Expert answer:Summarising a case study
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International Hotel Management
Fall 2017
Case Study II
The second case for you to analyze is: The Warsaw Marriott: New Competition for
Warsaw’s Marriott Hotel. This case demonstrates that after a challenging and
successful first mover entry into the luxury lodging market in Warsaw, the Warsaw
Marriott now faces competitive pressure from imminent new entry of well-managed and
well-financed competitions.
The guidelines for this case study are the same as for the first case analysis:
Your written analysis of this case should generally contain five sections
1.
2.
3.
4.
5.
Executive Summary
Brief overview of key case facts
Identification of the case problem or central issue
Discussion of 2-3 alternative solutions to resolve the problem
Selection of the preferred solution and explanation of how it solves the
problem
The body of your case analysis should be no longer than 4.5 pages, doublespaced. Allow yourself an average of one page per section (2-5 above) and a half-page
for the executive summary. Part of the learning experience is the distillation of notes,
ideas and opinions into succinct presentations of your thinking on this particular case.
Articulately state your points. You are encouraged to use other resources.
Case Analysis Rubric
TRAIT
Issues
Unacceptable
Does not recognize a problem or
mentions problems that are not
based on facts of the case
Acceptable
Recognizes one or more key
problems in the case
Perspectives
Does not recognize the
perspectives of any characters in
the case
Simply repeats facts listed in case
and does not discuss the relevance
of these facts
Considers the perspectives of
individuals who are related to
the problems
Considers facts from the case
and cites related knowledge
from theoretical or empirical
research
Knowledge
Actions
No action proposed or proposes
infeasible action(s)
Consequences No positive and negative
consequences are identified
More than one reasonable
action proposed
Positive and negative
consequences for each action
are discussed
Exemplary
Recognizes multiple problems in
the case. Indicates some issues are
more important than others and
explains why
Clearly describes the unique
perspectives of multiple key
characters
Discusses facts of the case in
relation to empirical and
theoretical research and add
knowledge from personal
experience
Proposed actions seem to deal with
the most important issues
Consequences are tied to the issues
deemed most important
Score
For the exclusive use of S. Tan, 2017.
Harvard Business School
9-693-024
Rev. March 16, 1994
The Warsaw Marriott:
New Competition for Warsaw’s Marriott Hotel
Gazing across the lobby from his vantage point on the balcony of the second-floor Vienna
Cafe, Stan Bruns, general manager of the Marriott Corporation’s luxurious Warsaw hotel, was
pleased to see the usual bustling crowd of Western guests. It was the summer of 1992 and Bruns had
been at the helm of the Warsaw Marriott for slightly less than a year. Since its grand opening in
September 1989, the Marriott had been the only hotel in Poland operated by a Western management
team, and it had managed to capture the lion’s share of high-end hotel demand generated by the
recent surge of Western business travelers in Warsaw. As a result, Bruns’s hotel had become one of
the company’s most profitable foreign operations. Almost all other tourist hotels in Poland were run
by Orbis, the country’s antiquated hotel and travel monopoly. Most Orbis facilities were sparsely
decorated and in poor repair, while Orbis employees, whose jobs and salaries were guaranteed by the
Polish government, were renowned for providing substandard service and operating at low
productivity levels. Thus, the luxury hotel industry, vastly overbuilt in most Western countries, was
virtually nonexistent in Poland. Marriott’s hotel in downtown Warsaw, the first of its kind in Poland,
was hailed in the world press as a city showpiece.
For over two years, its monopoly position as the city’s only provider of true luxury hotel
rooms enabled Marriott to charge prices that were comparable to Western standards for deluxe hotels
while maintaining occupancy rates of close to 70%. Marriott management did not allow the lack of
competition to erode the quality of service delivered by its employees, and despite tremendous
operational hurdles in Poland, the hotel consistently received high scores on customer comment
cards. Marriott’s Polish employees were young, often fluent in at least two languages, and
thoroughly trained in all of the hotel’s departments.
By the summer of 1992, with interest in Eastern European business still burgeoning two years
after the region’s democratic revolutions, Marriott’s comfortable position as the lone luxury hotel in
Warsaw was being threatened. Several new, Western-managed luxury hotels were either in the
planning stages or already under construction in downtown Warsaw. Two of these new hotels, the
Sobieski and the Bristol, were scheduled to open before the end of the year. With the onset of
competition, Bruns needed to make crucial decisions concerning the competitive advantages that had
enabled his hotel to be so successful, including a high-caliber work force and a monopoly position
that supported high room rates. He feared that his competitors might attempt to lure some of
Poland’s most extensively trained hotel employees away from Marriott. Bruns felt that his employees
would be one of Marriott’s most potent sources of competitive advantage once the other hotels
opened, but already the Sobieski had hired away some promising people. Among these were
This case was prepared by Research Associate David T. Kotchen under the supervision of Professor Gary W. Loveman as
part of a research project with Professor Simon Johnson of Duke University. It is intended to be the basis for class
discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Copyright © 1992 by the President and Fellows of Harvard College. To order copies or request permission to
reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to
http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system,
used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying,
recording, or otherwise—without the permission of Harvard Business School.
1
This document is authorized for use only by Shuaini Tan in International Hotel Management 2017 taught by Larry Yu, HE OTHER from September 2017 to December 2017.
For the exclusive use of S. Tan, 2017.
693-024
The Warsaw Marriott: New Competition for Warsaw’s Marriott Hotel
Marriott’s human resources director, stewarding supervisor, assistant housekeeping manager,
assistant controller, a concierge, a bellhop, and a number of kitchen workers. In addition to his
employee concerns, Bruns feared that an increased supply of high-end hotel rooms could erode
Marriott’s room and restaurant revenues.
The Marriott Corporation
J. Willard Marriott, the enterprising son of a poor Mormon farmer, laid the groundwork for
the Marriott Corporation when he left Utah in 1927 to open a 9-stool root beer stand in Washington,
D.C.. He dubbed his venture the Hot Shoppe, and eventually the modest root beer stand spawned a
chain of family restaurants that spanned the eastern half of the United States. Hot Shoppes, Inc.—
whose restaurants were easily distinguished by their bright orange roofs and interiors—flourished.
By the time he had become one of the country’s most successful restaurant operators in the mid-1950s,
Marriott decided to diversify into the hotel business. When Hot Shoppes, Inc., opened the Twin
Bridges Motor Hotel in Washington, D.C., in 1957, the company was still viewed as a food service
business, and few people predicted that over the next 30 years it would assemble one of the world’s
most expansive hotel empires. By the late 1960s, the company had developed a strong presence in the
U.S. hotel market. In 1969, the same year that it was renamed the Marriott Corporation, the company
opened its first foreign hotel, a 440-room resort in Acapulco. During the 1970s and 1980s, Marriott’s
hotel division experienced phenomenal growth; by 1991, Marriott owned or managed nearly 700
hotels worldwide—including 233 in the luxury and first-class segments—and lodging sales accounted
for 53% of the company’s pre-tax income of $82 billion. Marriott’s other business—contract services
(primarily cafeteria and restaurant management)—accounted for the remaining 47%.
Before 1980, Marriott had owned all of the hotels that it operated, but this capital-intensive
strategy severely constrained growth. In the early 1980s, with expansion a high priority, Marriott
tried a different approach: it began selling all new hotels to outside investors while retaining longterm management contracts. In the roaring eighties, this strategy enabled Marriott to earn an average
return on equity of well over 20% per year, but by 1990 the U.S. hotel market had become so
saturated that Marriott was forced to slow down. With average occupancy in the hotel industry
hovering around 61%Cits lowest level in 20 years—Marriott was having difficulty finding buyers for
its newly developed hotels, and all new construction was halted.
Marriott’s approach to the hotel business was centralized and highly structured. For
administrative purposes, the company divided the world into several regions, each of which was
overseen by a regional manager. (See Exhibit 1 for a map depicting Marriott locations in the
Europe/Middle East/Africa region as of early 1992.) All Marriott hotels were run according to a very
detailed set of standard operating procedures (SOP), which spelled out everything from checkcashing policies to hotel organizational charts. Even the company’s international hotels were
expected to adhere to the operating procedures as closely as possible, although some of the
guidelines, such as those that required supplies to be purchased from established Marriott vendors,
often had to be bypassed.
The SOP approach had worked well for the company. In the fall of 1991, an independent
survey of senior executives of Fortune 500 companies addressed the issue of service in corporate
America. When asked “which company sets the standard for service in the hotel/leisure industry,”
46% of the respondents selected Marriott—four times the number that chose the nearest competitor.
Additionally, Marriott had earned more AAA four- and five-star ratings and more Mobil four- and
five-diamond ratings than any of its competitors for 10 consecutive years.
2
This document is authorized for use only by Shuaini Tan in International Hotel Management 2017 taught by Larry Yu, HE OTHER from September 2017 to December 2017.
For the exclusive use of S. Tan, 2017.
The Warsaw Marriott: New Competition for Warsaw’s Marriott Hotel
693-024
Poland’s Hospitality Industry and Economic Reform
When the Soviet Union imposed a Communist system on “liberated” Poland after the Second
World War, the country’s hospitality industry was brought under the control of a government
ministry. In the early post-war years, hospitality remained low on the list of national priorities: not
only had Poland’s major hotels and tourist infrastructure been ravaged during the war, but Warsaw’s
Soviet-trained central planners preferred to invest national resources in the industrial rather than the
service sector. As industrialization progressed, however, and urban centers became densely
populated in the 1950s and 1960s, government authorities reasoned that it would be healthy for
workers to spend vacation time outside of the cities. Domestic tourism became increasingly popular
and, because it was closely affiliated with work, it was managed by trade unions and state-owned
enterprises. Pre-war hotels and resorts along the Baltic coast and in rural areas were converted into
factory-owned guest houses, and workers’ groups were bussed in for government-subsidized
vacations.
Growth in domestic tourism was followed by development of Poland’s international tourist
industry in the 1960s and 1970s. Although most of Poland’s international visitors hailed from other
Eastern bloc countries, the relatively small number of Western tourists became an important source of
hard currency revenue. Poland’s dominant player in the international tourist industry was Orbis, a
government-owned travel agency modeled on the Soviet Union’s Intourist. Orbis’s operations—
which included hotels, restaurants, and travel services—were overseen by Poland’s General
Committee for Tourism. For visitors from Western countries, Orbis specialized in arranging package
tours. Package tours, as opposed to private outings, were preferred by the Polish government for
several reasons. First, since Orbis controlled all aspects of a tourist’s visit (including itineraries,
hotels, and travel arrangements), it was possible to keep Western visitors isolated from Poles, which
was desirable for ideological reasons. Second, Orbis could maximize hard currency sales revenue by
booking tour groups in its more expensive hotels. Finally, by controlling tourists’ movement, the
Polish government was able to restrict excursions to those regions of the country that would create
the illusion of a successful Communist system. The Orbis monopoly was renowned for providing
low levels of service, and Western guests frequently complained that hotel and restaurant workers
were not responsive to their service demands. Furthermore, Western visitors paid much more than
citizens of socialist countries for the same level of service: in Orbis hotels, Poles paid 20% of the rate
paid by guests from capitalist countries, while other Eastern bloc citizens paid 40% of the capitalist
country rate.
Despite an increase in tourism in the 1960s and 1970s, Poland’s primary economic objective
remained industrial expansion, and heavy investment in manufacturing and mining restricted
development of the country’s service sector (for a comparison of employment in Poland’s service
sector with that of other countries, see Exhibit 2).1 In the early 1970s, Poland began a policy of
industrial modernization, importing capital equipment and technology from the West, with the
intention of repaying Western creditors with hard currency earned from increased exports. However,
Polish industry, which was already operating near capacity, was unable to absorb massive amounts
of new investment, and the planned exports never materialized. As a result, Poland’s foreign debt
soared from a negligible amount in 1970 to over $26 billion—or 40% of gross national product
(GNP)—by the end of the decade. Poland’s balance of payments crisis forced the government to
embark on an austerity program. Price increases for food and other basic commodities sparked an
era of confrontation that resulted in the formation of the popular trade union Solidarity in 1980, as
well as the government’s brutal imposition of martial law that crushed the opposition movement in
1981.
1. Even in 1978, Poland’s peak post-war year for tourist arrivals, receipts from tourism ($224 million) accounted
for only 0.2% of gross material product (GMP).
3
This document is authorized for use only by Shuaini Tan in International Hotel Management 2017 taught by Larry Yu, HE OTHER from September 2017 to December 2017.
For the exclusive use of S. Tan, 2017.
693-024
The Warsaw Marriott: New Competition for Warsaw’s Marriott Hotel
The specter of martial law delivered a crippling blow to Poland’s hospitality industry. As
government tanks patrolled the streets of every major city and armed troops enforced nightly
curfews, total tourist arrivals fell from a peak of 10.7 million in 1978 to 2.4 million in 1983 (see Exhibit
3). After the Polish government ended military rule in 1983, the country’s hospitality industry began
to recover, albeit slowly. In 1988, Poland’s income from international tourists amounted to only $193
million—far short of the $282 million received from tourists in 1980 (see Exhibit 4).
Although the period of martial law brought a temporary halt to social unrest in Poland, the
country’s balance of payment problems continued. Once again in 1988, the government was forced to
implement corrective measures, primarily in the form of reduced food subsidies, and again the
resulting price increases sparked massive industrial strikes. Workers’ demands for higher wages
touched off a wage-price spiral that accelerated into hyperinflation by early 1989. Desperate for
social peace, the government not only re-legalized Solidarity, but it allowed the trade union to contest
a limited number of parliamentary seats in the country’s first free elections since the Second World
War. When Solidarity swept virtually all of the seats for which it was eligible, the Communist
government lost credibility and was replaced by a Solidarity-led coalition.
The Solidarity government’s primary objective was to replace Poland’s central planning
system with a market economy. This was to be achieved through the Balcerowicz Plan, implemented
January 1, 1990. The Balcerowicz Plan—which sought to end hyperinflation and balance the national
budget—freed the prices of most consumer goods, established caps for annual increases in statesector employees’ wages, and made the zloty convertible within Poland’s borders. These reforms, in a
market of 40 million commodity-starved consumers, captured the imagination of the Western
business world, and eager Westerners flocked to Warsaw in search of opportunities. Suddenly,
Poland’s ill-prepared hotel sector was being overrun by a new type of visitor: the business traveler.
As a result of Poland’s democratic and economic reforms, the number of foreign visitors to
the country soared. Poland received 18 million international travelers in 1990—up from 8 million in
1989. Of the 4 million Western visitors in 1990, 2.8 million hailed from Germany and Scandinavia,
while 120,000 came from the United States and Canada. Although the number of U.S. and Canadian
visitors was relatively low, it had doubled since 1989. Foreigners in Poland spent a total of $250
million in 1990—an increase of 33% over the previous year (although this figure may seem low—$14
per visitor—visitors from other previously socialist countries, who still constituted the bulk of
Poland’s tourist base, preferred to stay in low-cost camping areas).
At the time the Balcerowicz Plan was implemented, a traveler wishing to book a high-quality
hotel room in Warsaw had two options: the Marriott, or, somewhat less luxurious (and less
expensive), an Orbis hotel. Orbis operated 55 hotels in Poland, 8 of which were located in Warsaw.
Three of Orbis’s Warsaw hotels—the Victoria Intercontinental, the Novotel-Orbis, and the Holiday
Inn (located directly across the street from the Warsaw Marriott)—were operated under franchise
agreements with Western hotel companies. The Victoria Intercontinental and the Holiday Inn, which
were the most luxurious of Orbis’s hotels, were rated “Superior First Class” by the Reed Travel Group;
the Warsaw Marriott received the more prestigious “Deluxe” rating. (For a list of Warsaw hotels
featured in the Reed Travel Group’s Official Hotel Guide in 1992, see Exhibit 5.)
Although Marriott held an uncontested position at the high end of Warsaw’s hotel market,
and Orbis dominated a more moderate niche, liberalization had begun to drastically change the
structure of Poland’s hospitality industry. As late as 1989, the industry was still designed primarily
for domestic tourists and tourists from other socialist countries. Only one-fifth of all tourist bed
spaces were accounted for by hotels, while more than one-half belonged to factory-owned guest
houses, and most of the rest were on camp sites or in private homes registered wi …
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