Marriott Corporation Case

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.

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

BRENDA WELLS, Administrator of the Estate of DANNY J. WELLS, deceased, Plaintiff-Appellant, Cross-Appellee, v. VINCENNES UNIVERSITY, BOARD OF TRUSTEES OF VINCENNES UNIVERSITY and SCOTT K. FONCANNON, Special Administrator of the Estate of JAMES JERNIGAN, deceased, Defendants-Appellees, Cross-Appellants. PRIOR HISTORY: Appeal from the United States District Court for the Southern District of Illinois, Benton Division. No. 89 C 4265. James L. Foreman, Senior District Judge. The US Court of Appeals for the Seventh Circuit has jurisdiction over Illinois, Indiana and Wisconsin. OVERVIEW: The widow's husband died on October 3, 1987, while taking a ride in a plane that

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

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

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

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

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:

What risk-free rate and the risk premium did you use to calculate the cost of equity?

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.

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

Marriott International envisions itself to be the world’s lodging leader. Its mission is to provide the best possible lodging services experience to customers who vary in backgrounds, language, tradition, religion and cultures all around the world. Marriot is committed to environmental preservation through using environment-friendly technology and engages in social responsibility and community engagement.  We value our shareholder’s so we will only take steps that will ensure our growth. Most importantly, through our “spirit to serve”, we emphasize the importance of Marriott’s people and recognize the value they bring to the organization’s growth and success. It aims to increase revenues by 9% every year, to increase

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