1. Exceeding Earnings
Expectations in 2 Years
CSF Final Case Competition
Thursday, April 12, 2012
Prateek Peres-da-Silva
Elizabeth Buoyer
Taylor Currier
Matt Cooper
Jack Dai

2. Executive Summary
Key Question
How can Marriott exceed consensus earnings expectations in 2 years?
Hypothesis
Marriott should cater to niche markets with increasing
propensities to spend in order to realize an 18.3% increase in profit
Approach
Drive Chinese
Travel Demand
Create Business
Class Package
Expand Casinos
in the US

3. Drive Demand of
Inbound Chinese Travelers

4. The rapid increase in Chinese visitors to the US presents a massive
new segmentation opportunity for Marriott
4
Inbound Chinese Visitors
3,500
Driving Causes
Total Visitors (K)
3,000
2,500
• Ease on US Visa
regulations of
Chinese
residents
• 14.1% increase
in Chinese
disposable
incomes
274%
2,000
1,500
1,000
500
2012
Sources: Mintel Oxygen, US Dept. of
Commerce, AdvisorAnalyst.com
2013
2014
Chinese Travelers
2015
2016
Business Class Casinos

5. While competitors focus on in-house accommodations, Marriott
can gain market share by catering to Chinese travelers’ preferences
5
Characteristics of
Chinese Travelers
Mandarinspeaking staff
Travel in large groups
Chinese
symbols
Stay in the US longer
Chinese
cuisine
Look for budget
hotels
Vacation
package
Sources: Mintel
Oxygen, CNNTravel
Chinese Travelers
Business Class Casinos

6. By packaging hotel stays in gateway cities, Marriott can drive
demand of Chinese travelers seeking to maximize travel experience
6
75
% of inbound Chinese travelers prefer
53 tour packages
% of total travel expenses by Chinese
9 travelers are hotel costs
% of inbound Chinese travelers prefer
economy or mid-priced hotels
San Francisco
Yosemite
East Coast
Sticker
Price
Hollywood
California
$2110
$2360
Group
Rate
$1600
$1770
*10 night tour
Sources: Mintel Oxygen, Group
Analysis, company sites
Chinese Travelers
Business Class Casinos
Niagara Falls
NYC
Washington DC

7. Packaging hotel options comes at no cost to Marriott and yields net
profit regardless of the market share captured
7
160
139.1
140
Profit ($M)
120
100
80
2013
55.6
60
40
27.8
20
0
Worst Case
Base Case
Best Case
Chinese Travelers Business Class Casinos
2012

8. Cater to the Increasing
Business Traveler Segment

9. Business travelers make up a growing market segment that
Marriott is well-positioned to capture
9
Comparison of Business and
Leisure Travelers
285
12%
277
270
255
% More Business
Travelers than Leisure
Business Travel Spending ($B)
3-Year Projection of
Business Travel Spending
264
252
240
10%
10%
8%
6%
4%
2%
0%
2011
Sources: Mintel Oxygen, Global
Business Travel Association
2012
2013
Chinese Travelers
8%
Business Class Casinos
3%

10. While Marriott’s current business packages cater to large
groups, the majority of businesspeople travel alone
10
Current Marriott Business Package
Business Travelers that Travel Alone
83%
Sources:
Thomson.com, Marriott.com
Chinese Travelers
Business Class Casinos

11. The business class accommodation package satisfies all of the
business travelers' needs
11
Personal Transportation
• Flight itinerary part of booking process
• Hotel will provide door-to-door service
Priority check-in and check-out
• Paperwork and keycards in the car to avoid waiting in line
• The check-out process will be streamlined the same way
Customized Accommodation
• Premium cable and wireless
• Office supplies available, including TV with HDMI cable
Source: Mintel Oxygen
Chinese Travelers
Business Class Casinos

12. Assuming that at least 0.1% of U.S. business travelers utilize this
service, Marriott will still earn a profit
12
35
29.8
30
Profits ($M)
25
20
18.0
2013
15
2012
10
5
6.3
0
Worst Case
Base Case
Chinese Travelers
Best Case
Business Class Casinos

13. Divest Future Project Funding to
Purchase High Margin Casino Boats

14. The U.S. casino industry’s steady growth and high margins present
an opportunity for Marriott
14
5-Year Projected
U.S. Casino Revenue
Profit Margin of
Hotels vs. Casinos
20
Profit as % of Revenues
Revenue ($B)
20
15
10
5
0
16%
16
12
8
4
1.6%
0
2011 2012 2013 2014 2015
Source: IBISWorld
Chinese Travelers
Hotels
Business Class Casinos
Casinos

15. By diverting funding from hotels to riverboat casinos, total profit
will increase by 50%
15
Jan 2012
Feb 2012
Delay 18 projected
new construction
projects
Divert funding to
purchase and furnish
5 casino boats
April 2012
Obtain licenses at key
locations
Dec 2012
Casino Boats are
operational, generati
ng profits
Hotels
Riverboat
Casinos
Capital
Expenditure
Total Profit
150
0
$3,079,125,000
$20,005,948
+$10.6M
132
5
$3,084,630,000
Chinese Travelers
$30,605,234
Business Class Casinos

16. Investing in riverboat casinos instead of low-margin hotels can
prove highly profitable for Marriott
16
Profit ($M)
Change in Profit Due to Riverboat Casinos
50
45
40
35
30
25
20
15
10
5
0
43.6
30.6
Additional Profit
20.2
No Boats
Worst Case
Base Case
Chinese Travelers
Best Case
Business Class Casinos

17. Marriott already has measures in place to mitigate the risks of
expanding into riverboat casinos
17
Marriott already operates casinos
Licensing and Regulations
Gas Price Volatility
Insurance Premium
Higher for Boats
Sources: EPA, Mintel
Oxygen
Chinese Travelers
Position along experience curve will
expedite process
Already included in industry profit
forecasts
EPA fees won’t exceed forecasted gains
Won’t be paying premiums on 18
delayed hotel projects
Business Class Casinos

18. By pursuing our recommendations, Marriott can realize net
profit gain of $84.2 Million
18
560
10.6
18
540
55.6
Net Profit ($m)
520
84.2
500
480
460
440
420
400
Analyst
Projection
Chinese Tourist
Business Class
Casino Boat
Total

19. Executive Summary
Key Question
How can Marriott exceed consensus earnings expectations in 2 years?
Hypothesis
Marriott should cater to niche markets with increasing
propensities to spend in order to realize an 18.3% increase in profit
Approach
Drive Chinese
Travel Demand
Create Business
Class Package
Expand Casinos
in the US

20. Appendix

21. Navigation
21
Financials
Chinese Tourists
Business Class Package
Riverboat Casinos

22. Worst Case Financials
22
Assuming 6% growth rate

23. Base Case Financials
23
Assuming 6% growth rate

24. Best Case Financials
24
Assuming 6% growth rate

25. Financials for California tour
25
Source: Company websites and Group Analysis

26. Financials for East Coast Tour
26
Source: Company websites and Group Analysis

27. Total Financial Impact
27
Source: Company websites and Group Analysis

28. The majority of business travelers will have the option to upgrade to
the Business Class Package because they book their trips themselves
28
Trip Bookings
Booked By
Someone
Else
39%
Source: Mintel Oxygen Report
Book
Themselves
61%

29. The average length of stay in the US is increasing for Chinese
visitors
29
Average Length of Stay
11.3
12
10
Days
8
7.4
6
4
2
0
2009
2012
Year
Source: Mintel Oxygen

30. Business travelers prefer working in their rooms
30
Source: Mintel Oxygen

31. With business centers becoming obsolete, hotels can add
convenience by keeping tech supplies on hand for travelers
with mobile electronics
31
Source: Mintel Oxygen

32. Business travelers prefer streamlined check-in
process
32
Source: Mintel Oxygen

33. Technology and automation is increasingly
important to business travelers
33
Source: Mintel Oxygen

34. Financials for Business Class Package
34

35. Breakeven Analysis on Car Acquisitions
35

36. Locations of Riverboat Casinos
Locations of
Riverboat Casinos
• San
Francisco, CA
• Santa
Monica, CA
• St. Louis, MO
• Chicago, IL
• New Orleans, LA

37. Many negative views of riverboat casinos are myths according to
the Louisiana Casino Organization
37
MYTH #1: Gaming creates nothing. It merely takes money that would otherwise be used by Louisiana residents for other purposes.
FACT: Riverboat casinos have become a major economic force that benefits all residents of the state, and it generates millions of dollars of new money for Louisiana in
several ways:
Approximately 53% of all gaming revenue comes from out-of-state, most from Texas. As a result, on average, over $18.2 million per month is received by the state
and local governments in gaming taxes.
Local merchants such as service stations, restaurants and retail stores benefit from the increased traffic of out-of-state visitors.
Each year, riverboat casinos pay over $368 million in salaries to some 15,000 employees.
The industry has invested more than $1.7 billion in facility construction, and is employs hundreds of Louisiana construction workers to build new luxury hotels and
entertainment centers.
Riverboat casinos purchase over 70% of all goods and services from Louisiana vendors including computers, printing and floral arrangements.
MYTH #2: The introduction of riverboat gaming into a community causes an increase in crime.
FACT: There is no correlation between crime rates and riverboat casinos. In fact, studies have shown that the increased police protection afforded by the tax revenue
generated by riverboat casinos often decreases crime.
MYTH #3: Society as a whole suffers when gambling is introduced.
FACT: Casino employment has meant a better life for more than 15,000 employees and their families, who earn an average salary of $25,001 plus full health benefits.
MYTH #4: Access to riverboat gaming increases gambling addiction and leads to a high rate of bankruptcy.
FACT: The vast majority of Americans gamble responsibly with little or no adverse consequences according to a new study by the National Gaming Impact Study
Commission (NGISC) released in June 1999.
MYTH #5: Riverboat gaming is controlled by organized crime.
FACT: Gaming companies may be the most tightly controlled and regulated of any industry. Nearly all are publicly traded companies owned by stockholders, much like
IBM, General Motors and Kraft. Therefore, these companies are not only bound by state and federal gaming laws, they are also regulated by the Securities Exchange
Commission. There have been no accounting scandals at gaming companies such as the ones associated with Enron, WorldCom and Global Crossing.
FACT: The U.S. Treasury Department recently released a study entitled A Study of the Interaction of Gambling and Bankruptcy. This study has found no connection
between gambling and bankruptcy. The study makes the following conclusions:Using state-level data, we find no connection between state bankruptcy rates and
either the extent of or introduction of casino gambling. This result is supported by county-level analysis that shows no statistically significant casino effect (proximity
to a casino) with regard to county bankruptcy rates.
An empirical analysis of bankruptcy data suggest(s) that gambling has no measurable effect on statewide bankruptcy rates in Nevada, New Jersey or Mississippi.
While most available studies have pointed to a connection between gambling and bankruptcy, none has proven that gambling causes bankruptcy.
These findings support the research findings of the National Gambling Impact Study Commission (NGISC).
Source: Louisiana Casino Organization

38. Casino Financials and Assumptions
38
Source: Louisiana Casino Organization