Marriot Financial Department
Marriott International, Inc. was formed in 1927 and is a global hospitality firm. Marriott's
income has been increasing from 2016 to 2019. The addition of new properties around the
world, as well as the acquisition of Starwood Hotels & Resorts Worldwide in 2016, contributed
to Marriott's revenue growth over these years. Revenue declined by 49.6% from 2019 to 2020.
COVID-19 is to blame for a large portion of the revenue drop. Marriott, as well as the tourism
and hospitality industries in general, have been hit hard by the pandemic. Marriott's net income
is expected to drop by 121 percent in 2020. The drop in net income was caused by temporary
hotel closures, weaker travel and hotel demand, and COVID-19 restrictions.
Revenue
From 2016 to 2019, Marriott’s revenue increased. A 39 percent increase in fee revenues
accounted for the majority of the revenue growth from 2016 to 2017. Cost reimbursements
income increased by $4,219 million, owing to reimbursements relating to Legacy-Starwood,
loyalty program activity, and systemwide development (AR 2017, p. 32). In 2020, revenue from
cost reimbursements will be sufficient to cover reimbursed costs. Marriott's revenue declined by
49.6% from 2019 to 2020. Several variables connected to COVID-19 contributed to the large
drop in revenue for 2020. As a result of these issues, all revenue accounts will have a
substantially lower balance in 2020 than in previous years.
Fee revenue, owned, leased, and other revenue, as well as cost reimbursement revenue, make up
Marriott's revenue. Franchise fees, company management fees, and incentive management fees
all contribute to fee revenue. Marriott earns money from both domestic and international
transactions. The United States and Canada accounted for the majority of income (74.8 percent).
The least share of income, 5.8%, comes from Asia Pacific operations.
Operating Income
From 2017 to 2020, Marriott's operational income decreased. Revenue increased at a faster rate
than total costs and expenses, resulting in a rise in operating income from 2016 to 2017. The
increase in income in 2017 was mostly due to a 39 percent gain in total fee revenue, which was
accompanied by increases in all other revenue accounts. Marriott's operating income fell by 95.3
percent from 2019 to 2020, owing mostly to the unfavorable impact of COVID-19 on the
company's revenue. As a result, revenue decreased by a greater proportion in 2020 than total cost
and expenses decreased.
Operating Profit Margin
In the case of Marriott's operating income, Figure 6 shows the revenue trend vs operating income
from 2016 to 2020. The data is based on the year 2016. From 2019 to 2020, operating income
fell 120 percent while revenue fell 67 percent, as indicated in Figure 6. The operating profit
margin declined in 2020 as a result of operating income dropping faster than revenue, as seen in
Figure 7. Marriott's operating profit margin fell to 8.6% in 2019 and will drop to 0.8 percent in
2020 (Figure 7). Operating profit declined by 40% from 2018 to 2019, while revenue climbed by
1%. Operating profit fell 120 percent faster than revenue between 2019 and 2020, compared to a
67 percent drop in revenue.
Interest Expense
Figure 8 depicts the increase in Marriott's interest expense from 2016 to 2020. Marriott's interest
expense climbed 12.9 percent from 2019 to 2020 as a result of higher interest rates as a result of
senior note issuances. Over a five-year period, higher interest rates on commercial paper and
senior note issuances contributed to an increase in interest expense.
Equity in (Losses) Earnings
Figure 9 depicts Marriott's equity in (losses) earnings. From 2016 to 2018, equity in (losses)
earnings grew, then decreased in 2019 and 2020. Marriott's portion of the gain attributable to its
equity method investees disposing off two of their properties accounted for the $63 million
increase from 2017 to 2018. Property sales were a factor in the drop from 2018 to 2019. Lower
profitability from investment dispositions and the AC Hotel by Marriott acquisition were also
factors. Impairment charges and the recording of losses by investees contributed to Marriott's
1184.6 percent drop in equity in (losses) earnings from 2019 to 2020.
Total Cost and Expenses
Figure shows the overall cost and expenses for Marriott. Owned, leased, and other-direct costs,
as well as depreciation, amortization, general and administrative, restructuring and merger-
related charges, reimbursed expenses, and other, make up Marriott's total cost and expenses.
Total cost and expenses have increased as a percentage of sales from 91.4 percent in 2019 to
99.2 percent in 2020, as indicated in Marriot Revenue, the standard sizing for Marriott's income
statement. For 2020, the increase was driven by a larger drop in income rather than a drop in
overall cost and expenses.
Solution for Financial Department
Reduce the Operating Expenses
The hotel industry faces the challenge of reducing carbon emissions by 66% by 2030 and by
90% by 2050 to stay within the 2˚C threshold agreed at COP21 - our climate change initiative.
United Nations. Authorized by Signify (Euronext: LIGHT), the world leader in lighting,
according to a Cundall study, for mid-range and high-end hotels, using Interact Hospitality can
help Significant energy savings without compromising quality and customer comfort. The room
connection management system allows for intuitive management through a single dashboard.
Compared to rooms without smart controls, a high-end hotel can consume 28% less energy per
guest room with 80% room occupancy. An additional 10% energy savings can be achieved when
guests use Green Mode on the thermostat.
Hospitality is an energy-intensive sector, consistently ranking highest in energy consumption in
the third building sector, the service delivery sector. One of the explanations for high energy
usage and inefficient operations is that hotels often prioritize guest comfort and experience above
everything else. However, hotels can do more than simply ask customers to reduce their towel
change requests and increase the use of reusable sanitary ware. Cundall's research shows that
integrating control systems into key hotel services (air conditioning, lighting and power) can play
a key role in helping to achieve energy reduction goals. standards set by the International Travel
Association, while maintaining guest comfort.
Reference
1. Hiệu quả trong việc sử dụng năng lượng và tiết kiệm chi phí tại khách sạn
https://www.signify.com/vi-vn/our-company/news/press-releases/2020/20200203-
saving-energy-use-and-costs-in-hotels-and-maintaining-superior-guest-experience
2. Maurie White, Financial Analysis: Marriott International
https://www.lagrange.edu/academics/undergraduate/undergraduate-research/citations/2-
Citations2021.MWhite---ACCT.pdf
