there were fewer than 10,000 hotels in the US which provided 750,000 to 850,000 rooms. The 2004 figures show that there are 47, 584 hotel properties in the US with 15 rooms or more. There are currently 4,415,696 guestrooms available. The industry had sales of $105.3 billion in 2003, which places average revenue per room at $50.42 with an average occupancy rate
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Mergers and acquisitions are common in the hotel industry. One of the most recent is the acquisition of hotels from CTF Holdings Ltd. (ElBoghdady, Washington Post) This acquisition caused second quarter profits to drop, however second quarter revenue jumped to 2.66 billion up 11% from 2.4 billion in the previous quarter. Marriot reported that revenue per available room rose 11.1 percent, a key measure of a hotel company's strength. Rising demand drove up room rates increasing to 8.9% worldwide and 8.5% in North America. In a call with analysts, Arne M. Sorenson, Marriott's chief financial officer stated," It's been a long time since we have seen demand so strong in so many places and average pricing moving up so quickly." (Washington Post) J.W. Marriott Jr., the company's chairman and chief executive added," occupancy and room rates improved due to accelerating corporate demand, growing group meeting attendance and increasing global travel." (Washington Post)
Demand, Supply, Pricing, and Competitive Strategy As we discussed in class, every business is faced with these issues and they are important to managers making strategic decisions. One of the first things learned about business is that if there is no demand for a good or service, the firm that provides it will not continue to exist. Over time the hotel industry has continued to change with market conditions and make itself attractive to business
Hotels (35% of sales)—Marriott Hotels was one of the world's leading and most successful operators
Bethesda, Maryland is the headquarters of Marriott International Incorporate. This unique organization transpired from a root beer stand in 1927 into a world-renowned hospitality hotel chain in 1957. Information provided will focus on the evolution of the root beer stand into the Marriott International Incorporate vast hospitality empire. Today, the Marriott hospitality industry has 5,756 hotels with 30 brands in 118 countries with 1.1 million rooms. Additionally, the Marriott generated $14 billion in revenue during 2016 and had over 85 million combined loyalty members between the Marriott and Starwood Preferred Guest reward programs. Furthermore, Marriott partnered with Universal Music Group to bring their rewards member’s additional
Everybody can travel around the world because of transportation, such as planes, ships, buses, and trains, and lots of accommodation, such as hotels, resorts, motels, and casino hotels. However, the importance of the casino hotels is growing because tourists can enjoy most activities in the casino hotels. The casino hotel which offers almost everything is the Cosmopolitan of Las Vegas. Many tourists who love gambling and shopping usually visit Las Vegas, so the market place and the economic impact of Las Vegas’ hotels on hospitality industry in the U.S. is significant. “The U.S. can expect 6-8 percent average annual growth in tourism over the next five
Though there has been growth in the luxury market, customers are increasingly identifying with other strong hotel brands. In addition, the market is getting more crowded. In 1996 Rosewood and its key competitors had 165 properties combined. Today that number has almost doubled to 310, with 120% growth specifically
The U.S. hotel industry recorded revenue of $113.7 billion and grossed $16.7 billion in pretax profit in 2004. As of December 31, 2004, there were 4.4 million hotel rooms in the United States. Approximately two-thirds of all U.S. hotel rooms were affiliated with a brand; the remaining one-third were independently owned and not brand-affiliated. The
According to the World Bank, the hospitality industry revenue has been the largest contribution to the world GDP, for the sixth consecutive year, outdoing a total of 10.2% (US$7.6 Trillion) in the year 2016. The hospitality industry currently employs around 292 million of people, and that means that 1 in 10 jobs around the globe is linked to the hospitality industry (Oxford Economics for World Travel & Tourism Council, 2017)
Another barrier for entry is the high amount of capital needed to come into the industry. In the 2013/2014 Hotel Development Cost Survey they reported that the average cost of a economy style hotel room costs $77,400, compared to a luxury hotel average around $641,00. (See table 1) Due to the high costs of quality rooms in a hotel, there is a lot of capital required to enter into the hotel industry. A lot of money is required for property, employees, and advertising to gain entrance into the industry, which provide a huge barrier of entry into the hotel industry.
purchase of Starwood Hotels & Resorts Worldwide. This was a friendly acquisition as the target firm Starwood Hotels was in agreement of the acquisition as it will create the world’s largest hotel company .The transaction combined the Starwood’s leading lifestyle brands and international footprint with Marriott’s strong presence in the luxury and select-service tiers, as well as the convention and resort segment, creating a more comprehensive portfolio. This will offer the broader choice for guests, greater opportunities for associates and should unlock additional value for Marriott and Starwood shareholders. Combined, the companies operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide. The combined company’s pro forma fee revenue for the 12 months ended September 30, 2015 totals over $2.7
“The hotel pipeline is not showing any signs of slowing down,” said Fred Dixon, chief executive of NYC & Company. The city’s hotels sold 29 million room nights in 2012 and 30 million last year, and are on track to increase by another million this year, Mr. Dixon said.
According to the Financial Times article, the hotel sector’s attractiveness is returning to the pre-financial crash levels. The industry has seen a flurry of deals involving private equity
Marriott had a very colorful history and expanded and grew mainly through mergers and acquisitions. For example, the first international expansion was the acquisition of an airline catering service in 1966. In 1987, Marriott continued the expansion by acquiring Fairfield Inn and Residence Inn and entered the lower-moderate lodging segment. The rapid growth and global acquisitions fostered lots of powerful strategies. These strategies were vital for Marriott to sustain and be successful in the competitive market. (ilovethjw, 2010)
The following report was derived from the primary use of secondary sources, in addition to telephone contact with hotel representatives. Secondary sources included research from the Internet, industry books, company marketing communications, trade and general business newspapers and magazines, among others. Through all the sources, relevant data and information was extracted into the report's appendices. After individual analysis and group discussion, the following report was devised. The mandate of this report is to provide a macro examination of the luxury hotel industry and specifically the future outlook of Four Seasons Hotel and Resorts, Inc.
Marriott is a key player in the hotel and catering industry with operations in more than 70 countries and regions all around the world. Revenue has been earned from the market in both developed and developing countries. In developed markets such as the United States and Canada, the stability enhanced value growth, while in the developing market, stability increased the volume growth. In addition, the global presence guards the company against particular economic
The majority of the five-star hotels are controlled by foreign hotel management group while the one, two, three, and four-star hotels are mostly controlled domestically without any strong chain brand. By August 2017, the profit of five-star hotels stands at 64.83 billion yuan, four-star hotels at 2.09 billion yuan, three-star hotels at 6.13 billion yuan, two-star hotels at 0.54 billion yuan, and one-star hotels are at 0.11 billion yuan. This shows that the majority of the profit share is earned by five-star hotels. Besides the starred hotel, there are 95000 individual hotels in China market, which occupies 27% of the market share; and economy hotel for around 7000, occupies 1.9% of the market share; social inn, hostel for about 234,000, which occupies 67% of the market share. In China, the main body market is filled with non-brand individual hotels, social inn, and hostels, but their competitive power and profitability indexes are relatively weak. Economy hotels, on the other hand, in terms of economic perspective, are lying in the ascendant mode with lots of domestic brands appearing having strong competitive power and profitability indexes.
Having just analyzed the general environment surrounding the upscale and luxury hotel industry, the next step in determining whether such an industry is attractive or not is to conduct an in depth external analysis of the threats and opportunities facing the industry. Thanks to the help of Michael Porter and his Five Forces Model, this analysis is not nearly as difficult or as time consuming as it may seem. According to Porter, there are five forces which determine the competitive intensity and therefore attractiveness of a market. These forces include the threat of entry, the threat of rivalry, the threat of substitutes, the threat of buyers,