Why Marriott’s hotels have a specific ownership structure

Ownership structure

Marriott (MAR) operated a total of 3,916 hotel properties in fiscal year 2013. Most of these properties were either managed, franchised, or licensed. Only a few of the properties were owned by the company.

Revenue from owned, leased, and others accounted for 38% of Marriott’s total revenue—excluding cost reimbursement. This is lower than its peers—including Hilton’s (HLT) 64%, Starwood’s (HOT) 46%, and Hyatt’s 86%. Wyndham (WYN) only has two owned properties.

• Franchised – Under this category, the property isn’t owned by the company. It only allows hotel owners and Marriott Vacation Worldwide Corporation (or MVW) to use its brand name and other services by charging a fee. MVW operates the timeshare properties. Click here to learn more about timeshare properties. The company receives an initial application fee. It receives a continuing royalty fee that ranges from 4%–6% of room revenues. It also includes 2%–3% of food and beverage revenue for some full-service hotels. Click here to learn more about the components of franchising and management fees.
• Managed properties – This includes a total of 1,058 properties. It includes 40 home projects under the Ritz-Carlton Residences. These properties are managed under a long-term management agreement—for a period of 20–30 years with an option to renew for additional years. The agreement is with the owners. There’s a management fee. The fee includes base management fees and an incentive fee. All the costs of operating these projects including hiring, training, and employee cost. This is separate from costs for providing centralized reservation services, advertising and marketing, accounting, and data processing services. These costs are reimbursed by the owners, according to the agreement.
• Owned and leased properties – The company only had nine owned hotels and 35 leased properties in fiscal year 2013. The lease agreements include fixed annual rentals and additional rentals based on a percentage of annual revenues in excess of a fixed amount.
• Others – Others include 80 unconsolidated joint venture properties. Marriott is a partner.

The Consumer Discretionary Select Sector SPDR Fund (XLY) is an exchange-traded fund (or ETF) that includes a broad category of companies from the consumer discretionary industry—including the weight of 14% in the hotels, restaurants, and leisure sector.