Marriot in Iraq: Managing a Hotel in Baghdad’s International Zone

1. Marriot in Iraq: Managing a Hotel in Baghdad’s International Zone Mindy La BrancheMuraliMedisetti Marc Mandel Paul Obame Gabriel Ruth STRT 571, Saxa 28 April 2010

2. “Marriott is a management company ... 99.9 per cent of our investments are our people, the brand, the resources and the systems. We are strictly a management company in every way.” "The [Middle East] is very critical ... from a source market perspective ... at the same time, the Middle East is critical for us because of the exposure we get. And guess what? We make a lot of money here too.” - Edwin D Fuller, President and Managing Director of International Lodging for Marriott International

3. Iraqi National Investment Council’s Reasons to Invest in Iraq As They Relate to Marriott • Gateway to Middle East and Asia • Unmet needs of a diverse domestic market • Educated, talented and available workforce • Competitive wages and operating costs • Investment incentives, tax exemptions and guarantees • Low corporate tax rates • Ample opportunity for local partnerships

4. Currency • Exchange rate is a crawling peg tied to the US $ • 1,170 dinar to US $1 • Managed appreciation of the dinar by Central Bank • US $ is most widely used foreign currency • Primarily cash-based transactions • Politics • March 7th parliamentary election still undecided • Court-ordered recount will delay formation of new gov’t • Political players are jockeying for advantage • Serious concerns of government instability while political process runs its course • Troop reductions and policymakers’ intent to reduce the scope of U.S. involvement limit the ability to intervene

5. Market • Security improvements lead to increases in tourist and business travel • Iraqi government recognizes tourism as a key economic sector; Iraq is home to over 12,000 historic sites • Baghdad is the national capital, largest city, and business hub • Increasing flow of international business travelers heightens need for world-class hospitality facilities • Investors and foreign government officials traveling to Iraq are seriously hindered by the lack of suitable accommodations • Competition • Shams Rotana Hotel, • Opening 2012 • 250 rooms • Less luxurious than Marriott • AI Rashid Hotel • Built 1982 • Recently refurbished • 400 rooms • Rocket attack in 2003

6. Management, Operations and Infrastructure Considerations • Investors would be advised to incorporate supplemental electricity and water infrastructure on site • Marriott should apply the lessons learned from the Islamabad bombing to the site design of its Baghdad property • Marriott should employ a local firm to help navigate the often confusing Iraqi bureaucracy • Potential for violence and pervasive government security presence advocate for additional on-site storage and service capacity • Many challenges can be turned into • profit-making opportunities Rendering of Proposed Green Zone Village

7. Financial Considerations • Capital requirement to construct hotel estimated at $100 million (Responsibility of investment group) • Estimate of $5 -10 million investment for Marriott to make the hotel operational • Little competition in short term = high daily rates • Opportunity for additional revenue in value-added services: Food & Beverage, Conference Management, Business Services, and more • Enhanced image worldwide with successful operation in Baghdad • Projected Revenue Per Available Room (RevPar) 3X that realized at comparable hotels in Middle East Region

8. Any questions?