Marriott Hotel UK and its Marketing Strategy

UNIVERSITY OF SUNDERLAND

MARKETING MANAGEMENTUGB 229

INDIVIDUAL REPORT ON THE MARKETING ACTIVITIES OF MARRIOTTHOTEL UKDate of Submission: 25-05-2015

Gideon Yusuf- 129159700 Page 1

Module Leader: RUBINA VIEIRAStudent Name: GIDEON YUSUFStudent ID: 129159700

Table of Contents

INTRODUCTION.................................................3I. MARKETING.................................................3II. THE EXTERNAL ENVIRONMENT..................................4THE PESTLE:................................................4

III. THE COMPETITIVE ENVIRONMENT..............................6The Power of Buyer........................................7Threats of Entry..........................................7Existing Rivalry..........................................7Threats of Substitute.....................................7

IV. THE SWOT ANALYSIS........................................8V. THE MARKET SEGMENTATION...................................8

Geo-demographic Segmentation..............................9Psychographic Segmentation...............................10Behavioural Segmentation.................................10

VI. TARGETING...............................................10VII. DIFFERENTIATION AND POSITIONING.........................11VIII. THE MARKETING MIX.....................................12

Product..................................................13Price....................................................13Place....................................................14

Gideon Yusuf- 129159700 Page 2

Promotion................................................14People...................................................15Process..................................................15Physical Evidence........................................15

CONCLUSION AND RECOMMENDATION...............................15Reference.................................................16Appendices:...............................................18

INTRODUCTION

This report is a research and evaluation into the marketing

activities of Marriott Hotel UK and the hospitality sector in

which it operates in the UK, using relevant marketing tools

and techniques to analyse how these activities contribute to

the successes of Marriot UK.

The Hospitability industry is the biggest employer of labour

in the United Kingdom, employing 1.36 million jobs,

contributes £115 billion to the UK GDP and generates over £90

billion of direct business for the UK economy annually.

(Gov.uk 2011)

Marriott international was founded by Mr J. Willard and Alice

S. Marriott in 1927. It is a worldwide business with

headquarters in USA, and listed on both the New York and UK

stock exchange. (NewYorkStockExchange2015) The business has

five operating segment namely Europe (within which the UK is);

Gideon Yusuf- 129159700 Page 3

America; Asia Pacific; Caribbean and Latin America; Middle

East and Africa. Marriott hotel is regarded one of the best

and luxury hospitability company in the world with over 3,700

branches managed and franchised in over 75 different

countries. The hotel is ranked the top most admired lodging

company in the world, with annual revenue of over $12billion.

Marriott also manages 19 hotel brands (Marriott.com).

I. MARKETING

Chartered Institute of Marketing (CIM, 2001) define marketing

as a management process responsible for identifying,

anticipating and satisfying customer requirements profitably.

A dlifferent definition was given by The American Marketing

Association (AMA, 2007). The association defines it as

activity set of institution and processes for creating,

transmitting, and exchanging offerings that deliver value for

customers, clients, partners, and the society at large.

Both definitions agree marketing is a management process, a

way of anticipating customer need and creating value for

customers. see. Figure 1.1

The marketing Process:

Source: Kotler et al (2014)

Gideon Yusuf- 129159700 Page 4

Understandingthe

marketplace &customer

Design acustomerdriven

marketing

Constructintegratedmarketing

program that

Build aprofitablerelationshipand create

Capturevalue fromcustomersto createprofits &customer

II. THE EXTERNAL ENVIRONMENT

These are factors within the external environment of Marriott

UK which are capable of affecting the operations of Marriot

and they are either an opportunity or threat. These external

factors are often beyond the control of business. (Kotler and

Armstrong, 2013) see Figure 2.1

Source: www.usb-ed.com

THE PESTLE:

The Political Factor

The political factor sets the field of play for businesses and

businesses must conform to government legislation. This

implies all their products and services must be in full

conformity to these legislations (Brassington and Pettit,

2013). Marketing plans and decisions are affected by changes

in the political environment including VAT, other Taxes and

government agencies influencies.

Gideon Yusuf- 129159700 Page 5

Though UK the hotels are one of the most attractive

destinations in Europe. Despite this, its profitability has

been undermine by the increase in VAT over the years with the

recent one in 2011 from 17.5% to 20%. (Bhs.org.gov). This

reduced the number of UK tourists.

A reduction in the VAT rate will therefore be beneficial to

both the hospitality industry and the Uk economy, as this will

create the much needed jobs in the UK. Marriotts UK can work

around this with lobby and engagment in the legislative

discussion process for favourable legislation.

Economic Factor

These economic factors have a significant impact on the

purchasing and spending power of consumers. This includes

interest and exchange rates, inflation, and economic growth.

The 2008 global recession negatively affected the exchange

rates, which reduced Marriott’s revenue, demand and rate they

could charge per available room. Even a well-planned marketing

strategy could fail when a country experiences a swift

business decline, due to decrease in consumer buying and

spending power (Mensah, 2009).

Gideon Yusuf- 129159700 Page 6

Social- Cultural Factors

The lifestyle, attitude, norms and believe of buyers are

capable of changing their taste, preference and buying

decisions (Mensah, 2009).

More visitors have been coming to the UK year in year out

According to (Standard (2014). This is due to fascinating

museums and also better green space which is considerably

better than any EU country.A research by Thornton (2006)

revealed that there will be 72% increase in the number of

nights spent by visitors in the UK over the next 20 years with

an increase from 90million in 2004 to 155million by 2026.

Therefore, more rooms/hotel will certainly be needed to cater

for the growth. 40,000 rooms will be needed by the year 2007-

2026, i.e. 2,000 rooms per/year (London.gov.uk, 2006). This

is an opportunity for Marriot UK to grow the business and

drive profitability for shareholders .

Technological Factors

Technology has immensely contributed to Marriott’s market

share, a recent report by CSIMARKET (2014) stated that there

was an increase in Marriott market share in the 4th quarter of

2014 by 10.56% while competitors like WYNN Resorts had a

decrease of -2.65% in their 4th quarter revenue. Marriott uses

cutting edge technology that have significant impacted on all

the operations of the business. It cuts across their booking

and reservations, internal operations and social connect that

creates customer engagements. Also, Marriott invented the

Gideon Yusuf- 129159700 Page 7

industry first ever leading concept tagged “content studio” in

2014. The concept was a partnering with snapchat, medium.com

and youtube to create contents that does not only allows the

brands come to live in the minds of the customers but also

serve as a platform for users to share in the hotel’s

adventurous offers (Marriotts Annual report 2014). As a

continues technologically driven business, Mariotts in intend

to continue with similar concepts in 2015.

III. THE COMPETITIVE ENVIRONMENT

According to Henry (2011), the competitive environment are

those factors that have a significant direct impact on the

operations of a business without the exclusion of their

performance and profitability.

The competitive environment is analysed using the Porters five

forces. It is of great benefit that organisations understand

these competitive five forces and their underlying causes, as

they are capable of revealing the roots of an organisations

present profitability and also proffer a framework for the

business to anticipate competition and profitability over

time. Porter (2008)

Figure 3.1

Gideon Yusuf- 129159700 Page 8

Source: csusap.csu.edu.au

The Power of Buyer

Buyers have the power to reduce the profitability of an

organisation. When the power of buyer is high, buyers tend to

demand for a better quality and price of products and

services. These occur and increases when the products and

services of marriotts UK are underfferentiated and cost of

switching is low (Henry, 2011).

Threats of Entry

Marriott UK operates in an uncertain economy, when the rate of

entry is high it pressurises the cost, rates of investment and

prices required for Marriott Uk to compete in the market.

Porter (2008) stated that when new entrants diversify from

other market they tend to deduce cash flows and leverage

existing capabilities to shake up competition, apple did this

when it diversified into the music line. In the UK, the threats

of new entrants in the hospitality industry is relatively low

due to the high capital requirement for new entrants (Cheng,

2013).

The Power of SupplierGideon Yusuf- 129159700 Page 9

Supplier power increases when the cost of switching is high,

few suppliers exist in the industry, and when supplier’s

products and services are differentiated and unique. When the

supplier power is high Marriott’s it reduces the cost of

Marriott’s products and services. (Porter 2008) however argued

that this threats are limited in the UK as there are large

number of suppliers.

Existing Rivalry

Rivalry is said to be intense when the barriers to exist and

fixed cost are high. Rivalry alslo increases when the cost of

switching is low and when products and services are

undifferentiated (Henry, 2011). This is not the case of

Marriott UK as they provide different brands for different

customer. When rivalry is high, it limits the amount the hotel

could charge per room as they have to consider what rivals

like Hilton and Holiday Inn charges per available room.

Threats of Substitute

This is when products and services of a business are been

replicated by a different company and offered and produced in

a different way and sold at a different price. Substitute

product can be in size and quality (Porter, 2008).

When the threats of substitute is high, business profitability

reduces and if businesses do not distance itself from

substitute through a well-planned marketing strategy and

performance, the business will suffer financially and in

potential growth.

Gideon Yusuf- 129159700 Page 10

The UK hospitality industry is highly competitive and

organisations like Marriott with many competitors have to be

proactive and not reactive in their marketing activities

IV. THE SWOT ANALYSIS

SWOT, is an acronym for strength, weakness, opportunities and

threats. It is an analytical tool use for scanning the

internal environment of an organisation (Kotler et al 2013).

Below is the SWOT of Marriott hotels UK

STRENGTHS WEAKNESS OPPORTUNITY THREATS

Highly

Innovative

Low credit

rating

Increase

demand for

rooms in the UK

Terrorism

Differentia

ted Brands

Global

competition

Technological

innovations

Government

Legislations

Economies of

scale

Corporate

social

responsibilit

y

Increase in

population

Uncertainty of

the economy

customer service Lack of law

cost brand

Customer

experience

Intense

competition

Source: Reuters.com

Gideon Yusuf- 129159700 Page 11

V. THE MARKET SEGMENTATION

The UK market is characterised by different customers and

customer need and wants: businesses do not always appeal to

all buyers of the business products and services in the same

way (Kotler et al. 2009. P. 192). Smith (1957) defined

segmentation as an art of discerning and defining meaningful

differences between groups of customers to form the foundation

of a more focused marketing effort.

Segmenting the market into smaller groups helps organisations

to know how best it can allocate, offer products and services

that are appealing and capable of satisfying the segment

market whilst making profit, the needs of consumers varies and

are said to be diverse when making a choice of a product and

when buying a products and service (Armstrong and Kotler,

2009). Moreover each buyer has a different intention to use a

product and service of a business. Customers are the most

valuable assets of an organisation and segmenting them is

crucial for profitability (Armstrong and Kotler, 2009). There

are three major ways by which Organisations segment. See

figure 4.1

Gideon Yusuf- 129159700 Page 12

Source: staffs.ac.uk

Geo-demographic Segmentation

Geo-demographic is the analysis of a group of people by where

they live. Sleight (1997, p.16). This encompasses demographic,

lifestyle and geographic information about a people which

helps organisations to know where potential customers are and

how they can effectively and strategically target and meet

their needs. Businesses can constantly change and modify

products and services whenever the need arises. (Brassington,

Pettit, 2013)

Psychographic Segmentation

People tend to think and behave in a certain way, due to their

level of education, social class and lifestyle, and these

factors determine their buying decisions. Armstrong and

Kotler, (2007) aaffirmed that buyers and consumers of a

product and service in the same demographic group tend to have

a different psychographic background. This forms the

psychographic approach of segmentation.

Behavioural Segmentation

This segmentation approach is solemnly based on the product

consumption related- behaviours of consumers of a product and

service. Businesses divide these market into groups based on

their usage, attitude and knowledge of a product a d service

(Ft.com/Lexicon, 2011)

Figure 5.1 is showing the requirement for an effective

marketing segmentation in Marriott hotel.

Gideon Yusuf- 129159700 Page 13

Source: vulms.vu.edu.pk

VI. TARGETING

(Kotler and Armstrong, 2013) defined targeting as effective

evaluation of each segment market attractiveness and chose one

or more of the segments to operate in. Marriott should not

just decide to enter into a segment without targeting the

segments that will increase its profit and one that will be of

significant customer value. (Kotler, Armstrong, 2013, 78).

Alternatively a business may decide to serve more than one

segment market- perhaps segment with different types of

customers with same type of need and wants (Kotler, Armstrong,

2013, Pg:78).

Marriott UK, targets more than one segments, these segments

includes travellers seeking for luxurious and quite

environment, high quality cuisine, customer service just to

mention but a few, Marriott’s services to these targets has

been satisfactory. (Kuang 21, 2012) Marriot UK can target both

narrowly and broadly. See fig.6.1

Gideon Yusuf- 129159700 Page 14Coverage Strategies

Targeting Broadly Targeting

Narrowly

Source: Adapted from Kotler et al, 2009

Targeting a market without differentiating and positioning

your products rightly is very chaotic; the perception a

company creates of a product in the mind of a buyer determines

its profit and attractiveness.

VII. DIFFERENTIATION AND POSITIONING

Marriott’s hotel has experienced a lot of patronage due to

the perception their products and services creates in the

minds of customer. These includes good quality food, services

and value for money (Marriotts.com).

Kotler et al (2013) stated that differentiation and

positioning is the different ways by which businesses arrange

goods and services to create a more desirable place from

competing goods and services in the minds of their target

market.. Marriott’s UK has created this perception of

excellence in the minds of their customers as confirmed by a

recent customer benchmarking survey conducted by Temkin Group

Gideon Yusuf- 129159700 Page 15

Undifferentiated (Mass)Marketing

Differentiation

(Segmented)

Concentrated(Niche)Marketing

Micro-Marketing(Individual)Marketing

which concluded that Marriott’s customers ranked Marriott’s as

the second best hotel worldwide. See Appendix 3

when a company wants to position its product and services,

they must find out the divergent customer value preposition

that will give the company a competitive edge to effectively

build the position. (Kotler and Armstrong, 2013). There are

five value prepositions which Marriott’s can build its

products. See figure 7.1

Source: Adapted form (Armstrong, Adam, Denize and Kotler,

2012)

VIII. THE MARKETING MIX

Kotler et al, (2005) defined marketing mix as the set of

controllable tactical marketing tools- products, price, place

and promotion that businesses often use to produce its much

Gideon Yusuf- 129159700 Page 16

desired responses from its target market. Figure 8.1 shows the

elements of the marketing mix

Source: bbc.co.uk

Product

products is defined as anything that is created and offered to

the market to get the needed audience, satisfy the need and

wants of customers mainly through acquisition or consumption

of products and service (Kotler, et al 2004). These can be

persons, services, physical objects, and places.

Marriotts successes is dependent on how well it satisfies the

need and want. Nowadays customers demand more than just

products and services offered by a business; they also tend to

buy companies experiences and what their offer has to do for

them when acquired or consumed. (Kotler et al, 2009), a recent

customer rating indicates that customers were satisfied with

the products and services of Marriott’s, as 4.3 out of 5.0

rated Marriott’s high and 90% recommended Marriott’s to family

and friends who wants sophisticated products and services

(Marriotts.co.uk)

Gideon Yusuf- 129159700 Page 17

There are three levels of products and services; they include

the core, the actual product and the augmented product. The

core level offers both products and solutions to ascertain if

product and services will satisfy the need and wants of

customers. The actual level focuses on the features of the

product and services e.g. quality, whereas the augmented level

focuses on the additional benefits and services that both the

core and actual level offer (Kotler et al, 2004). See figure

8.1

Source: staffs.ac.uk

Price

Price is any amount a consumer has to pay in exchange for a

product and service (Solomon et al, 2009). Price is the only P

that creates revenue for the business as the other P’s

represent just costs. Kotler, et al (2009) suggests that

businesses need not to always cut prices but rather convince

customers that the products and services they are been offered

matches the charged price. Marriott charges high for products

and services and in return give customers sophisticated and

luxurious product and services that meets customers

satisfaction. Also, the hotel’s “Look No Further®” price

inititive ensures Best Rate is Guaranteed and has helped in

Gideon Yusuf- 129159700 Page 18

preventing customers from shifting to intermediaries’

platforms like booking.com and therefore use that to gain

customer loyalty and engagement. Figure 9.1 shows some of the

factors affecting price decisions

Source: www.dlsweb.rmit.edu.au

Place

Producing goods and services that will satisfy customer needs

and wants is just a part of the process, making them available

and easy to get as essential (Blythe, 2008). In today’s

businesses, finding the right place and channel to distribute

products and services is very crucial because it creates a

competitive edge. Almost all of Marriotts’ UK is concentrated

on city gateways and this has been an added advantage to the

company. Marriott uses the world’s most powerful, effective

and efficient distribution channels which have made customers

to trust in their brand (Marriott.com). The internet is also

one distinctive way by which Marriott distributes its goods

and services to customers who can effortlessly check

Marriott’s menu, location and product and service, on the

internet. Kotler et al, 2006 suggest that place is the most

important mix. See also technological factor under PESTLE.Gideon Yusuf- 129159700 Page 19

Promotion

As defined by CIM (2009), promotion is the way by which

businesses communicates and attracts costumers to buy their

goods and services. With the revolution of the internet,

Marriotts now tend to use the internet for most of it sales

promotion due to the large frequency it captures, however some

businesses still use the old traditional print and mass media.

In 2013, Marriott started a new campaign targeted at young

travellers, whom rivals failed to attract. Although this will

cost marriott $30 million, but Marriott reaped the benefits

way of increasing its customers and taking market share from

the competitors (Nytimes.com 2013). Also in 2014, the hotel

launched CANVAS – an inititive that brought global chefs,

bartenders and entreprenuers to the UK for food and drink

pitch. The aim and as achieved was to place Marriotts in the

minds of it growing customers (Marriotts Annual report 2014).

People

Having the right people for the right job that are capable of

providing customers with the best services has a positive

effect on business, nowadays customers are also concerned

about the kind of services firms offer them. As often said

the reputation and profit of a business rest on its people’s

hand. Marriott UK says it realised having the right people who

know how to manage is very important and that is why they have

constantly been training, developing and motivating them to

provide customers with exceptional services that will match

customer expectations (Marriott.co.uk)

Gideon Yusuf- 129159700 Page 20

Process

These are ways by which an organisation makes sure that

customers are provided with the best goods and services. (Rao,

2011) highlighted that customers are not really concerned how

the business is operated, but rather how this goods and

services satisfies them. The hotel must therefore create

processes that defined and ensure that customers receive

exceptional service whenever they visit.

Physical Evidence

CIM, (2009) stated that services are experienced only when

they are been delivered to customers because they are

intangible. Marriott says its environment and services are of

opulence that gives customers a lasting experience and

memories of always wanting to come back to have that feel of

elegance (Marriottbrandworks.com)

CONCLUSION AND RECOMMENDATIONIt is almost impossible to satisfy customers nowadays, as their need

and wants are constantly changing. However businesses can still

satisfy a vast number of its target market effectively, if only they

understand the marketing tools and techniques and apply them

appropriately in other to get the desired responses from their

target market

CSR has a significant impact on the successes of a business and this

is one of the weakness of Marriott’s Uk: Marriott has failed to

understand that the present day customers are also very much

conscious of how an organisations positively impact and affect the

society in which they operate in. Friedman, (1962, pg, 163) firms

Gideon Yusuf- 129159700 Page 21

must realise the impact of social responsibility, as it is the only

way a business can efficiently and effectively utilize its

resources and energy to increase profit and this can only happen

when an organisation is socially responsible to the society and

engage in open and free competition

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Appendices:

Appendix I (Marriott financial statement)

Gideon Yusuf- 129159700 Page 25

Source: Marriotts.com

Appendix II (Marriott Brands)

Gideon Yusuf- 129159700 Page 26

Source: www.biznews.com

Appendix III (Marriott Customer Ratings)

Source: experiencematters.wordpress.com

APPENDIX IIII (MARRIOTT COMPETITOR COMPARISON)

MARAccor

SAHilton IHG H HOT Industry

Market

Cap:11.93B N/A N/A 4.67B 6.91B 9.35B 1.37B

Emplo

yees:

137,00

0158,1621

130,00

01N/A 45,000

145,00

07.10K

Gideon Yusuf- 129159700 Page 27

Revenu

e

(ttm):

10.91B 10.73B1 7.77B1 1.54B 3.33B 4.71B 456.96M

Gross

Margin

(ttm):

6.28% N/A N/A 50.00% 17.38% 21.82% 40.14%

EBITDA

(ttm):

155.00

MN/A N/A

472.00

M

318.00

M

678.00

M68.85M

Oper

Margin

s

(ttm):

-0.28% N/A N/A 23.60% 1.80% 8.60% 5.41%

Net

Income

(ttm):

-

346.00

M

864.00M1 N/A207.00

M

-

42.00M-1.00M N/A

EPS

(ttm):-0.971 N/A N/A 0.722 -0.284 0.406 N/A

P/E

(ttm):N/A N/A N/A 22.67 N/A 123.28 22.02

PEG (5

yr

expect

ed):

3.44 N/A N/A N/A N/A 40.26 3.55

P/S 1.08 N/A N/A 3.01 2.03 1.95 1.09

Gideon Yusuf- 129159700 Page 28

(ttm):

Source: Marketrealist.com

Gideon Yusuf- 129159700 Page 29