Essay about Marriott Corporation and Project Chariot

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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
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The corporation’s past success had been achieved through the building of hotel properties for sale to investors, while at the same time maintaining long-term lucrative service contracts that would bring cash flow to the corporation.

MC went into joint ventures by constructing hotels and selling them to the Equitable Life Insurance Society, which became a very profitable and powerful growth strategy. Over one five year period, MC sustained an annual growth rate of 30% and had 70% of their hotel rooms owned by outside investors. The growth was so substantial that the corporation gained an exceptional reputation in the field for quality and reliability in service, which lead to hotel occupancy rates between 4 and 6% above the industry average. Marriott continued to widen the gap and in 1992, although the industry standard was 65%, Marriot Corporation was achieving 76 to 80%.

The Economic Recovery Tax Act, introduced in 1981, continued to stimulate MC’s hotel-developing activities, as the new law created more incentive for ownership of real estate. MC’s first real estate limited partnership gave investors $9 in tax writeoffs for every $1 invested. The company continued expansion, entering the market of mid-scale properties and introducing Courtyard in 1985 and Fairfield in 1987.

In 1986, the Economic recovery tax act ended the majority of tax incentives. When

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