Memo

Date: February 17, 2017

To: Prof. Lori Marchese, Prof. Tom Marchese, Prof. Xiaohu Deng, Prof. Paul
Benedict, and Prof. Catherine Penrod

From: Cohort Team 6 001AM: Anthony Bartolomucci, Nicholas Bishop, Mikayla

Schweck, Robert Springle, Daniel Bruss, and Matthew Dilenschneider

Subject: Project 1 Final Report

The team has prepared an industry analysis of the lodging industry for the professors and the Ohio
University Copeland Associates. The team has spent time and effort to fully understand the current
state, trends, and the future of the industry. Our research provides in depth information on industry
developments, new innovations, financial understanding, and an analysis of the competitors that are
key players in the industry. Through the teams research, it was determined that there were several
over arching factors important to the industries long- term sustainable growth. They are:

Increase in franchising
Expansion outside of North America
Companies targeting millennials
Managing the increase in competition from online travel agencies

The factors listed above are driving the industry and are reasons key competitors are continually
increasing revenue. These factors are also ways that competitors are trying to separate themselves
from the competition. The research has lead to this conclusion using Porters 5 Forces and PESTLE
analysis which can be found in the appendix.

The team has gained a substantial amount knowledge about the lodging industry after this initial
research, and would like to thank Ohio University Copeland Associates for the opportunity to work
on such a prestigious project. We look forward to continuing progress, and ultimately the final goal.
 Cover Page

Prepared for:
Copeland Associates
Integrated Business Cluster

Professor Catherine Penrod

Professor Paul Benedict
Professor Xiaohu Deng
Professor Lori Marchese
Professor Tom Marchese

Prepared by AM001 Team 6:

Anthony Bartolomucci
Nicholas Bishop
Daniel Bruss
Matthew Dilenschneider
Mikayla Schweck
Robert Springle
 AM001 Team 6

Daniel Bruss Mikayla Schweck

Matthew Dilenschneider Robert Springle

Anthony Bartolomucci Nicholas Bishop

 Table of Contents

Introduction_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1
Industry Explained/Macro Environ._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2
Breakdown_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2
Key Driving Forces_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2
Factors That Negatively Affect Growth_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2

Trends _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ 3
Franchising and Management _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ 3
Increase in Competition from Online Travel Agencies_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 3
Expansion Outside of North America_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 3
Companies Targeting Millennials _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 3

Micro Environment _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 4
Internet Makes it Easy to Substitute _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 4
Today Barriers to Entry are Low_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 4
Bargaining Power of Buyers _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 4
Industry Rivalry_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _4

Industry Competitors _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5
Hilton Worldwide_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5
Marriott International _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5
InterContinental Hotel Group _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ 5
Airbnb_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5
Hyatt Hotels Corp._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5
Wyndham Worldwide_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5

Hilton Worldwide _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 6
Hiltons Focus_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 6
Capital Light Business Model Repays Debt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 6
Hiltons Sales Accell in Foreign Nations _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 6
Hilton Worldwide Brands & Segments _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 7
Hilton Targeting Millennials With Brand Unique Affordable Experiences_ _ _ _ _ _ 7
Hilton HHonors Boosting Mobile Sales_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 7
Hilton Attacks Online Booking Websites with the Stop Clicking Around Campaign_ 7

Marriott International _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8
Marriott is Focusing on Emerging Markets _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8
Marriott International Brands & Segments_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 9
Marriotts Segments Brands Targets Millennial by Offering Personalized Experiences_ _ 9
Hotel Industry Partnering With Other Industries _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 9
Marriotts Mobile Sales Are Exploding_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 9
Marriott Uses You Are Here Campaign to Strike Back Against Online Travel Agencies_ 9
 Table of Contents

InterContinental Hotel Group_ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 10

IHGs Global Expansion_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 10
Franchising Increases Return Percentages and ROA_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 10
Selling Properties to Maintain Asset-Light Business Model _ _ _ _ _ _ _ _ __ _ _ _ 10
InterContinental Hotel Brands & Segments_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 11
InterContinental Hotel Target Millennials Focusing on Wellness Needs_ _ _ __ _ 11
IHG Boost Mobile Sales _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 11
Booking On IHG Direct Websites Sway Reward Members from OTA__ _ _ _ _ _ 11

Airbnb_ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 12
What is Airbnb_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 12
Airbnb Own No Properties_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 12
Most Globally Spread_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ 12
Airbnb Indirectly Targets Millennials _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 12-13
Airbnb is the OTAs Competitor_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 13

Industry Decision Matrix _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 14

Franchising 30% _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ 14
Globalization Outside of North America_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 14
Targeting Millennials 25% _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 14

Franchising Sub-Matrix_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _15

The Criteria and Their Weights_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 15
Franchising Revenue _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 15
Number of Units in Operation _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 15
Franchising Fee _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 15
Royalty Fee _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 15

Globalization Sub-Matrix_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 16
The Criteria and Their Weights _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 16
Number of Current Properties Outside of North America_ _ _ _ _ _ _ _ _ _ _ _ _ _ 16
Hotel Pipeline Outside of North America _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 16
Global Revenue Outside of North America _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 16
 Table of Contents

Hotels Targeting Millennials Sub-Matrix_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 17

The Criteria and Their Weights _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 17
Pipeline Hotels Targeting Millennials _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 17
Current Properties Targeting Millennials _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 17
Age of the Board of Directors _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 17

Strengthening Rewards Systems to Fight Back Against OTAs _ _ _ _ _ _ _ _ _ _ 18

The Criteria and Their Weights_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _18
Benefits and Services_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 18
Growth in Rewards Memberships_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 18
Average Rank in App Store_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 18
Airbnb is the OTAs Competitor _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 18

Recommendations for IHG _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 19

InterContinentals Globalization _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 19
InterContinentals Reward System _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 19

Conclusion _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _20

Appendix A _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 21
Appendix B _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 22
Appendix C _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 23
Appendix D _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _24
Appendix E _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 25
Appendix F_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 26
Appendix G_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 27
 Table of Figures

Figure 1: The Lodging Industry Decision Matrix _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 1, 14

Figure 2: Market Share _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 2
Figure 3: Macro-economic Factors _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ 2
Figure 4: Customer Website Visits Before Purchasing _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 3
Figure 5: JD Power Rankings of Hotel Reward Systems_ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ 4
Figure 6: Rooms By Region _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 5
Figure 7: ROA Boost from Asset Sales _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 6
Figure 8: Revenue Growth from 2013-2015_ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 6
Figure 9: Hilton Hotel Segments _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 7
Figure 10: Marriotts Debt Ratio Is Increasing _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ 8
Figure 11: Marriotts Significant ROA Growth_ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ 8
Figure 12: Marriott Hotel Segment_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ 9
Figure 13: InterContinental Sales Lagging Globally 2013-2015_ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 10
Figure 14: InterContinental Significant ROA Growth _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 10
Figure 15: InterContinental Hotel Segments_ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ 11
Figure 16: IHGs Global Rewards System Boosts Revenue_ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ 11
Figure 17: Millennials are Airbnbs Top Customer_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ 12
Figure 18: Airbnb Revenue Growth vs. Hotel Booking Sites _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ 13
Figure 19: Franchising Sub-Matrix _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ 15
Figure 20: Globalization Sub-Matrix_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 16
Figure 21: Age of Board of Directors Rating Scale _ _ _ __ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 17
Figure 22: Hotels Target Millennials Sub-Matrix _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ 17
Figure 23: Strength Rewards Systems to Fight Back Against OTAs Sub-Matrix_ _ _ _ _ _ _ _ _ _ _ __ _ 18

*Figures A-T located in Appendix

 Executive Summary

The lodging industry is experiencing consistent sustainable growth, and a significant reason why is
because of low cost high income franchising options. Our research provides a great opportunity for
investors to make a safe and satisfying investment within the lodging industry. Marriott International,
Hilton Worldwide, and InterContinental Hotel Groups have been analyzed and ranked based on their
trends and projected success in the future. We have statistical confirmation that is represented by the
decision matrix on page 1. This is the most accurate and effective method to project the future
profitability and sustainable growth for each company.

The team has provided insight and explanations on which company is going to be projected for the
most success in the future. The decision matrix is based on the following criteria:

Increase in franchising
Expansion outside of North America
Companies targeting millennials
Managing the increase in competition from online travel agencies

Increase in Franchising
One of the biggest trends noticed in the hotel segment of the lodging industry is the recent transfer of
ownership properties towards franchising and management contracts. Franchising is the licensing of a
companys brand to smaller, more independent hotels. This benefits both parties; the franchisee uses
the well established name of the company to start their business while the franchisor collects fees and
royalties from them. Although Hilton was late to franchise compared to Marriott and InterContinental,
their franchised and managed segments have grown 37% over the past ten years. Hilton only has
franchised or managed properties in their hotel pipeline, which includes over 266,000 rooms. Marriott
has a strong franchise and management segment that represents approximately 97% of their total
rooms. They recently acquired Starwood Hotels, who primarily owned most of their hotels. Marriott
believes there is an attractive market to sell these properties, so they plan to turn a profit and invest it
back into their franchised segment. InterContinental has the strongest majority of properties under
franchising and management contracts at 99%. IHG only owns seven properties total around the globe.

Expansion Outside of North America

The hotel industry has seen a demand for expansion outside of North America into emerging markets.
With the increase in travel, new hotel development is accelerating in many emerging markets around
the world (Marriott 3). Marriott took advantage of the pipeline market with a total of 1663 hotels
being built in newly emerging markets. This is a significantly higher amount than any other of the three
hotel companies. Hilton is slowly increasing their pipeline production with 391 hotels being built in
these developing markets. InterContinental has 463 hotels in the development pipeline.
 Executive Summary

Companys Targeting Millennials

Millennials are a rapidly growing generation and companies are beginning to target this market.
They have significantly different needs than baby boomers, such as the need for unique and affordable
experiences over typical hotel amenities. Hilton Worldwide announced their millennial focused brand
Tru in 2016 whose main focus is on combining business and pleasure as one. This allows for public
work environments that are also social atmospheres which millennials can enjoy. Marriott has unveiled
brands like EDITION, Moxy, and AC hotels, that are structured to accommodate millennials. These new
brands have a focus on the boutique hotel structure; smaller hotel with upscale amenities. IHG has
also jumped on the millennial bandwagon with two brands that cater to millennials. Theyve
incorporated lines of work that fall within health and wellness with the EVEN Hotels brand. Indigo,
their second millennial driven brand, uses the cultural diversity of their locations as their selling point.
With the yearning for new experiences and anticipation for feedback, Indigo provides the hospitable
atmosphere millennials are expecting.

Increased Competition from OTAs

Over the past 20 years, hotels have been in constant competition with online travel agencies.
Marketing and sales teams are experiencing challenges that directly correlate with the competition
from OTAs. In the year 2016, Hilton released their Stop Clicking Around campaign in hopes to
provide examples on how easy direct booking is via applications. In 2015, 57 million Hilton HHonors
points went unused because consumers werent aware of some of the benefits they held. Marriotts
marketing strategy has recently involved more authentic, creative, and personalized story tellings.
Their You Are Here campaign gives the customers personal opportunities to share their travel stories
within various Marriott hotel brands. This helps the companys marketing platforms seem more
personalized and gives users an incentive to book directly. InterContinentals Your Rate by IHG
Rewards Club campaign was promoted worldwide beginning in the Americas and Europe. Their
approach was direct and promoted lower room rates only to those who are members. This directly
targets the consumers focus away from OTAs and more toward booking directly through
InterContinental.

The strength of each company is represented by the their franchising operations, expansion outside of
North America, targeting of millennials, and management of the increased competition from online
travel agencies. Hilton is the most effective in franchising and in their ability to minimize competition
from online travel agencies. Marriott is the most successful in globalizing their business, and the
targeting of millennials.
 Introduction

Our team would like to thank The Copeland Associates for the opportunity to work on this project. Our
team has prepared a briefing of the lodging industry and individual company analyses of Hilton
Worldwide, Marriott International, InterContinental Hotel Group, and an indirect competitor, Airbnb.
Weve gone in depth in the understanding of the $490B industry and analyzed the main competitors.
We plan to compare and evaluate these competitors in four growing trends that our team found and
studied. The trends being evaluated are an increase in franchising, expansion outside of North America,
companies targeting millennials, and an increase in competition from online travel agencies (OTAs).
Other important aspects we have analyzed for each company includes financial standing, information
systems, management, and marketing strategies.

We analyzed each companys use of diversification and the effectiveness within each of their top
segments, (luxury, upper-upscale, upscale, upper-midscale, midscale, and economy). In addition to this,
franchising is analyzed based on the revenue generated by franchised operations, the number of
franchised units in operation, franchising fees, and royalty fees. Globalization was analyzed based on
number of current properties outside of North America, hotels in the pipeline outside of North
America, and Global revenue outside of North America. Hotels targeting millennials will be analyzed
based on pipeline hotels targeting millennials, current properties targeting millennials, age of board of
directors. Strengthening rewards systems to fight back against online travel agencies will be analyzed
based on benefits and services, growth and reward members, and average rank in the app store.

After an in-depth consideration across each decision criteria, Marriott Worldwide received the highest
composite score of the three main companies of 8.39. (Refer to figure 1) Following was Hilton
Worldwide with a score of 7.16, and InterContinental Hotel Group scoring a 7.08. Based upon our
analysis of these criteria, Marriott would be the most secure investment because of their dominance in
two key categories: globalization and targeting millennials.

The Lodging Industry Decision Matrix

Figure 1

Weight 30% 30% 25% 15% 100%

Managing
Targeting Composite
Criteria Franchising Globalization Competition
Millennials Score
from OTAs
Hilton 7.73 7.80 5.22 8.00 7.16
International
Marriott 7.28 9.40 8.82 7.90 8.39
Worldwide
InterContinental 7.43 7.30 6.50 6.90 7.08
Hotel Group

1
 Industry Explained/ Macro Environ.
Breakdown
The lodging industry consists of hotels, motels, bed
and breakfasts, casino hotels, cruises, and campsites.
Its a mature industry and has been growing steadily
since the market crash in 2008. Currently, the industry
is valued slightly above $490B (Statista 2017).
Projections of the market have it growing
approximately 12% to over $550B in 2018. The
industry, specifically focusing on hotels, is segmented
into six different options to fit all consumer budgets
and needs. These segments are shown below along
with the percentage of hotels they represent globally
(Bloomberg Terminal).
Luxury (2%)
Upper-upscale (9%)
Upscale (23%)
Upper-midscale (27%)
Midscale (12%)
Economy (26%)
There are a handful of major market holders in the
lodging industry. The chart below represents some of
these key competitors and where they stand in terms
of market share.
Market Share
Figure 2
Industry Analysis Hilton Marriott
Key Driving Forces
Hotel revenues are highly dependent on the travel
industry. Disruptions in travel will have an adverse
effect on the lodging industry. In addition, traveling is
highly dependent on crude oil prices, which are
expected by many experts to stay somewhat stagnant
in the coming years. If something were to happen to
change this, it could directly impact the lodging
industry. Factors that drive the industry include:
Business travel accounts for about 60-70% of
hotel bookings, but this is a very blurred line
due to professionals adding leisure days on to
business trips
International tourism is expected to increase
3.3% each year(2010-2030).
Mobile devices with internet access are
expected to reach 75 billion by 2020.
Millennials are expected to take 325 million
trips per year by 2020; an increase of 47%
from 2013.
(InterContinental Hotels Group, 2016)
Figure 3
Factors That Negatively Affect Growth
Economic slowdown
Terrorism
Political strife
Acts of war
Interest rate hike
Decision
IHG Airbnb Conclusion
Matrix
2
2
 Trends
Franchising and Management
Competition within the hotel industry dramatically
increased over the past decade. In order to
compensate for this increasingly competitive
landscape, many of these companies have been
aggressively expanding. The quickest and most
efficient form of expansion is pursuing new properties
through franchising and management contracts, while
maintaining an asset-light business model. An asset-
light model refers to a company deriving more than
50% of their revenue from their fee businesses. The
majority of major hotel competitors such as Marriott
and IHG are considered asset-light companies. Hilton is
one company that is a little late to the party. They
could not be considered asset-light until after they
completed their most recent spin-offs in early 2017 of
their time share and ownership segments.
Increase in Competition from Online Travel
Agencies
Online travel agencies have been in constant
competition with hotels for the past 20 years. On a
global scale, two of the largest online travel agencies
are Priceline and Expedia. In 2015 Priceline and
Expedia were worth $2.5B and $765M, respectively
(Rossini, A, 2016). OTAs grew significantly in the year
2016, dominating hotels online direct booking systems
posing a direct threat for sales and marketing teams.
Below is a graph comparing OTAs vs. Hotel Websites
within each market.
Customer Website Visits Before Purchasing
Figure 4
Industry Analysis Hilton Marriott
Expansion Outside of North America
Hotel companies expanding in large quantities outside
of North America has become a regular trend we have
witnessed. This is largely due to a rising middle class in
several emerging markets such as the Middle East,
Germany, UK, Canada, Greater China, India, Russia,
Mexico and Indonesia. With rising middle classes in
places outside of North America, this provides a great
opportunity for hotels to expand their global presence
and brand names. Specifically we see an explosion of
middle classers in the Greater China region. In the year
2000, about 4% of Chinas population made between
$9,000 and $34,000 USD per year, but by the year
2022, roughly 75% of Chinas population will earn at
least that much. A rising middle class means families
will have more disposable income to spend on things
other than basic necessities, such as traveling.
Companies Targeting Millennials
According to Forbes, the number of trips taken by
millennials each year is projected to reach 320 million
by 2020, a 47% increase from 2013. It was found that
32% of millennials will be willing to spend more on
vacations rather than Baby Boomers at 16%.
Millennials are approaching their 40s and statistics
show that household income reaches its peak at
approximately the age of 42 (Mintel, 2017). Companies
such as IHG and its competitors have begun targeting
millennials through new brand creation and marketing
strategies. Millennials stretch the norms of what they
expect out of the traveling experience in regards to
flexibility and personalization. For example, Marriott
has recently introduced EDITION, Moxy, and AC Hotels
that are designed as modern properties focused on
customer service and unique experiences.
Decision
IHG Airbnb Conclusion
Matrix
2
3
 Micro-Environment
Internet Makes it Easy to Substitute
There is a very high threat of substitute goods in the
lodging industry, and the internet can facilitate this
even more. There is usually a hotel right down the
road from another, if not side-by-side. The internet has
made it easier to substitute one service for another in
the matter of a few touches of the screen with online
travel agencies and services such as Airbnb.
Barriers to Entry are Low
The initial investment to build a hotel is a very high
barrier of entry, but posting your house for rent on
Airbnb provides the ladder necessary to overcome that
barrier. Aside from Airbnb, franchising and
management agreements have lowered the barrier to
enter the market by allowing an owner to possess a
well-established brand name from the start. This
provides the hotel an upper-hand while trying to
attract customers immediately.
Industry Rivalry
The rivalry in the lodging industry is intense especially
in places of high growth. The competition in these
areas become more intense because it attracts tourist
groups, independent leisure, and business travelers.
Reward programs also promote rivalry because
companies are competing to get and maintain repeat
customers. Location causes even more rivalry because
the more convenient a location is the more attractive it
is for a consumer. Companies specifically compete for
space in or around cities because it insures them for
significant potential in the future.
J.D. Power Rankings of Hotel Reward Systems
Figure 5

Bargaining Power of Buyers

Buyers of lodging services have power for a number of
different reasons. They can directly book through a
companys website in order to obtain a cheaper price.
Online travel agencies in some cases can negotiate a
lower price for the consumer giving them more power
as well. This forces companies to lower prices on their
website in order to compete for the direct purchase by
a buyer. If there are no switching costs or cancellation
fees,then the buyer gains power by having the
opportunity to switch their reservation to a better
choice last minute.

Bargaining Power of Suppliers

Suppliers have the power to charge higher prices to
customers who are not frequent travelers. This is
because they are willing to pay higher prices and their
money is not crucial to the success of the business.
Whether its a person or a business that is buying in
large quantities, or buying their product regularly, the
supplier usually has less power because they want to
retain this customer for a long term relationship. These
people that buy in bulk or stay at their hotels often
provide a substantial amount of money that fuels daily
operations.

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
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 Industry Competition
Hilton Worldwide
Hilton had a revenue of $11.7B, putting them in third
place in 2015. Their room total as of 2015 was 768,221
across 78 countries worldwide. After acquiring
Starwood in 2016 their room total rose to 1.1 million.
Marriott International
Marriott International had the second largest revenue
in 2015 totaling $14.5B. Their guestroom total
currently is 764,513 worldwide without counting their
subsidiaries like Starwood that make up a total of 30
different brands. Marriott is currently residing within
110 countries, and plans on expanding further.
InterContinental Hotel Group
InterContinental Hotel Group is the largest hotel
company in the world by revenue at $24B, and has
properties in over 100 countries. However, it only
owns 749,721 rooms within itself, making it a bit
smaller than its direct competitors.
Airbnb
The largest competitor of the hotel industry is Airbnb.
Their revenue was estimated around $900M in 2015,
and their estimated bookings were estimated to be
Rooms by Region
Figure 6
$12.3B in 2016. They are an online, independent
community where people will put living spaces they
own up for rent for a fraction of the cost of a hotel
room. The average cost of an Airbnb listing is $43
cheaper than a hotel. They are located in 191 countries
worldwide, and is most convenient in big cities like LA,
San Francisco and New York when hotels have no
vacancy.
Hyatt Hotels Corp.
In 2015, Hyatt had revenues of about $4.5B. They are
one of the major competitors in the industry because
they have the fifth largest market share. They own
164,925 rooms around the globe and currently have
hotels in 54 different countries.
Wyndham Worldwide
Wyndham Worldwides revenue in 2015 was about
$5.5B. They have a total of 683,300 rooms worldwide,
and these properties are located in 66 different
countries. They are a big competitor in the industry
because they have the fourth largest market share.

The hotel industry is a highly competitive environment that is lead by three giants: Marriott International, Hilton
Worldwide, and InterContinental Hotel Group. These three companies represent about 36% of the market share in
the hotel and motel segment of the lodging industry. Marriott International accounts for 14.7% of the total market,
Hilton Worldwide accounts for 13.8%, and InterContinental Hotel Group accounts for 7.4%. The success of these
companies is based on several factors such as franchising, globalization, the targeting of millennials, and managing
competition from OTAs.

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
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 Hilton Worldwide
Hiltons Strategic Focus
ROA Boost from Asset Sales
Figure 7
Hiltons business strategy relies on
extensive international expansion and
service differentiation with a focus on
quality.

Capital Light Business Model Repays Debt

Our strategy allows us to invest minimal amounts of
capital in growing our Management and Franchise
segment, while providing owners with a valuable
platform of commercial services and development
opportunities (Hilton Worldwide, 2). The franchise
and management segment of Hilton has grown 37%
(180,000 rooms) in the last 10 years, with a mere
$47M in capital investment. All of the hotels in their
development pipeline, which includes over 266,000
rooms, are all in the management and franchised
segments.
In 2015, Hilton sold its properties Hilton Sydney and
the Waldorf Astoria New York for a total of $2.39B.
Both of these hotels were a part of their small
ownership segment. In early 2017 Hilton completed
the spin off of Park Hotels & Resorts and Hilton Grand
Vacations, their major ownership and timeshare
businesses. These actions directly reflect their
persuance of an asset-light business model.
Hiltons Sales Excel in the U.S.
Hilton Worldwides revenue has been growing faster in
the U.S. compared to internationally even with the
recent uprising in foreign hotel markets. (Refer to
figure 8) From 2013-2015 The Middle East and Africa
were experiencing geopolitical unrest and low oil
prices. This would cause less traveling and spending in
these regions. Even with negative growth over the past
couple years internationally, there are still several
emerging hotel markets outside the United States.
Hilton has began to target these emerging markets in
their hotel pipeline.

Selling Hilton Sydney and the Waldorf Astoria New Revenue Growth from 2013-2015
York significantly reduced the amount of assets owned Figure 8
by Hilton. This massive decrease in assets was the
direct cause for the increase in ROA as shown in figure
7. Sales growth can be difficult to maintain while
adapting to a new business model. While Hilton may
not have grown revenue in the most attractive
manner, they still managed to sustain more growth
than their major competitors over the past five years.

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
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 Hilton Worldwide
Hilton Worldwide Brands & Segments
Hilton Worldwide consists of 14 brands in four
different segments. These segments include luxury,
upper-upscale, upscale, and upper-midscale.
Hilton Hotel Segments
Figure 9
Hilton Targeting Millennials With Brand-
Unique Affordable Experiences
Hiltons latest hotel, Tru, focuses on affordable
experiences that millennials demand. Consisting of 102
hotels, Hilton has selectively placed these segments
into urban areas that millennials are interested in living
in. The modern design of each hotel allows for a more
social work environment. Advanced technology, such as
mobile check-in, also play a key factor in appealing to
millennials. Their main focus is to be able to attract
business and pleasure while being the niche that
attracts millennials with something new and
affordable; rooms do not exceed $90 to $100 per night.
Their mobile applications for HHonors programs also
keep booking easily accessible and technologically
friendly for younger generations.
Industry Analysis Hilton Marriott
Hilton HHonors Boosting Mobile Sales
The Hilton HHonor application was founded in 2015.
The mobile application brought in $1.34B of online
revenue accounting for 10% of Hiltons bookings.
Mobile applications are still new to the Hilton brand,
however, more customers are committing to this
application for a direct booking approach. The
mobile applications shares the similar features with a
check in/out, mobile accommodations, and booking
from 3,900 hotels or resorts (Capterra.com, 2017).
The Hilton HHonor application, which varies slightly
from other hotel applications, allows users to view
previous booking activities. My Offers is another perk
within the application giving guest selective discounts
on hotel stays and promotions at Hilton.
Hilton Attacks Online Booking Websites with
the Stop Clicking Around Campaign
Third party online booking systems are a leading
trend within the hotel industry, which cause
problems with hotels direct booking initiatives. Last
year Hilton stated that 57 million Hilton HHonors
points more than 1.6 million free nights were
unrented because of guests booking their stays
through a third party, (Lucky, 2016). In February
2016, Hilton launched the Stop Clicking Around
Campaign in hopes to initiate consumers to book
directly with the brand. The idea was to make direct
booking simpler and more easily accessible all while
rewarding consumers to book directly with the
company. Success was measured within the Apple
Store with star ratings which range from 1.5 stars to
4.7 stars. The application has grown their
membership by 3.64 million users since the launch in
February, 2016. This totals to around 780 new guests
per Hilton hotel worldwide (Dietz, N. & Seidel, E.,
2016).
Decision
IHG Airbnb Conclusion
Matrix
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 Marriott International
Marriotts Strategic Focus
We continue to focus on new hotel
development that can provide sustainable
economic activity and local employment,
particularly in emerging markets where
tourism is a major driver of new jobs and
economic growth.
Arne Sorenson, Marriotts President and Chief
Executive Officer, provided the necessary expertise to
facilitate acquisitions. Joining in 1996, Sorenson
climbed the corporate ladder eventually solidifying his
position as CEO in 2012. Before he joined Marriott, he
was a partner at the law firm Latham & Watkins where
he specialized in mergers and acquisitions litigation.
This fact confirms that Marriotts primary focus is on
expanding and merging with existing companies to
grow their brand. Notable acquisitions since Sorenson
became CEO include:
2012: Acquisition of Gaylord brand hotel
management company. This accounted for
30% of gross room additions.
2013: Acquisition of Protea, the leading
hospitality brand in Africa. Marriott doubled
their distribution in the Middle East and Africa
to more than 23,000 rooms.
2014: Acquisition of a property under
construction in Brazil for $31M.
2016: Acquisition of Starwood making Marriott
the worlds largest hotel chain. Marriott plans
to sell off many of these properties that are
under the ownership segment.
Marriotts Debt Ratio is Increasing
Figure 10
Industry Analysis Hilton Marriott
Mergers and acquisitions have been driving Marriotts
debt ratio up over the past five years. (Refer to figure
10) Marriott faces the most credit risk looking into the
future. They completed their switch to an asset-light
company years before Hilton did, though through
different methods. Marriotts steady sales growth and
decrease in assets has allowed their ROA to grow in a
more attractive manner than most of their
competitors. The growth of ROA over the recent years
can be seen seen in figure 11.
Marriotts Significant ROA Growth
Figure 11
Marriott is Focusing on Emerging Markets
With travel rates increasing globally, new hotel
development is exploding in several emerging markets
around the world. Marriott continues to pursue these
high growth opportunities by expanding the markets
with current brands and brands specifically tailored for
the specific location. Their focus for development is
primarily in the Asia Pacific region, and more
specifically China, Thailand, Indonesia, and India. In
2011 Marriott signed their 100th hotel in the Asia
Pacific region, and by 2015 they had over 273 hotels
there. The Asia Pacific region is second to the United
States in terms of open hotels and hotels in the
development pipeline, but is growing at a much faster
rate. Marriott also signed a partnership agreement in
2016 with Eastern Crown Hotels, one of Chinas fastest
growing lodging groups. The partnership was created
to help introduce FairfieldSM, a mid-range Marriott
brand, into the Asia Pacific region, and promote
growth there.
Decision
IHG Airbnb Conclusion
Matrix
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 Marriott International
Marriott International Brands & Segments
Marriott International has a total of 30 brands. All
brands are segmented into four categories including:
luxury, upper-upscale, upscale, and upper-midscale.
Out of 30 brands, six are considered luxury, ten upper-
upscale, seven upscale, and four upper-midscale.
Marriott Hotel Segments
Figure 12
Marriotts Segment Brands Target Millennials
by Offering Personalized Experiences
Marriott International has taken newly designed
brands: EDITION, Moxy, and AC Hotels, and structured
them to meet the needs of the up and coming next
generation millennials. They have been focusing on a
structure known as the boutique hotel layout. This
concept is formed around the idea that lobbies and
common areas are structured to be not only modernly
designed, but socially compatible. They are
constructing work and play rooms with the latest
technology that millennials are focused on. Marriott
hotels are even going as far as having no doors or
traditional business centers, enhancing the unique
experience platforms (Ting, D., 2016). Along with
unique experiences and gaining the upper edge on
advancements to meet consumer needs, Marriott has
partnered with TripAdvisor in order to gain an
upperhand in the online booking competition.
Industry Analysis Hilton Marriott
Hotel Industry Partnering With Other
Industries
Marriott partnered with trip advisor and provides new
edge booking across all 19 brands. TripAdvisor receives
a commission rate of 12% to 15%, and handles the
customer service needs. This partnership has increased
online booking sales with Marriott by 20% in June of
2015.
Marriotts Mobile Sales are Exploding
Marriott has seen a trend with the customer loyalty
program, which has increased 170% in the last 5 years.
Marriott created a mobile application that launched in
2014, which allows for reward members to book
rooms. In 2015, revenue brought in by the mobile
application was $1B, with a growth of 66% from the
previous year.
Marriott Uses You Are Here campaign to
Strike Back Against Online Travel Agencies
Marriott recently has been focused on transforming
marketing strategies into authentic, creative, and
personal story tellings. This has positively affected the
company by allowing for campaigns that attract
millennials to positively benefit the brand as well.
David Beebe, VP Global & Creative Content Marketing
stated, Its no longer about brand first. Its about
giving consumers content that adds value to their lives,
and in return adds value to us, (Albee, A., 2015). The
You Are Here campaign is a massive, multi-channel
media movement that uses not only television as a
media outlet but also Facebook, Instagram, and the
microsite
YouAreHere.Marriott.com. First launching in the
United States, the You Are Here campaign has
expanded in multiple countries including: Canada, the
United Kingdom, Germany, Mexico, Brazil, India, and
China, (Ting, D., 2016). The purpose of this campaign is
for travelers to not just go from place to place, but to
share their experiences and personal stories along the
way.
Decision
IHG Airbnb Conclusion
Matrix
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 InterContinental Hotel Group
IHGs Strategic Focus Franchising Increases Return Percentages and
ROA
Being highly competitive and driving In 2015, 95% of IHGs hotels were franchised.
superior returns. Focused on asset-light Franchising is a very big part of their success because
they make an 85% profit margin on each investment
strategy, disciplined approach to capital
yearly. In other words, this means that they made
allocation, investing for future growth and back 85 cents per dollar invested in franchised
delivering shareholder returns over the long operations. If they owned their own properties they
would make about 18 cents per dollar invested each
term. year. It would take about 6 years for properties owned
by IHG to be paid off, which would increase their debt
IHGs Global Expansion dramatically. Franchised locations can make their
In IHGs 2015 20-F it states, We focus on building and money back in just over a year, and remains one of
leveraging relevant scale, which is not just a numbers IHGs top priorities.
game. Its also about building scale in our priority
InterContinental Significant ROA Growth
markets, such as Greater China (IHG, 2015). (Refer to
Figure 14
appendix B, figure I) So why did they perform poorly in
these markets? There was lower inbound travel to
Hong Kong, and RevPAR in Greater China moderated.
In addition, IHG failed to meet their international
corporate responsibility and human rights standards in
relation to planned Plaza Hotel in China. In Europe,
declines were driven by refirbishments that were
taking place at the InterContinental Paris- Le Grand.
The hotel delivered revenue of $111M, but was a 38%
decrease in revenue from this source since 2013.

InterContinental Sales Lagging Globally 2013-2015

Figure 13
Selling Properties to Maintain Asset-Light
Business Model
In 2015, IHG sold two properties from its ownership
segment earning a total of $1.3B. The disposal of the
InterContinental Paris- Le Grand accounted for about
$350M, and the InterContinental Hong Kong for
approximately $928M. The disposal of these assets is
the reason for large gains in cash and the jump in net
income during 2015. InterContinentals ROA jump
from 14% in 2014 to 32% in 2015 reflects this
transaction. (refer to figure 14)

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
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 InterContinental Hotel Group
InterContinental Hotel Brands & Segments Their visions are to provide properties worldwide in order
InterContinental has an array of 12 different brands for consumers to gain the cultural experience and not be
and is organized amongst six different segments. confined to the hotel area.
Segments included are luxury, upper-upscale, upscale,
upscale-extended stay, upper-midscale, and upper- IHG Boosting Mobile Sales
midscale extended stay. Out of 12, two are considered InterContinental started their mobile application, IHG
luxury, three upper upscale, two upscale, one upscale- Hotel Booking & Deals, in 2010, becoming first in the
extended stay, one upper-midscale, and one upper- industry to have a booking system for reward members.
midscale extended stay. In 2015, IHG mobile application revenue was $1.2B with
a 30% increase in booking from the previous year
InterContinental Hotel Segments
(Businessofapps.com, 2017).
Figure 15
Booking on IHG Direct Websites Sways
Rewards Members Away from OTAs
InterContinental took the largest campaigning
approach and plastered it worldwide amongst the
Americas and Europe in the year 2015. This campaign
promoted lower booking room rates that only IHG
rewards members were entitled to. Your Rate by IHG
Reward Clubs, is currently extending into regions such
as Asia, Middle East, Africa, and China to get IHG
Rewards Club members to book directly on IHG
websites for exclusive rates. After the campaign,
InterContinental has around 92 million members while
Hilton has 50 million and Marriott 55 million (Ting, D.,
2016).
InterContinental Hotels Target Millennials by
Focusing on Wellness Needs IHGs Global Rewards System Boosts Revenue
InterContinental has a total of two brand segments Figure 16
that are specifically targeting millennials. EVEN Hotels
are working along the lines with health and wellness.
Many millennials are concerned with health and are
seeking that within their hotel stay experiences. EVEN
hotels offer best-in-class fitness experience, healthier
food choices, and natural, relaxing spaces (IHG, 2016).
Hotel Indigo, the second brand, is on the opposite side
of the spectrum using culturally diverse travel locations
as the main attraction. Millennials seek unique travel
experiences and destinations. Theyre interested in the
ability to draw on the story of local areas to inspire
every aspect of the hotel, from intriguing design to
distinctive local ingredients in our menus, (IHG Group,
2016). Hotel Indigo uses a similar approach to Airbnb.

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
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 Airbnb
What is Airbnb
Airbnb is an online marketplace for hosts to list
properties to be leased by travelers from around the
world. Founded eight years ago, what used to be a
small company based out of San Francisco is now a
$25.5B hospitality enemy of the lodging industry.
People from all around the world list anything from
single rooms, apartments and moored yachts to house
boats, entire houses and even castles. Airbnb has a
focus on customization: room type, price, size,
amenities, property type and even host language.
Hosts have the benefit of meeting anybody but with
most too good to be true ideas, there are always
some risks. Property damage, theft and even evidence
of drug usage have been reported from some hosts on
the site. Airbnb provides a Host Guarantee program
that provides protection from damage up to $1M. It is
important to understand whats covered and what
isnt covered such as cash, jewelry, and pets.
Regulations are also relevant for some cities. New
York City, for example, induces heavy fines on hosts
it's illegal to sublet a single-family home, apartment
or room for fewer than 30 days if you aren't living
there. (Investopedia, 2016). These types of services
are used largely by tourists seeking a different
experience than the average hotel but with this in
mind, more business travelers are looking towards
Airbnb to escape the rut of hotels.
Millennials are Airbnbs Top Customer
Figure 17
Industry Analysis Hilton Marriott
Airbnb Owns No Property
Uber, the worlds largest taxi company, owns no
vehicles. Facebook, the worlds most popular media
owner, creates no content. Alibaba, the most valuable
retailer, has no inventory. Airbnb, the worlds largest
accommodation provider, owns no real estate.
Something interesting is happening (Goodwin 1). The
way Airbnb functions is completely different from
hotel companies, even ones that are completely
franchised. They have a massive interface connecting
them to millions of clients and customers, which
draws revenue. Airbnb also sits on massive supply
systems, or hosts, which is where the costs come in.
They function very much like a hotel business, except
they do not own a single property. Instead they are in
the business of simply connecting the host to the
customer.
Most Globally Spread
Airbnb has over three million listings worldwide over a
span of 191 countries and upwards of 65,000 cities.
Airbnb has doubled the number of territories since
The company holds $25B of booking sharing service
now seen in two thirds of trips being booked. Booking
expands across several reigns in 2015, and over 65
currencies were paid out to Airbnb hosting services.
The growth and demand for a unique experience will
grow with Airbnb.
Airbnb Indirectly Targets Millennials
Airbnbs structural layout attracts millennials
indirectly but maybe more effectively than top tier
hotels; Marriott, Hilton, and InterContinental.
JWTIntelligence conducted a study that has shown
that over half of the millennials population admitted
theyd rather use a peer-to-peer service, Airbnb. This
conducted to be a far higher percentage than Gen X
and baby boomers, (Beckwith, J., 2016). This
concludes that younger generations are the largest
percentage using Airbnb. (refer to figure 17) United
Nations studies have shown that millennials are
contributing to about $180B in annual tourism
revenue. Millennials are focused on two things: price
and convenience. The average price of Airbnb rentals
are around $43 cheaper than typical hotel rooms,
(Downs, A., 2016).
Decision
IHG Airbnb Conclusion
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 Airbnb
Airbnb Indirectly Targets Millennials (Cont.)
Another incentive that Airbnb provides is a voucher
for posting a review after a stay. There isnt print that
states Airbnb is directing marketing towards
millennials, but their travel for the experience not the
features of a hotel initiative is whats catching their
eyes, (Hagen, C., 2017). Many even admit that after
their Airbnb driven vacation, theyd never go back to a
typical hotel.
Airbnb is the OTAs Competitor
Airbnb has virtually no competition from online travel
agencies, and can actually be considered an OTA in
current standing. Airbnb is the OTAs newest and
potentially most dangerous threat. The company has
already stolen considerable market share from
traditional hotels, and adding air travel could draw
even more customers away from other platforms (BI
Intelligence 1). Airbnb is currently working on their
new OTA known simply as Flights. This extra form of
revenue stream could help fund the company while
they are having legal difficulties in some areas.

Figure 18

Decision Matrix Introduction

Throughout the analysis of each leading competitor in the hotel industry, its reasonable to conclude that the
following criteria best represents the positioning for each companys future. These criteria include: an increase in
franchising, expansion outside of North America, companies targeting millennials, and an increase in competition
from online travel agencies. All three of these companies have been taking major strides to increase the
effectiveness of their asset-light business models. The success of each company will be determined by their ability
to expand out of the saturated North American hotel market. Millennials will soon be the largest generation with
the most disposable income; hotels have been targeting this segment earlier by creating brand with specific
qualities to attract millennials. Online travel agencies have taken a toll on hotel revenues. In contrast with
increased OTA competition, hotels are revamping their rewards systems and applications. We were not able to
include Airbnb into our decision matrix due to the privacy of their information.

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
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 Industry Decision Matrix
Franchising 30%
The undermining philosophy of the asset-light business
model is franchising. Some of the most successful
businesses in the world own little to no assets such as
Airbnb and Uber. In terms of percentage of properties
franchised or managed by each company, Marriott and
Hilton are both at 97% and IHG is at 99%. All of the
properties in each of their pipelines are in the
franchised or managed segments. Each company's
transformation into an asset-light business model
stresses how important this criteria is. This criteria is
the most important to future success along with
globalizing outside of North America, and is why they
both received a 30% weight.
Targeting Millennials 25%
Making up around 83.1 million of the nations
population, millennials are the largest generation
according the U.S. Census Bureau, (Arthurrson, D.,
2016). Being the largest generation currently,
millennials will be a highly focused target market for
hotel companies now and in the near future. Hotels
have already began shaping their innovations around
the needs and wants of millennials. Each company has
a significant amount of millennial focused hotels in
their pipeline which represents how important they
are to the businesses success. This is why Targeting
Millennials received a 25% weight.

Globalization Outside the U.S. 30%
The hotel industry has seen a demand for expansion
into foreign markets. The current properties that
Hilton, Marriott, and InterContinental have, see
revenue upwards of $800M yearly in foreign markets.
Each company has a pipeline in place to expand into
new emerging markets that have a rising middle class.
As the demand for hotels increase within these
emerging markets, market expansion will be necessary
for the hotel industry to sustain growth. This criteria,
along with franchising, are the most important factors
to each companys future performance.
Managing Competition from OTAs 15%
Online travel agencies are a growing threat to the
integrity of hotels and their booking platforms. On
average, OTAs are obtaining customer acquisition of
around 15-25% in total guest-paid revenue
(Washington, D.C., 2015). In order to fight back against
OTA threats, these three hotels are re-modifying their
online applications and rewards systems. Weve
ranked Managing Competition from OTAs at 15%
because it affects each companys revenue but does
not determine how successful each company would be
if OTAs did not exist.

The Lodging Industry Decision Matrix

Figure 1

Weight 30% 30% 25% 15% 100%

Managing
Targeting Composite
Criteria Franchising Globalization Competition
Millennials Score
from OTAs
Hilton 7.73 7.80 5.22 8.00 7.16
International
Marriott 7.28 9.40 8.82 7.90 8.39
Worldwide
InterContinental 7.43 7.30 6.50 6.90 7.08
Hotel Group

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
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 Franchising Sub-Matrix
The Criteria and Their Weights
The franchising sub-matrix is composed of four criteria
that best represent the successfulness of each
companys asset-light campaigns. These criteria are
Revenue from Franchising (30%), Number of
Franchised Units in Operation (30%), the Initial
Franchising Fee (20%), and each companys Royalty
Fee (20%). Revenue from franchising is solely
represented by fees generated from franchising and
management contracts. The number of units in
operation represents how many franchising and
management properties each company has globally.
These two criteria received the highest weights of 30%
because they are the most transparent in representing
the success of each companys asset-light business
model. A franchising fee is the up-front fee that the
third-party hotel owner must pay the company to
open a hotel under that companys brand name. This
was weighted at 20% because it is key to attracting
potential hotel owners. A royalty fee represents the
percentage of a hotels revenue that must be payed to
the parent company. This was weighted at 20% due to
its direct correlation to each companys franchised and
management hotel revenue.
Franchising Revenue
In order to judge this criteria we compared each
companys growth in revenue from franchising fees
from 2013 to 2015. To assess a fair score, we divided
each companys percentage by 3 to apply them all to a
ten point scale. Hiltons revenue from franchising grow
27% over the two year time span, resulting in a score
of 9. Marriotts revenue grew 17%, so they received a
score of 5.7. InterContinental's revenue from fees only
grew 15%, resulting in a score of 5.
Number of Units in Operation
To rank each company on a ten point scale, we divided
their number of franchised and managed units by 550.
The following numbers are the companys total
properties in operation as of 2015s year end. Hilton
has a total of 4,464 units, Marriott has 4,336 units,
and InterContinental has 5,025 total units. Each
companys score then resulted in 8.1, 7.9, and 9.1,
respectively.
Franchising Fee
We rewarded companies with the lowest franchising
fees the highest scores, because this makes their
brand name more attractive to business people
looking to become hotel owners. Hilton charges
$85,000 as a franchising fee, Marriott charges
$75,000, and InterContinental charges only $50,000.
(Refer to appendix A, figure A to see the Franchising
Fee Sub-Matrix Scoring Chart.)
Royalty Fee
All three companies have royalty fees within one
percent of each other. This is still a dramatic
difference though, as one percent in this case can
represent upwards of $100M. Hiltons royalty fee is
5%, Marriotts is 6%, and InterContinentals is 5%.
(Refer to appendix A, figure B to see the Royalty Fee
Sub-Matrix Scoring Chart.)

Franchising Sub-Matrix
Figure 19

Weight 30% 30% 20% 20% 100%

Franchising # of Units in Franchising
Options Royalty Fee Composite Score
Revenue Operation Fee
Hilton Worldwide 9.0 8.1 6.0 7.0 7.73
Marriott International 5.7 7.9 7.0 9.0 7.28
InterContinental Hotel 5.0 9.1 9.0 7.0 7.43
Group

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
2
15
 Globalization Sub-Matrix
The Criteria and Their Weights
The Globalization Outside of North America sub-
matrix is based off three criteria: Number of Current
Properties Outside of North America (15%), Hotel
Pipelines Outside North America (25%), and Global
Revenue Outside North America (60%). Global revenue
outside of North America is weighted the highest
because it is a measure of how the companies are
doing on a global scale. Hotel pipelines are weighted
second highest due to the importance of growth in
developing countries; specifically in the Asia Pacific
region. Some of these countries include China,
Thailand, Indonesia, and India. The demand for hotel
growth has seen an increase within the foreign
markets. Weighted the lowest on the decision matrix is
number of current properties outside of North
America. This shows the expansion of Marriott and
Hilton increasing their prescence in the foreign market.
Number of Current Properties Outside North
America
IHG is a European based company that takes
advantage of having 5,025 hotels spread out over
different regions. Hilton is slowly increasing branding
across several markets throughout the China, Thailand,
Indonesia, and Indian markets. Hilton has 800 hotels
based outside of North America and are expanding
further into different markets. Marriott is increasing its
presence within the hotel industry with 781 hotels
outside of North America as of 2015.
Globalization Sub-Matrix
Figure 20
Hotel Pipeline Outside North America
Hotel pipelines are very important because they
represent the number of hotels under development in
different regions. Marriott is ranked the highest with
1,663 hotels being built across multiple regions. They
have seen an increase of new segments within the
Asia Pacific market. InterContinental has expanded out
of the European market with 465 hotels being
developed elsewhere. Hilton has increased their
pipeline properties with 391 hotels being built within
the foreign markets.
Global Revenue Outside North America
Hilton brought in $2.43B in revenue from the global
hotel market in 2015. Hotel accommodations are
increasing in emerging markets within the Asia Pacific
region. Marriott was ranked at 10 with revenue of
$2.2B. InterContinental has seen a slight gain with the
expansion with $848M in sales.
(Refer to Appendix G Figure R for breakdown and
figures on how each category is ranked on based by
hotel and revenue outside the U.S.)

Weight 15% 25% 60% 100%

Number of
Hotel Pipeline Global Revenue
Criteria Current Properties
Outside of Outside of North Composite Score
Outside North
North America America
America
Hilton Worldwide 7 3 10 7.8

Marriott International 6 10 10 9.4

InterContinental Hotel 10 4 8 7.3

Group

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
2
16
 Hotels Targeting Millennials Sub-Matrix
The Criteria and Their Weights
The millennial sub-matrix is composed of three criteria:
Pipeline Hotels Targeting Millennials (45%), Current
Properties Targeting Millennials (40%), and Age of the
Board of Directors (15%). Pipeline hotels are ranked the
highest because millennials will soon represent 60% of
our business (Marriott, 2013). Current properties is
ranked the second highest because the number of hotels
already built targeting millennials represents the firm's
ability to see a trend and act upon it. Age of the board is
the final criteria and is relevant because these people
make the ultimate decisions on big moves within the
company. These people must understand the innovation
within the industry from an older point of view.
Pipeline Hotels Targeting Millennials
To grade this criteria, the number of hotels in the
pipeline targeting millennials were added up and divided
by 17. The formula being (# of millennial focused hotels
in pipeline/17). Hilton has 163 hotels targeting
millennials which was the largest out of the three
companies by a substantial amount. Marriott has 109
hotels in the millennial focused pipeline which was the
second largest of the three companies. InterContinental
has 71 millennial focused hotels in their pipeline which is
less than half of Hiltons.
Current Properties Targeting Millennials
To grade this criteria, the total number of hotels each
company has that are targeting millennials were added
and then divided by 10. The equation being (# of
millennial focused hotels in existance/10).
Hotels Targeting Millennials Sub-Matrix
Figure 22
Hilton currently has two hotels in existance that are
specifically focused towards millennials. This is a
significantly less than the other two companies.
Marriott currently has 89 hotels that are focused on
millennials. They have the most out of the three
companies, which is interesting because their
executive board is the oldest of the three.
InterContinental has 68 millennial focused hotels
currently in existence.
Age of the Board of Directors
To grade this criteria, the age of the board members
were averaged and then graded based on a 10 point
scale. (Refer to figure 21) In this case, the older the
board of directors, the better because they have more
experience living through several new generations.
This gives them a natural ability to notice and adapt to
trends faster than a young board. Hiltons Board of
Directors are the youngest by several years and have
almost no millennial focused hotels in existance.
Hiltons board averaged to be about 57 years of age.
Marriotts board was the oldest of the three and
averaged about 64 years of age. This correlates to their
high amount of millennial focused locations currently
in existence. InterContinentals average age of the
board is 59.
Age of Board of Directors Rating Scale Figure 21
69-67 66-64 63-61 60-58 57-55 54-52...
10 9 8 7 6 5...

Weight 45% 40% 15% 100%

Pipeline Hotels Current Properties
Age of the Board of
Criteria Targeting Targeting Composite Score
Directors
Millennials Millennials
Hilton Worldwide 9.6 0.2 6.0 5.22

Marriott International 6.4 8.9 8.0 8.82

InterContinental Hotel 4.2 6.8 7.0 6.5

Group

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
2
17
Strengthening Rewards Systems to Fight Back Against
OTAs
The Criteria and Their Weights
The rewards and app system matrix is composed of
three criteria: Benefits and Services of the Rewards
Programs for Consumers (40%), Growth in the Rewards
Members over 2014-2015 year (60%), and the Average
Rank in the App Store for each rewards application
(10%). Growth in rewards members over the year (2014-
2015) is ranked highest because it correlates with
revenue growth as well. The more members you have,
the more money you are to bring in. This also means
that marketing campaigns for mobile applications
promoting these rewards systems are successful to most
extents. Benefits and services of these particular
rewards programs are ranked second because different
ranks of memberships provide a different incentive to
book directly. Lastly ranked are the average ratings in
the app store for each rewards application. This is less
important because more stars did not directly correlate
with the highest membership growth calculated further
down.
Benefits and Services
In order to calculate benefits and services our group
looked at the number of perks offered, number of
member levels, and the average percent discount
percent and average percent of points earned. We
created a sub-matrix and scale in order to rank the three
competitors of Hilton, Marriott, and InterContinental
(refer to appendix A, figures E and F). These calculations
were made by adding the number of perks, number of
member levels, and average discount percent/ points
earned (that was multiplied by 1% to get a whole
number). They were weight as followed: 20% for the
amount of perks, 10% for the number of membership
levels, and 70% for average discount percent/ points
earned. Strength Rewards Systems to Fight Back Against OTs Sub-Matrix
Figure 23
Weight 40% 60%
Benefits and Growth in Rewards
Criteria
Services Members
Hilton Worldwide 8 7
Marriott International 10 5 9
InterContinental Hotel 9 4
Group
Industry Analysis Hilton Marriott IHG
Growth in Rewards Memberships
To grade this criteria, the actual rewards members for
each company in 2014 were compared to the 2015
number. In 2014 IHG had 84 million members,
Marriott 49 million, and Hilton 44 million. In 2015 all
three companies grew, IHG to 92 million, Marriott to
54 million, and Hilton to 51 million. The members
percentage growth was closely analyzed for changes
between 2014 and 2015 in each company. A decision
scale was created out of 10 in order to conclude which
rankings each company would receive (Refer to
appendix A, figure C and appendix B, figure G). For the
scale and additional sub matrix, IHG had a 10%
membership change and fell on the scale at four,
Marriott had a 10.2% and fell under five, while Hilton
had a 15.9% change and fell under a seven.
Average Rank in App Store
In order to weigh this criteria, the average rankings of
each hotel's rewards applications were reviewed on
the App Store. Also taken into consideration were the
applications age; how long the app has been in
existence. This is particularly important because it is
more impressive if an app has been on the market the
longest and holds a high average star rating. This
indicates that their application was successful over a
particular amount of years. Marriotts app has been on
the market for five years and has an average ranking of
three. Hiltons app has been on the market for four
years, IHG seven, and both have an average rating of
four and a half stars. In order to determine an exact
number for each criteria, a ten point scale and
separate sub matrix was created and located in
(appendix A, figure B and appendix B, figure H).
10% 100%
Average Rank in
Composite Score
App Store
6 8.0
7.9
9 6.9
Decision
Airbnb Conclusion
Matrix
2
18
 Recommendations for IHG
InterContinental's Globalization
One of the main factors that has caused turmoil for InterContinental is their strategies relating to
globalizing outside of North America. Their gross revenue from 2013-2015 saw a 14% decrease in China,
one of their biggest emerging markets. Gross revenue for InterContinental also saw a 51% decrease from
2013-2015 in the European region. Total revenue in 2015 for InterContinental outside of North America.
was only $848M compared to Marriotts $2.2B. InterContinental also lags behind its competitors in terms
of number of hotels in their pipeline outside of North America. IHG has 463 hotels in their global pipeline
excluding North America, whereas Marriott has 1,663. The North American hotel market has become
very saturated, and InterContinental has made very little progress in hedging against this factor.

The first step for InterContinental is to gain a larger share of the international markets must be to
improve their number of pipelined hotels on a global scale. We have comprised a list of
regions/countries with the strongest emerging markets that would be attractive to InterContinental;
places where Marriott and Hilton are currently focusing their pipelining efforts. These countries include:
China, Thailand, Indonesia, and India. Since IHGs business is primarily in the United States, we
recommend that they start to focus on pipelining hotels into these emerging markets as much as
possible. Once new hotels are developed in these emerging markets, improvements in revenue will
follow.

InterContinentals Rewards System

Marriotts reward systems consistently accumulate points that will never be taken away.
InterContinentals reward system accumulates points for one year, and then rewards points restart to 0 if
they dont stay at an IHG hotel at least once a year.
Their first review on the app store (rated most helpful by consumers) states, When I joined the
loyalty program, Priority Club, it was one of the best in the world The best feature of the
program was Points Never Expire. Fast forward to 2017 and all of that has changed. Priority Club
is now IHG rewards club, points expire without notification (in other words you never know when
they will zero your account), they have no decency to send you an email on points expiry and
then you suddenly realize that 200,000+ points have vanished your account. Customer care is of
no help and they are cheating their customers (Rocha 1).
200,000 IHG reward points is worth over $20,000 spent at their locations, and they are making many
customers frustrated. Most reviews state that the app is simple and easy to use, which means the reward
systems focus is not on leisure travels who make up a significant amount of revenue.

IHG needs to improve their customer relationship by implementing a better CRM system. The CRM could
provide an alert system that would notify customers when they get close to their 12 month inactivity
period, and would provide a better relationship with customers. This could enable leisure travelers to
convert to repeat customers if discounts were available during their stays. Another option that IHG could
pursue to solve this problem would be to return to the Points Never Expire program. Competitors like
Marriott are openly taking all of the unsatisfied customers from IHGs reward programs, and making
them repeat customers at their locations. IHG needs to restructure their rewards program model to give
incentive to customers to rebook with them instead of elsewhere.

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
2
19
 Conclusion

Marriott International, Hilton Worldwide, and InterContinental Hotel Groups are three of the top hotel
companies in the lodging industry. Each of them have been taking strides in the right direction over the
past several years. With the increase in franchising, expansion outside of North America, the targeting of
millennials, and managing the increase in competition from online travel agencies, a bright and successful
future is in the hands of each company. We approached these companies using a number of
fundamental, technical, and analytical processes to determine where each hotel company currently
stands in the industry, as well as where they are heading in the future.

In order to compile information used in our decision matrix, we used a series of sub-matrices to analyze
the four most important trends of the lodging companies. While analyzing the increases in franchising, all
of the companies had different strengths and weaknesses but received a similar composite score. Hilton
had a slight advantage over the other companies. Marriott received a score for globalization that was
significantly higher than the others. They also received the highest score for targeting millennials. Hilton
showed the most strength out of the three companies in terms of competing with online travel agencies.

Factors that have shown the most growth, and have strong potential for future growth in lodging include:
Increase in franchising
Expansion outside of North America
Companies targeting millennials
Managing the increase in competition from online travel agencies

Throughout our extensive research and data collection, we have concluded that the most successful hotel
companies are franchised globally. Analysis of the three companies has shown that at least 97% of their
hotels are under franchising or management agreements. This strategy has proven to be the most cost-
effective and profitable method of expansion. With the U.S. market being saturated, expansion outside of
North America into emerging markets is a key trend these companies take advantage of. Having hotels
that target millennials is crucial in today's market because millennials are soon to make up nearly 60% of
their customer base. Managing the competition from OTAs is imperative because they are taking away
from hotels revenue with commission fees typically ranging from 15-20%.

Each companys composite score is a representation of all criteria weighted together. Marriott
Internationals composite score was 8.39 on a 10 point scale, receiving the highest score of the three
companies. Hilton Worldwide brought in a composite score of 7.16, rated second to Marriott.
InterContinental Hotel Group was a close third behind the other two with a final composite score of 7.08.
The scores provided are based off the analysis of the main trends trends found within the hotel industry.

Decision
Industry Analysis Hilton Marriott IHG Airbnb Conclusion
Matrix
2
20
 Appendix A

Franchising Fee Scoring Chart Royalty Fee Scoring Chart

Figure A Figure B
$40,000 - $50,000 - $60,000 - $70,000 - $80,000 - 6.5% 6.0% - 5.5% - 5.0% - 4.5% -
$49,000 $59,000 $69,000 $79,000 $89,000 6.9% 6.4% 5.9% 5.4% 4.9%

10 9 8 7 6 10 9 8 7 6

Growth in Rewards Programs

Figure C

Average Rank in Appstore

Figure D

Benefits and Services Scale

Figure E

Sub-Sub-Matrix of the Benefits and Services

Figure F
Weight 20% 10% 70% Column Colu
1 mn2

Options Number of Number of Average Discount Percent/ Total Score

Perks Member Levels Points Earned Sum

Hilton 0.1 0.9 21 22 8

Marriott 0.4 1.2 28 29.6 9

International

InterContiental Hotel 0.3 0.9 26.369 27.569 10

Group
21
 Appendix B

Sub-Sub Matrix for Growth in Rewards Members

Figure G

Options Growth in Rewards Members (2014-2015) Score

Hilton Worldwide 15.90% 7

Marriott International 10.20% 5

InterContinental 10% 4

Sub-Sub Matrix Average Rank in the App Store

Figure H

Options Average Rank in the App Store Score

Hilton Worldwide 3 6

Marriott International 4.5 9

InterContinental 4.5 9

Figure I Figure J

Figure I
Figure J

22
 Appendix C

Threat of New Entrants:

Airbnb and similar companies like HomeAway.
Figure K Growth is fairly limited in cities because of the
lack of suitable locations.
High barriers to entry to start a hotel or motel,
but low barrier to entry to post your house on
Figure K Airbnb.

Bargaining Power of Buyers:

Ability to negotiate prices
Bulk purchases give buyers bargaining power because
its a significant amount of business being sold.
Buyer power in areas with low lodging customer inflow.
Many lodging options

Bargaining Power of Suppliers:

Brand recognition
Location
Cancellation/ switching penalties
Packages that induce saving and add value

Industry Rivalry
Figure L Hotel Casinos
Hotels with certain services (e.g. restaurants, spa,
shops, etc.)
Earth friendly practices and social responsibility are
being valued more now
Most large hotel and motel chains are geographically
diverse

Threat of Substitutes:
Small independent hotels and motels.
In times of depression or recession domestic
travel would be more prevalent than
international travel.
Hotels can be replaced by cheaper options like
hostels, motels, or bed and breakfasts.

23
Appendix D

Figure M

24
 Appendix E

Figure N

Figure O

2011 FY 2012 FY 2013 FY 2014 FY 2015 FY

Sales 8.9% 5.6% 5.0% 7.9% 7.3%

Growth
ROA 0.9% 1.3% 1.6% 2.6% 5.5%
ROE 13.5% 15.3% 9.5% 14.2% 23.5%
Profit 2.9% 4.0% 4.3% 6.4% 12.5%
Margin
Debt Ratio 59.7% 57.5% 47.9% 44.7% 41.0%
Free Cash $685M $574M $1,769M $1,029M $1,022M
Flow

25
 Appendix F

Figure P
2011 FY 2012 FY 2013 FY 2014 FY 2015 FY
Sales 5.4% (4.1%) 8.2% 7.9% 5.0%
Growth
ROA 3.4% 9.0% 9.2% 11.0% 14.1%
ROE
Profit 1.6% 4.8% 4.9% 5.5% 5.9%
Margin
Debt Ratio 36.7% 46.3% 46.4% 54.9% 67.5%
Free Cash $832M $299M $675M $748M $1,004M
Flow

Figure Q

2011 FY 2012 FY 2013 FY 2014 FY 2015 FY

Sales 8.0% 5.0% 1.9% 6.5% 4.4%

Growth
ROA 16.0% 16.7% 12.6% 13.9% 32.4%
ROE 115.7% 127.3% 329.2%
Profit 2.3% 2.6% 1.7% 1.7% 5.1%
Margin
Debt Ratio 16.2% 32.1% 36.2% 52.4% 38.3%
Free Cash $376M $344M $379M $295M $425M
Flow

26
Appendix G
Globalization Sub-Matrix Criteria
Figure R

Marriott Brands
Figure S

IHG Brands
Figure T

27
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