Report On The Purpose Of An Annual Report.
Analysis of Marriott International Inc. 2012 annual report
The main purpose of an annual report is to provide information to the shareholders, the public and stakeholders: it provides financial information, upcoming plans for the next year, introduces the company’s key personnel and board members to everyone, changing company conditions and marketing campaigns and strategies. It follows that an annual report gives a comprehensive highlight of your company’s achievements such as gains in the market share, sales increase, financial achievements, research advances, new machinery and honors or awards given to its employees or the company. In addition, the annual report serves to promote your company since it can be used as a marketing tool to target new customers and investors.
Marriott’s purpose for diversification of brands.
The main purpose for diversification of brands by Marriott is to enable them to expand into their potential market. For example, Marriott had to get the Courtyard and Fairfield Inn brands to specifically target the budget and business guests. Before this they were not able to fully expand their sales. Secondly, the purpose for diversification as included in its corporate programs is to expand Marriott’s portfolio to all parts of the world. This serves to significantly increase their traveler’s ratio and offer an alternative to the specific and rigid Marriott brand standard. Thirdly, Marriott’s diversification of brands seeks to spur growth in its share value and in its profits while still remaining affordable to its customers compared to its competitors.
The role of an Executive Chairman and Chairman of the Board and the President and Chief Executive Officer of Marriott.
The role of the Executive Chairman and Chairman of the Board include: performance and development evaluation, understanding and effectively communicating to and for the shareholder on issues of concern, maintain an appropriate balance between the stakeholder's and shareholder's interests to ensure that the business is sustained in the long term, drive the business into profitability, examining capital expenditure and investments, championing diversification initiatives, identifying business opportunities, developing and implementing policies on corporate social responsibility and charitable donations and offering leadership. The role of the President and Chief Executive Officer include: executing or integrating business policies into daily operations, oversees daily company operations, effectively manage the relations with shareholders, increase the shareholder value, set company goals, developing actual qualitative performance highlights, developing and implementing marketing strategies and campaigns and drive investment and global growth.
The purpose of performance highlights and the outcome of RevPAR for Marriott Hotels.
The purpose of the 2012 performance highlight is to show investors Marriott’s abilities to make money, how growth and operations are being funded, illustrate the business assets and liabilities, give income and cash flow statements, introduce new or existing corporate programs, show their brand diversification and portfolio and displays Marriott’s dividend and share value. The Revenue Per Available Room (RevPAR) for Marriott Hotels increased by more than six percent in 2012. RevPAR was higher and improved globally despite economic weakness.
The Americas, Asia Pacific, Europe, Middle East and Africa regions
Best performing region
The area that is doing well is the Americas with fifteen brands, three thousand three hundred and thirty nine open properties in twenty seven countries and five hundred and seventy four hotels under development. This is due to addition of new complete service hotels through conversion and the Gaylord brand. Additionally, this performance has further been improved by the development of new extended stay and modern essentials brands. This good performance in 2012 was enhanced by an economy that is becoming stronger day after day and a supply industry that is modestly growing especially in North America.
Region with the greatest potential
The region that has a greater potential is the Americas. This is due to the fact that it aims at nearly doubling its footprint in Latin America and the Caribbean. The fact that it has a footprint in the area shows that it has dominance and many hotels. Furthermore, the Courtyard and Fairfield brands specifically target the South American (Brazilian) market. Finally, Americas has the greater potential since it has fifteen brands and five hundred and seventy four hotels under development which if they were to be increased would still surpass all other regions.
Least performing region
The region that is lagging behind is the Middle East and Africa region. This is shown by having the least number of brands (seven), opened properties (forty one) and hotels under development (forty one). Factors that have contributed to such a performance include political uncertainty in the Middle East and some African countries.
The potential risks and uncertainties to the Marriott brand.
The first risk is the high competitiveness of the lodging industry. Marriott has to do everything in its power to create a distinction in its loyalty programs, technology services and platforms and lodging services and products from those offered by its competitors. Lack of a competitive edge in this industry leads to a decline or failure of the business. Secondly, economic uncertainty can influences Marriott’s financial growth and results. Economic uncertainties and conditions such as weaknesses in Europe and other countries, political instability in the Middle East and Africa, industry supply growth that is modest, potential disruptions by the United States government inaction or action on the budget, federal deficit and related issues, long term bad economic conditions and strengthening or improving economies in countries such as North America can affect travel trends and finances.
Major operational risks that could affect the brand.
One major operational risk is premature termination of Marriott’s franchise and management agreements. This may be as a result of bankruptcy of the franchise or owner or failure to meet some performance and financial criteria in the agreement. A significant amount of premature termination may lead to financial losses. Secondly, regional, national and global economic conditions affect the Marriott brand. Weak economic conditions and heightened travel advisories due to fear of infectious diseases such as Ebola and further terrorism influence performance. Thirdly, success of new branded products and programs is not guaranteed. There is no surety that launched brands and products will be successful and if unsuccessful the cost incurred cannot be recovered. Fourthly, susceptibility to international business risks that increase costs, reduce profits or revenues, disrupt business and enforce sanctions and liabilities. As Marriott continues to expand its business internationally, it is increasingly being exposed to international risks and challenges that may impede business.
An analysis of Marriott’s development and financial risks and recommendations for the brand’s continued development.
Marriott’s development and financial risks include franchises and existing hotels seeking capital or financing for buying, developing and improving hotels that at maturity of loans they may be unable to refinance or meet the debt service payments. To avoid this risk Marriott can educate its franchise on how to solely deal with liquidity and capital markets factors. They can also carry out comprehensive market surveys to determine which new investments or improvements are worthwhile. For Marriott brand to continue developing it must broadly mitigate development and financial risks in three ways. Firstly, Marriott can retain the risk themselves. Secondly, they can transfer the risk to other key counterparts. Finally, they can transfer the risk to some company whose business is risk management such as insurance agencies (Kumar, 2015).
A timeshare refers to a property that has specific use rights or form of ownership. These properties are usually resort condominiums that are used by different owners at specific times every year. For instance, Marriott offers timeshare properties in seventy four countries. The timeshare risks associate with Marriott brand include the 2011 spin off that could result in tax liabilities for Marriott’s and its shareholders and the spin off may not result in the estimated tax benefits thus ruin the relationship with its customers. Marriott is adversely affected by the weak or lack of demand for timeshare interval and the tax imposed.
Highlights of the “Lodging Results”.
Highlights of the “Lodging Results” in 2012 include improved lodging conditions, increases number of hotels, improved operating efficiencies and a strong demand except in Washington D.C due to election, shorter congressional calendar and government spending restrictions. These impressive results are mostly due to a strengthening North American economy. Secondly, Marriott experienced a strong international arrive in Europe despite its weak economic conditions. There was increases demand in Europe, Asia Pacific and the Middle East regions despite the economic and geopolitical conditions. In 2012 Marriott experienced a worldwide increase in the average daily rates, RevPAR and occupancy. Room rate prices and mix improvements are reviewed daily as demand levels changes, as demand increases the prices increases. In most markets the demand for highly rated rooms increased in 2012. In 2012, demand for business and leisure transient for individual and group customers increased. There was an increase in the number special corporate business. This is due to negotiations and careful consideration of the customer’s stay patterns, non-room and aggregate spend and locations of stay to maximum property earnings.
Increased revenues in 2012.
Revenues decreased in 2012 compared to 2011by four percent. The spin off contributed to the decrease in revenues although it was partially offset by the increase in revenues from the lodging business. There was a seven hundred and seventy nine million dollar increase in the lodging business revenues. This was due to an increase in management incentive fees, cost reimbursement revenue and base management fees. The increase in cost reimbursement revenue was as a result of increased growth and property level demand globally. However, it was offset partially by a decrease in the timeshare cost reimbursement revenue caused by the spin off. There was an increase in the total franchise fees, which translated into an increase in license fees and lodging revenues due to a stronger RevPAR and unit growth globally.
Review of revenues from 2010, 2011, 2012 and forecast for 2013.
Revenues for 2010 were $11,691 million, for 2011 were $12,317 million and for 2012 were $11,814 million. My revenue forecast for 2013 is $12,003 million. Forecast increase areas in 2013 for Marriott include franchise fees, management incentive fees, and cost reimbursement revenue.
Kumar, Leela. (2015). Financial risks and mitigation. Academia. Retrieved from http://www.academia.edu/6851541/financial_risk_and_its_mitigation.
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