Marriott Corporation Case

One additional factor to consider was the cost of capital. Based on the information provided, Bridgehampton has enough cash on hand to finance the projects without seeking outside capital. As such we utilized both Jim’s and Isabel’s projected discount rates to assess the projects. In addition, we wanted to consider the affect obtaining outside capital would have on the project. The percentage of debt for Bridgehampton is currently 30% and the equity is 70%. Therefore we calculated the weighted average cost of capital and also used that rate to assess the projects. Since both projects are Spa’s we assumed there would be a similar risk profile assigned and use of the WACC as assessment tool would be warranted. Conversely, It seems that both the Suncoast lease and the internal Bridgehampton spa are non-typical projects for Bridgehampton and this could affect the accuracy of using

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

Assumptions need to be made for the Cost of Equity. We used the corporate rate of 11.766%

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?

Lodging generated 41% of 1987 sales and 51% of profits. Contract services provided food and services management to health care and educational institutions and corporations. It also provided airline catering and airline services through its Marriott In-Flite Services and Host International operations. Contract services generated 46% of 1987 sales and 33% of profits. Marriott 's restaurants included Bob 's Big Boy, Roy Rogers, and Hot Shoppes. Restaurants provided 13% of 1987 sales and 16% of profits.

(9) Marriott puts a lot of attention to hiring the best talent and based on the results they have achieved so far, we can conclude that their assessment center and the selection process work very well. The selection process includes several steps. Each step provides Marriott with valuable information about a candidate including information about his skills and experiences. The length of the selection process depends on the position, location and number of applicants. Marriott ranks several preferred candidates and if the first one denies the offer, it proceeds with the offer to the second one, and so on until one of the candidates accepts the offer. This saves a lot of time for the company.

According to the article, “[i]n 1987, Marriott’s sales grew by 24% and its return on equity stood at 22%. Sales and earnings per share had doubled over the previous four years, and the operating strategy was aimed at continuing this trend” (HBR, 9-298-101, p.1). The article also noted that the company intends to “…aggressively develop opportunities within [their] chosen line of business” (HBR, 9-298-101, p.1). Currently, Marriott’s four components of their financial strategy are:

By 1980, more than 23,000 rooms were offered through 55 hotels and resorts located primarily in the U.S. Approximately 70% of company-operated rooms were owned by outside investors and managed by Marriott under agreements averaging 70 years in length. These management agreements contributed approximately $40 million to operating profits in 1979—profits that tended to rise with inflation. Contract Food Service (32% of sales)—Marriott operated almost 300 contract food units, providing a wide range of food service capabilities to a variety of clients. It was the world 's leading supplier of catering services to airlines, with 62 flight kitchens serving domestic and international air travelers. The Food Service Management Division also managed restaurants, cafeterias, conference centers and other facilities for over 200 clients, including business, health care, and educational institutions. Restaurants (25% of sales)—Marriott 's Restaurant Group consisted of 476 company-owned units offering a variety of popularly priced food in 46 states. Roy Rogers fast food restaurants and Big Boy coffee shops accounted for 92% of the total units. Theme Parks and Cruise Ships (8% of sales)—The two Great America theme parks, located in Gurnee, Illinois, between Chicago and, Milwaukee, and in Santa Clara, California, were opened in 1976. Both parks combined a wide variety of thrill and

The Warsaw Marriott case that’s assessed in this paper is a decision case where Stan Bruns (at the time general manager of the Warsaw Marriott) had to make important decisions regarding its pricing strategy and think of ways to protect Marriott’s work force from its comp set.

To calculate the cost of debt and equity for this project, we combined the risk-free rate with a risk premium based on the market risk premium and the riskiness of Southwest Airlines.

7. What is the cost of capital for Marriott’s contract services division? How can you estimate its equity costs without

Since its foundation in 1927 Marriott Corporation grew into one of the leading lodging and food services in the US. With three major business lines: lodging, contract services and related business, Marriott has the intention to remain a premier growth company. To achieve this goal the corporation’s strategy is to develop aggressively appropriate opportunities within their business lines. Marriott would like to be the preferred employer, the preferred provider and the most profitable company in each of the operating areas. The financial strategy includes four key elements:

Karen Daniels , president of Borders Hotel Corporation (BHC) , has to investigate three financing alternatives in order to evaluate their impacts on viability of the BHC

• Compute a separate cost of capital (WACC) for the lodging business, contract services business and restaurant business.

In January 1980, the management of the Marriott Corporation found itself in an interesting dilemma: not only did the corporation have considerable excess debt capacity, but projections of future operations and cash flows indicated that this capacity was on the rise. For Marriott, excess debt capacity was viewed as comparable to unused plant capacity because the existing equity base could support additional productive assets. Management was therefore faced with two problems. First, it needed to determine the amount of funds that would be available if Marriott's full debt capacity were utilized. Second, management needed to decide whether to invest excess funds in new or existing businesses, or to return them to the companies shareholders