A Case of Marriott Corporation

When Bill Marriott Jr became president in 1964, the Marriott Corporation’s hotel business consisted of five hotels. Under his leadership, the Marriott Corporation became a significant member of the hotel industry. From 1975 to 1984, the number of rooms available in the Marriott chain of hotels increased from about 14,000 to over 60,000. By the end of that time Marriott had become the ninth largest US hotel chain, with 142 hotels and resorts in North and Central America, Europe, and the Middle East.

When broken down into different quality levels, this industry capacity of some two million plus rooms consisted of about 4 percent luxury units, 29 percent quality units, 35 percent moderate units, and 32 percent budget units. The customers using these rooms did so for personal pleasure (40 percent of usage); for business reasons where the travel expenses were paid for by employers (45 percent of usage); and for personal business, such as job hunting, where the individual traveler paid for his or her own expenses (15 percent of usage)

Marriott was in an above average position relative to the industry in terms of both room quality and room rates. Compared with the industry as a whole, 20 percent of Marriott’s rooms were considered luxury units, 60 percent were considered quality units and 20 percent were considered moderate units. Because of their luxury and, high quality rooms, Marriott’s average room rate was in the $80 – 100 range, compared with slightly more than $50 for the industry as a while. Additionally, Marriott’s hotels enjoyed an occupancy arte typically 10 percent or more above the industry average. Marriott’s favorable operating results stemmed in part from the four groups it targeted for its hotels; high income business travelers (40 percent); convention goers (28 percent); well to do pleasure travelers (15 percent) and airline flight crews (15 percent). However, Marriott’s good operating results probably also resulted from the fact that they under look research in order to measure consumer likes and dislikes. For example, in the early 1980s the company set up some two dozen model rooms and interviewed 1,000 people in-depth about what they liked and disliked in those rooms.

Two trends important to Marriott emerged by the mid-1980s. By 1990 it was expected that Marriott would have saturated the upscale, luxury, and quality segments on which the company had targeted. That is, it was expected that there would be a Marriott Hotel everywhere that the company wanted to have one. Because of this trend, Marriott’s annual growth rate could decline from the 20 percent it was in the late 1970s / early 1980s to around 10–12 percent in the early 1990s. To continue at a high rate of growth, Marriott would have to find new markets to serve.

Another important development was the growth of the population in the 35 – 45 years of age bracket. Research showed that this age group was about to grow at a rate far above the growth rate for the population as a whole and that they traveled more than, any other age group, although they were quite value oriented in their travel outlays. As Marriott would have to find new markets to serve to maintain a high growth arte, the 35 – 45 years age group could prove to be a promising segment for the firm to address.

Company officials thought that a down scaled hotel (i.e. a smaller hotel with limited services) might be an attractive product for the 35 – 45 year old travel group. Top obtain a better understanding of whether and how a down scaled hotel might be successful, the company undertook several research projects, and two company officials stayed in and / or visited more than 200 moderate priced hotels throughout the country. Studies were also carried out to determine how satisfied or dissatisfied consumers were with the moderate priced hotels available. These investigations led company officials to conclude that a small hotel of approximately 100 – 150 attractive, functional rooms at about a $45–50 rate would be very appealing to the 35–45 year old travelers. The hotel would be a two story building around a well landscaped courtyard that also included a swimming pool. The hotel’s restaurant would offer good food from a limited menu.

A major decision to be made involved the room size and layout to use in the new hotel. One of the rooms design was to create the impression that the room contained four separate areas, for relaxing, working, bathing and dressing and sleeping. Decisions would also have to be made regarding the furnishings and appointment to be included – for example, size of bed, type of telephone equipment and service, bath and shower facilities and equipment and window treatment. Because the number of combinations of different room designs, furnishings, and appointments that could be used was very large, this decision would not be an easy one to make.

Several suggestions involved the building of actual test rooms – at least three or four, but perhaps as many as eight or ten which would show potential customers exactly what the different room designs looked like. By walking through them, and be seeing and using the furnishings, potential customers could get a more realistic impression of the rooms’ sizes layouts, and furnishings. However, because of the costs involved, the number of sites where this approach could be utilized would be limited to only a few perhaps to only one or two.

Still another suggestion was to build a prototype of the proposed hotel that included the different room designs under consideration. Users of a particular room design could be asked to evaluate the various features of the room after having spent the night in it and to indicate their overall liking or disliking of the room. This approach would probably result in the most valid likes, dislikes and preference data; but it would also require the largest investment. The large investment would probably limit its application to only one or two locations.

Initially the Marriott group should go in for 2 projects with 2 different patterns of room designs for each hotel project. The projects must be located in totally different cultures say Eastern India (Kolkata) and Western India (Mumbai) and obtain suggestions from the occupants random as well as regular. Then for other projects based on capital availability shall be implemented with customer acceptable design common to all cultures.

  • George Chao

    I am regular traveller and loved your information like this, interesting to read such article, give more if you have in the future.Thanks