A 5-Forces analysis of the hotel industry suggests that it is unfavorable. The key factors affecting the industry are: high buyer power, relatively high power of suppliers, and high rivalry. The power of buyers is high as customers are typically very price sensitive, and they have many different choices owing to the size of the industry. There is high rivalry in the industry since there are many established hotel chains, most of which are located in close proximity, and attract customers via competitive prices. Finally, power of suppliers is fairly high since prime locations are in limited supply, and typically very costly.
Further financial analysis also supports that the hotel industry is unfavorable. The industry currently underperforms the overall economy by 3.4% - the economic average is 5.9%, while the industry profitability is a poor 2.5%. However, Marriott is currently outperforming both, the industry and the economy, with an overall profitability of 8.6% and the highest ROE in the industry. The firm’s competitive positioning is broad-market, differentiated. The company’s brand attracts several segments of customers ranging from holiday travelers to businessmen, with Marriott currently operating 16 specialized brands catering to the differing needs of customer segments. The company offers a suite of resorts, moderate priced lodgings for business travelers, top-quality conference centers, mid-priced extended-stay facilities, as well as, exclusive, luxury hotels for wealthy travelers.
With regards the firm scope, horizontal diversification allows Marriott’s various brands to leverage the company’s resources and take advantage of... [continues]
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