Marriott International, Inc. is an American multinational company that operates franchises, and licenses lodging, including hotel, residential, and timeshare properties. The company was founded by J. Willard Marriott and his wife Alice Marriott in 1927 and is headquartered in Bethesda, Maryland. It operates through the following business segments: North American Full-Service, North American Limited-Service, Asia Pacific, and Other International. The North American Full-Service segment includes luxury and premium brands located in the U.S. and Canada. The North American Limited-Service segment comprises select properties in the U.S. and Canada (Forbes, 2021). The company boost the portfolio of our 30 brands and 7,000+ properties across 131 countries and territories in the world (Marriott, 2021). Porter’s five forces model is a valuable tool to identify threats and opportunities faced by Marriott International in the Travel and Leisure industry in the world.
Marriott International – Competitive Rivalry in The Market
The travel and leisure industry worldwide is dominated by few multinational companies. Travel both internationally and domestically has become increasingly common all over the world. As a result, leisure travel spending and business travel spending have seen year-over-year growth over the past five years (Lock, 2021). The industry is very competitive. Marriott International is the world leader based on revenue (Statista, 2021). Marriott International compete with Hyatt Hotels, Hilton Worldwide and Wyndham Destinations. Hyatt Hotels and Hilton Worldwide posted annual income of $2.1 B and $4.3 B in 2020 (Craft, 2021). Marriott International published 10.57 billion U.S. dollars in revenue in 2020, down from 20.97 billion the previous year due to pandemic (Statista, 2021). The competition within the industry is increasing.
Marriott International – Threat of Substitutes
The products which differ from the existing product available but do the same function are substitute products. According to Luenendonk (2019), Substitute products offer customers different choices and allow them options within the industry and beyond it to products that may fulfil a similar need. The threat of substitution is at a medium level but increasing. The rise of individual hospitality places a severe threat to the companies like Marriott. The IoT offered a new solution, and the services as Airbnb and Vrbo are providing the same services at a lower rate affect the business model provided by Marriott. Airbnb is revolutionizing the lodging market by keeping hotel rates in check and making additional rooms available in the country’s hottest travel spots during peak periods when hotel rooms often sell out. Rates skyrocketed (Gerdeman, 2018). These companies are threatening traditional companies. The overall threat of substitutes is medium.
Marriott International – The Threat of New Entrants
The threat of new entrants in the travel and leisure industry is low. The significant factors are a higher initial capital requirement, competing with the existing brands, and the scale of the economy. The high capital costs and a high proportion of fixed costs to total costs make it difficult for new entrants. The scale of the economy to gain profit is complex, and strategic location to set up new hotels while competing with existing brands is impossible for new entrants. Cullen (1997) examines economies of scale in hotel operations and proposes areas in which economies of scale may be possible. According to Cullen, economies of scale in hotel operations can be achieved in purchasing and production, management, personnel, marketing, and finance. The industry exhibits high entry barriers that restrict new entrants because of the following factors of economies of scale and high capital cost of entry, competition with the existing companies.
Marriott International – Bargaining Power of Buyers
According to Slater & Olson (2002), The Bargaining Power of Buyers is high if the buyers are enormous; they can switch easily to another supplier who may be in numbers. The buyers of the industry are individual, corporate companies and distributors. Certain buyer groups exercise bargaining power due to their concentration or bulk purchases of hotel rooms such as tour operators, domestic or international airlines and large customers, such as convention organizers. Distributors and marketing companies are the companies that market the product through the internet or outlets and provide business. These companies purchase products in bulk quantity. They can negotiate for better deals. Individual customers cannot influence the significant business, but the availability of the options can play its part for a better deal. All the factors mentioned above are the reason for low to medium it varies significantly within the industry, depending upon a group
Marriott International – Bargaining Power of Suppliers
According to Porter (1979), Suppliers can exert bargaining power on participants in an industry by raising prices or reducing the quality of purchased goods and services. Powerful suppliers can squeeze profitability out of an industry unable to recover cost increases in its own prices. The primary supplier of the hospitality industry is labour and experienced trained personnel. These are the people on which the hospitality industry based. These services are directly dependent on it, and they spend millions of dollars to train their staff to get better business. Except that hotels are not significantly subject to the bargaining power of their suppliers and suffer low levels of indirect pressure on their competitiveness from this source.
References
Craft. (2021) Marriott International competitors. Available at: https://craft.co/marriot-international/competitors
Cullen. P. (1997). Economics for hospitality management. Available at: Oxford, International Thomson Business Press.
Forbes. (2021). Marriott International. Available at: https://www.forbes.com/companies/marriott-international/?sh=3966041f4fa0
Gerdeman. D. (2018) The Airbnb Effect: Cheaper Rooms For Travelers, Less Revenue For Hotel. Available at: https://www.forbes.com/sites/hbsworkingknowledge/2018/02/27/the-airbnb-effect-cheaper-rooms-for-travelers-less-revenue-for-hotels/?sh=771d0859d672
Lock. S. (2021) Global tourism industry – statistics & facts. Available at: https://www.statista.com/topics/962/global-tourism/
Luenendonk. M. (2019). Threat Of Substitutes – Porter’s Five Forces Model. Available at: https://www.cleverism.com/threat-of-substitutes-porters-five-forces-model/
Marriott. (2021). We Are Marriott International. Available at: https://www.marriott.com/marriott/aboutmarriott.mi
Porter., E. M (1979). How Competitive Forces Shape Strategy. Available at: https://hbr.org/1979/03/how-competitive-forces-shape-strategy
Slater, Stanley & Olson, Eric. (2002). A fresh look at industry and market analysis. Business Horizons. 45. 15-22. 10.1016/S0007-6813(02)80005-2.
Statista. (2021) Revenue of Marriott International, Inc. worldwide from 1999 to 2020. Available at: https://www.statista.com/statistics/266279/revenue-of-the-marriott-international-inc-hotel-chain/
Statista. (2021) Sales revenue of selected leading hotel companies worldwide in 2020. Available at: https://www.statista.com/statistics/273064/revenue-of-the-largest-hotel-groups-worldwide/