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Marriott Corporation and Project Chariot
The Marriott Corporation (MC), had seen a long, successful reign in the hospitality industry until the late 1980s. An economic downturn and the 1990 real estate crash resulted in MC owning newly developed hotel properties with no potential buyers in sight and a mound of debt. During the late 1980s, MC had promised in their annual reports to sell off some of their hotel properties and reduce their burden of debt. However, the company made little progress toward fulfilling that promise. During 1992, MC realized that financial results were only slightly up from the previous year and their ability to raise funds in the capital market was severely limited. MC was left with little choice, as they had to consider some major changes within the company if they wished to remain a successful business. Thus, J.W. Marriott, Jr., Chairman of the board and president of MC, turned to Stephen Bollenbach, the new chief financial officer, for ideas and guidance.
Bollenbach, who had a reputation for creating innovative financial structures in the hotel industry, proposed a radical restructuring for MC. Bollenbach's proposal included breaking MC into two separate entities. The new company would retain the service businesses of MC and have the financial strength to raise capital and take advantage of various investment opportunities. On the other hand, the old company would retain the hotel properties and the pressure to sell properties at reduced prices would be greatly lessened. This drastic restructuring proposal, deemed Project Chariot, had to be evaluated by J.W. Marriott before he went before his board of directors with his ultimate recommendation. Thus, Marr ...