Hyatt vs Marriott: Who Rules in Bill Collection?

Ever wondered how hotels make cash moves?

Step into the financial dance of Marriott and Hyatt: one with a lightning-quick cash grab, the other a master at collecting bills. Brace yourself for the numbers that tell their cash stories:

When it comes to cash flow, every day counts for hotel giants- Hyatt and Marriott. As the receivables rack up from legions of guests, these chains go toe-to-toe to quickly convert invoices to cash.

Today we'll crack open their financial reports to see who's coming out on top of the collections game.

We'll analyze key financial ratios like Days Sales Outstanding and Days Payable Outstanding to compare how fast each chain gets paid. Who leads the pack in converting reservations to revenue? And who's carrying a bigger balance of unpaid bills?

Pop some popcorn - it's showtime as we crown the collections king with the quickest cash grab. The receivables rumble is on, so place your bets on Hyatt vs Marriott before we break down the winners and losers!

Marriott's impressive turnaround post-COVID

In 2020, both Hyatt and Marriott faced AR struggles, but Marriott sprinted ahead with rapid cash collections. 

With an average Accounts Receivables Turnover Ratio of 8 in the last five years, Marriott emerges as the quicker pandemic checkout in the hospitality industry

Both the hotels touched a low ART of 6 in 2020, Marriott’s ART grew upward post that while Hyatt had difficulty with cash collections in 2021 as well (see graph). This could be because of Hyatt’s franchise model of operations and its focus on luxury segments.

Marriott wins on cash conversion cycle

In the race of Cash Conversion Cycle (CCC), Marriott and Hyatt take center stage, each boasting its unique tempo. 

Marriott’s average CCC for the last five years was 20 days. This indicates that Marriott pays its suppliers in less than a month. 

In contrast, Hyatt has an average cash conversion cycle of 28 days between 2018 and 2022.

Now let’s examine in detail the metrics (DSO, DPO, DIO) driving their CCC scores.

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Marriott’s DSO is lower by 10 days

Timely payment collections from customers and adequate working capital are critical for hotel chains to maintain their properties.  

Marriott’s balance sheet seems to be better at collecting credit payments from customers than Hyatt. Its Days Sales Outstanding (DSO)for the last five years is 46 days, while Hyatt’s is 56 days. Hyatt’s DSO has always been, on average, ~6 days longer than that of Marriott, with the difference reaching almost 28 days in 2021 (see graph).

Interestingly, both Hyatt’s and Marriott’s balance sheets report a DSO that is higher than the hospitality industry average of approximately 22 days, as they serve more business customers than retail customers.

Why is Marriot’s DSO lower than Hyatt’s?

• Budget-friendly options: Hyatt targets premium customers, while Marriott serves a budget-friendly audience through brands like Courtyard and Fairfield Inn. Business customers and high-net-worth individuals enjoy liberal credit terms at Hyatt, while tighter terms for budget audiences contribute to Marriott’s lower DSO, facilitated by cash transactions at checkout.
• Credit card partnerships: Marriott has partnerships with multiple banks for co-branded credit cards. These cards offer various perks, including bonus points, elite night credits, and anniversary free night certificates while Hyatt’s credit card partnerships are more limited. This makes collecting payments faster for Marriott.
• Fee structure: Marriott’s resort fees, parking charges, and pet fees are noted to be lower compared to Hyatt, thus reducing their overall receivables.

Hyatt and Marriott have near zero DIO

For hotel companies, efficiently managing inventory is crucial but easier said than done. You need to keep enough rooms on hand for guests yet not let stock pile up taking up valuable space and cash.

According to Hyatt’s financial reports, its Days Inventory Outstanding (DIO) averaged 1.5 days over the last five financial years, while for Marriott, it reached near-zero levels (see graph).

Marriott’s budget-friendly options and higher number of hotel locations (8,000properties in 130 countries versus Hyatt’s 1,150 properties in 70 countries) enable it to service clients globally and manage its supply chain better.

Why is Marriott’s DIO lower than Hyatt’s?

• More budget options: Marriott’s larger portfolio includes more economy and midscale brands that generally have higher occupancy rates compared to luxury brands. Hyatt skews more towards luxury, hence, it has a lower overall occupancy.
• Self-owned and operated properties: Marriott owns most of its hotels compared to Hyatt’s greater reliance on franchisees. Owned properties give Marriott more direct control over operations to optimize inventory utilization.

Hyatt Pays Suppliers Sooner by 7 Days

In the competitive hotel industry, managing cash flow is crucial for long-term success. Not only do companies need to quickly replenish inventory stocks, but they must also juggle the timing of payments to suppliers.

Hyatt’s financial reports have disclosed an average Days Payables Outstanding (DPO) of 20 days over the last five financial years, whereas Marriott’s average DPO was 27 days (see graph).This indicates that Marriott pays its suppliers much later after collecting its revenue dues.

Why is Marriot’s DPO higher than Hyatt’s?

• Supplier diversity initiatives: Marriott emphasizes supplier diversity and encourages the inclusion of businesses owned by individuals from historically disadvantaged communities. This results in more prompt payments to suppliers as part of Marriott’s commitment to supporting and fostering relationships with diverse-owned firms. 
• Centralized procurement and payment: Hyatt’s extensive franchising model and local procurement at individual properties indicate decentralized payment practices. In contrast, Marriott’s centralized procurement processes provide better oversight and structured payment terms, contributing to better control over DPO for Marriott.

A Close Contest Between the Hotel Giants

In the high-stakes world of cash collection, Hyatt emerges as the sprinter, turning payments faster with a nimble receivables turnover. 

Yet, the real champion of efficient working capital management is Marriott. Armed with an integrated operation and stellar supplier relationships, Marriott boasts an industry-leading 20-day cash cycle.

While Hyatt clinches the prize for swift collections, their asset-light model takes the spotlight, maximizing profits. It has increased its mix of luxury, lifestyle, and resort rooms to 44% of the portfolio in 2022, vs. 32% in 2017. Marriott, on the other hand, secures a dedicated focus on inventory, payments, and supplier diversity.

In essence, it’s a tale of two giants – Hyatt racing to the finish line with rapid collections, and Marriott mastering the cash conversion marathon through strategic inventory and supplier management. Both showcase impressive cash collection skills, but Marriott’s integrated approach ensures it remains steadier in the receivables race.