The Keys to Marriott's Success

Long before the economy went south, Marriott had a reputation for finding creative ways to wrest the most value from every IT dollar.

Hanging in the office of each of Marriott International’s 1,200 I.T. employees is a framed document titled "Information Resources Operating Values." Executive Vice President and CIO Carl Wilson brought this statement of principles to Marriott in 1997 to guide IT decision making, and Marriott has issued it in ready-to-mount form to every new employee since then.

The Spirit to Serve, Chairman and CEO J.W. Marriott Jr.’s management book published that same year, is also required reading for new hires. It covers everything from how his father bought his first A&W Root Beer stand in 1927 to how to do just about anything involved in running a hotel in the best way possible, of course. It includes, for instance, J.W.’s famous 66-step process for cleaning a room. Talk to an IT associate, and you’ll inevitably hear him recite from the book chapter and verse. (The next time you stay at a Marriott, check it out. The Spirit to Serve is in every room.)

All this may sound more cult than corporate culture. And within the hospitality industry, Marriott does indeed come in for its share of teasing about its almost religious adherence to the tenets of the "Marriott way." Yet many of these precepts revolve around one word: resourcefulness.

Now it might seem that following strict, documented rules would inhibit innovation. But in practice, the fact that Marriott and its IT department have documents and systems, policies and procedures, and even history and philosophy to guide their decisions frees them to focus on real resourcefulness: creativity combined with the commitment to wringing the most value from every IT dollar.

It seems to be working for the $8.4 billion hotel management company. Marriott has just experienced the worst two years in its 75-year history. Yet thanks largely to the resourcefulness of its IT, last year the Bethesda, Md.-based company was able to add more than 31,000 rooms and sustain an occupancy rate of 70 percent, well above the 59 percent industry average.

"Resourcefulness has to do with a mind-set and a culture. Our fundamental operating values define our culture here," Wilson says. "One of the things we always say is that we’ll never be satisfied with the way things are today. We’ll continue to improve them to make them better."

No tree grows to the sky.

-The Spirit to Serve

After the early ’90s hit the hospitality industry with the one-two punch of recession and the Gulf War, Marriott was quick to spin off its real estate business in order to focus on managing hotels. But once the company returned to growth mode in 1994, its executives started to believe that happy days had come again and for good. "When times are tight, you struggle for ways to cut costs. Then all of a sudden you have a great year, like those we had in the mid-1990s, and you tend to start adding a lot of extra support functions," admits President and COO William J. Shaw. "When we had some of our best years, we let those costs slip back in there."

"No tree grows to the sky," one of the company’s directors was fond of pointing out at Marriott board meetings. Or as J.W. Marriott says, Growth can’t go on forever; inevitably, it slows.

So when Shaw, a 29-year Marriott veteran, became COO and hired Wilson as CIO in 1997, they started working to get those costs back out. Shaw began to sell off more of the company’s noncore businesses, including food service, senior living communities and distribution. Wilson evaluated the systems the business was running on to see how the company could streamline operations and boost revenue, and decided that Marriott’s single biggest business application—the enormous Marriott Automated Reservation Systems for Hotel Accommodations, better known as Marsha—needed a complete and immediate overhaul.

"Even in the good times, you ought to behave like you’re in the bad times," Wilson says.

In the wrong hands, such a corporate outlook could create a pessimistic, "sky is falling" kind of culture. But at Marriott, that belief is spun in more positive terms: Employees are expected to improve the way the company operates no matter what the balance sheet says.

Reuse if possible, buy if available, and build for competitive advantage.

-"Information Resources Operating Values"

As Mike Keppler, vice president of sales, marketing and revenue management systems, explains: "In the IT business, the pressure is always there to do more with less and bring things to market faster."

Keppler hit the ground running in 1998 on the Marsha overhaul. Marsha’s importance to Marriott is best understood, says Misha Kravchenko, senior director of Marsha systems and performance measurement, by thinking of it as a "supply chain system for the hotel industry." Much more than a database of reservations, it connects in real-time to Marriott’s customers, partners and suppliers and contains more than 6,000 programs.

Some questioned Wilson’s rush to refurbish a system that seemed to be working. Marsha was 14 years old and outdated, but most companies in the industry were content with their similarly dated systems. Nonetheless, Wilson’s department embarked on an upgrade, taking as its guide the "Information Resources Operating Values" that decreed, "Reuse if possible, buy if available, and build for competitive advantage." So Wilson kept much of the original system while adding functionality and reducing the cost of operation.

"Some people said, Why are you pushing so hard to make this happen? We don’t have any issues right now," recalls Wilson. His response was this: "It wasn’t raining when Noah started to build the Ark.

"Resourcefulness," Wilson continues, "is actually a journey that starts way back here somewhere—you have to be continually doing it even when you don’t need to."

Some of the work to transform Marsha had a looming deadline: Y2K. But Marriott had another, earlier Armageddon in mind. With the advent of the Internet, the look-to-book ratio (the number of times a traveler browses the system before buying) had skyrocketed from 5-1 to 100-1. If that held, Kravchenko calculated that Marsha would run out of capacity by September 1998. In addition, Marsha ran on just one processor, so Marriott was forced to buy ever bigger and more expensive single processors.

Kravchenko and his team converted all the application components and systems middleware so that Marsha could run on parallel processors. "It was like performing open-heart surgery on a marathon runner while he’s running the race," Kravchenko says. The move allowed the IT department to take advantage of the plummeting prices of new, smaller disk storage devices.

The team expanded Marsha’s network capabilities to respond to increased Internet demand, moving from the older IBM SNA network infrastructure to open TCP/IP architecture. That took three years.

"We had so many connections to so many partners, from our hotels to booking companies to banks and rental car companies, and they all had to be moved from the legacy architecture," says Kravchenko. But it was a boon in terms of cost savings as the older IBM system was much more costly to maintain.

Marriott plowed those savings into additional upgrades to Marsha. Keppler replaced a decades-old DOS front end with a Windows application called Merlin for call center operations; Merlin typically captures more than $15 million in revenue each weekday. This was a situation in which it was worth it from a competitive standpoint for Marriott to build its own application, Keppler says.

The final upgrades to the operating system and network infrastructure are being implemented this year, but Marsha handled 59 million reservations last year, and its processing capacity has increased 300 percent. The cost per transaction (which Marriott charges to hotel owners and wants to keep flat) has dropped 16 percent since 2000. And Marriott can now boast a single image inventory (one view of all rooms across all channels and 17 Marriott-owned hotel chains). "We’ve been able to reduce costs and deliver more power while increasing the scale, scope and functionality of the system," Keppler boasts.

Preserve change amid order.

-The Spirit to Serve

When questioned about Marriott’s current fiscal condition, company executives quickly turn to the positive effects of the negative forces at work. They believe the current downturn comes with a gift: the discipline to take a hard look at what’s not adding value to the company. The slump just makes it easier to, as J.W. Marriott writes in his book, "preserve change amid order." That is, the best time to shake things up is when things are going smoothly.

Just before the recession settled in, in early 2001, each department cut its budget by 10 percent. After Sept. 11 that same year, each department trimmed its budget by another 20 percent. Marriott IT was asked not just to cut its own costs but also to help the rest of the business units cut theirs.

"You have to stop doing things that aren’t adding value," Wilson emphasizes.

Like using two separate yield management systems.

Marriott wants to sell its rooms at the highest price possible. But if it doesn’t book a room (which has a shelf life of 24 hours) because it’s overpriced, that revenue is lost forever. In order to sell the right product to the right customer at the right time for the right price, the company uses software: a yield management system.

But Marriott was using two different architectural platforms: one for full-service hotels such as Marriott, the other for less upscale properties such as Courtyard. IT had to employ almost twice as many people to maintain the two systems and reply to requests from two separate user communities. In addition, franchisees who owned both types of hotels had to invest in both systems.

In 2001, Senior Vice President of Information Resources Howard Melnick and his team began to work on a unified system.

Rather than replace the two apps, Melnick employed IBM WebSphere to combine the best of each and introduced a new standard desktop. In the resourceful spirit of "reuse before buy before build," he explains that he used as much of the existing batch architecture and code base as possible and bought the WebSphere to combine them in a more flexible Web-based environment.

The final product enabled the IT department to reduce the number of support personnel and integrate the hardware the system required. At the corporate level, collapsing and upgrading the two independent systems has enabled Marriott to improve the accuracy of its reservation forecasts and lift lodging revenue 20 percent, according to Amy McPherson, senior vice president of global revenue management and the business owner of the system.

"These systems are hugely important and a key part of our competitive advantage," McPherson says. "Last year we had the worst year in our history, yet we were able to grow revenue and maintain our costs."

Success is a team sport.

-The Spirit to Serve

If a company is going to be resourceful, IT and the business better be aligned. Marriott’s IT employees receive a crash course in the hospitality industry; Marriott’s businesspeople are intimately involved in IT projects. They must sponsor any new initiative and retain ownership for the life of the system. The result: Marriott employees, whether in IT or marketing, are on the same page.

"Sometimes when I’m in a meeting, I can’t tell if the person speaking is in IT or on the business side," Wilson says. "We’ve developed a culture of IT-literate, business-knowledgeable professionals. You don’t find people in one department saying to people in another that the hole’s in your end of the boat. We’re all in the same boat."

In fact, the phrase "IT project" has been banned; Wilson’s team works only on business projects. "We’re not a technology business. We’re not even a technology shop." says Melnick. "We’re a lodging business, and we want to do things that move Marriott forward as a lodging company." Thus, the IT department focuses on business results, not technology.

COO Shaw contrasts the current joint IT-business approach with mistakes made in the 1970s. Marriott would start to build a hotel, and then the business would say, I want a different kind of restaurant or room layout, and people just kept changing things around. Today with IT, says Shaw, "the business has to put a stake in the ground" to prevent that costly and time-consuming back and forth.

Therefore, as resources become scarce and the IT department has to become hyper-resourceful by, say, halting certain projects or introducing new cost-cutting systems, the business is already on board and changes can be made quickly and effectively.

When hard times hit recently, this teamwork came in handy. For example, Marriott had nine help desks that "weren’t providing the level of satisfaction required by our business partners," Wilson explains. So IT rolled those systems into one, adding some automated self-service capability that would help them support the 24/7 global operation they had become and, more important, cut costs.

The problem, as Wilson puts it, was "We have what I call a very facing culture. In the hospitality business, you greet people and the cultural preference is to do a lot of things face-to-face." Business partner satisfaction is one of the IT department’s missions, and there was concern about user resistance to automated tools. But teamwork kicked in.

"People realized that even though I like to talk to Joe in the middle of the night because he’s so friendly and helps me with my problems, I need to do this because it will save money and Joe can help someone else," says Wilson. Thanks to the growing acceptance of automated tools, the consolidated help desk is up and running at 85 percent of the cost.

The devil is in the details—success is in the system.

-The Spirit to Serve

Metrics drive Marriott. Talk to an IT associate on any given day, and he can tell you exactly how much business the company processed via its systems that week per second ($3,568 when this reporter visited).

When implementing the PeopleSoft enterprise service automation module for project tracking and time reporting within IT, for example, programmers developed a tool so that project and productivity metrics are automatically computed after time is entered.

Another rule for metrics is to make sure that the right people get the right data in a form that’s meaningful to them. "You need to measure a lot of things, but the trick is to publish the right information to the relevant audience," says Melnick.

"Having Marriott.com up and running is not as important as the dollars running through it," explains Keppler. Melnick adds, "For each system we try to focus on the core metrics. And that changes. What might have been important the day you go live becomes a nonevent a few weeks in."

For example, five years ago the critical metric for Marriott.com was uptime. Today, it’s how much business the website books. Last year, metrics fueled the IT department’s decision to invest in an upgrade to the site that would make it easier to reserve rooms. Today, more than 75 percent of rooms booked online come through Marriott.com, saving the company $12 million annually.

Keeping its eye on the numbers lets Marriott revisit business cases for IT projects each quarter. "The project itself may not change that much, but something external may happen—something like SARS, something from the competition," Melnick explains. "Just because you start a project and it’s on track doesn’t mean you want to keep the same pace. There may be something that comes up that’s even better."

Success is never final.

-The Spirit to Serve

Though the IT department’s resourcefulness is helping keep Marriott afloat during hard times, Wilson and his peers aren’t taking anything for granted. They say they can’t let their culture of resourcefulness wither away when the economy turns around. They’re reminded of how easy it could be to let their guard down each time they flip through Mr. Marriott’s book in which he quotes Somerset Maugham: "The unfortunate thing about this world is that good habits are so much easier to give up than bad ones."

But Wilson believes the principles and procedures put in place for prudent and resourceful IT decision making should keep the company on the straight and narrow and ahead of the competition.

"I have a firm belief that the only real sustainable competitive advantage we can get with IT is making sure our people understand conceptually what IT can and can’t do and apply it better than competitors," Wilson says. "Anything we do in IT, a competitor can install. What they can’t capture that quickly is having a team of people throughout the company that really gets this and follows it all the way through. That’s sustainable."

Marriott has valued resourcefulness—on paper if not always in practice—for decades. But resourcefulness is not an end in itself. It’s a tool one uses in the ongoing construction of value, a project that’s never finished. Or, as Mr. Marriott says succinctly in his book, "Success is never final."

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