The main reason that Marriott finished the quarter with a loss even though they increased their revenue is their change in their timeshare operations. According to a statement from Marriott’s upper management, "Marriott International expects to spin off its timeshare operations and development business as a new independent company through a special tax-free dividend to Marriott International shareholders in late 2011." Basically, Marriott splitting itself into two independent publicly-traded companies, offsetting its timeshare operations. This is similar to some moves by Marriott’s competitors, such as Starwood Hotels & Resorts Worldwide and Wyndham Worldwide. Although there are not enough details for full speculation, an industry analyst is saying, "the ability to allow investors to cleanly value timeshare will be a welcome development." The new company will be able to focus all of its operations on the timeshare side of the business, under both the Marriott and Ritz-Carlton brands. In addition, Marriott International will focus on the hotel management side of the business, but will still get franchise fees from the timeshare’s use of their Marriot and Ritz-Carlton brands. "’Marriott took a bold step when we introduced our Marriott brand to the timeshare industry in 1984,’ said CEO J.W. Marriott, Jr. ‘In this transaction, we take another innovative step forward as we combine the power of the Marriott and Ritz-Carlton brands with the flexibility and focus of a new independent timeshare company’" (Reimer). In conclusion, investors should not be thrown off by this recent loss in the third quarter, and look to see if Marriott International’s recent restructuring will pay off in the long run.
Sunday, October 23, 2011
Revenue and Loss for Marriott International Inc.
Following two quarters of profit, Marriott International Inc. reported a loss in the third quarter of 2011. In total, Marriott reported a loss of $179 million, even though they had a net income of $83 million a year ago. In addition, Marriott’s revenue rose 8.5% ($2.87 billion) from the year before. Their revenue per available room (abbreviated RevPAR, a key measurement in the hotel industry) rose 6.9% from last year with a 3.3% increase in average daily room rates and a 2.5% increase in occupancy. The rise in revenue has been attributed to demand in North America, Latin American, Asia-Pacific regions, and the Caribbean. The Caribbean and Asia-Pacific RevPAR has increased 14%, which makes up for their 10% Rev-PAR loss in the Middle East and Africa.
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I think this post is crucial when discussing opportunity cost and investment. In the short term, Marriot International Inc. is lossing money. However, it is because they are changing their operations, which will hopefully increase net profit in the long term. The opportunity cost of having a negative net profit now is ok, considering it is do to developments that will eventually bring in more money.
ReplyDelete-Laura Iaffaldano
I think this post emphasizes the idea of making losses but at the same time that doesn't necessarily mean failure. Businesses must often take greater risks in order to gain better outcomes in the future, this basically sums up the idea of economies of scale where the costs incurred at the mean time for Marriott in its operations would result in better gains in the long run.
ReplyDelete-Lila Al-Refai
What really stuck out to me is the fact that even though their RevPar rose by a significant amount, the company still lost so much. Although the 3rd quarter is notorious for being back for businesses, when compared to how they did last year during a worse economy in some aspects, it is hard to see why they posted such a large profit loss, even with the decision to split the company. It will be interesting to see if the stock market with reward them for following in the footsteps of their competitors or if they will drop the stock.
ReplyDelete-Domenick Cocchiara