When Marriott International Inc. reports its fourth-quarter performance today, it will be the first time in decades that the Bethesda firm has posted results as only a hotel company.
Since it first got into hotels in the 1950s, Marriott has operated a variety of businesses -- restaurants, theme parks, senior living centers. But in recent years it has jettisoned ancillary businesses, many of which, by management's admission, were mistakes.
The most recent discards: Marriott's supply distribution business and its chain of senior living centers.
"These weren't key businesses for us," said Laura E. Paugh, the company's senior vice president of investor relations.
The company was started as a root beer stand in 1927 and grew to become an empire of more than 2,000 hotels worldwide. Along the way, several ventures were added.
"From its very beginning the company has put a premium on looking for ways to put its know-how into business," Paugh said. "You've seen the company evolve from a restaurant company into a lodging company."
The root beer stand led founder J. Willard Marriott to start a popular line of restaurants, the Hot Shoppes, known for their all-American food. In the late 1930s, the chain was one of the first companies to get into the airline catering business. Marriott got into running cafeterias at government institutions in the 1950s.
Marriott did not build its first hotel until 1957, when the 365-room Twin Bridges Motor Hotel opened in Arlington.
In the late 1960s, Marriott quickly expanded its restaurant business, buying the Big Boy restaurant chain and later the Roy Rogers chain. Marriott even tried its hand in the late 1970s at running two theme parks -- one in California and another in Illinois -- and a cruise line that ran to the Greek Islands. But it got out of those businesses in the late 1980s.
"In the 1980s, we were still a three-part strategy," Paugh said. "There were hotels, contract services and restaurants. We looked at each of those businesses and the amount of capital it required -- what we could bring to it -- and we made determinations to get out."
Food service and restaurants, the roots of the company, did not mesh with chief executive J.W. Marriott Jr.'s vision for creating a global hotel company built around well-known brands. He sold the restaurants in 1990. The company left the food service business in 1997, when it sold it to Sodexho Inc.
The company's senior living services were designed to take advantage of the Marriott name and impart the company's service philosophy on the elder-care business. But the business changed in the 1990s and, increasingly, did not fit with the company's priorities.
"We got into senior living because it fit in well with the company," Paugh said. "It was seen as a hospitality business, so we thought at the time."
The senior living industry had become overbuilt by the late 1990s, leading Marriott to pull back on developing more centers. It eventually decided to get out altogether, agreeing to sell the business to Sunrise Assisted Living Inc. of McLean in December for $150 million. The deal is expected to close this quarter.
"Senior living has become much more a health care business," Paugh said.
Marriott spokesman Tom Marder said: "We don't run hospitals."
The last of the businesses Marriott decided to get rid of was distribution services. Because the company was in the restaurant and hotel business, it seemed efficient for it to distribute supplies and food to its other businesses. But as it sold those businesses, it became too costly to run 13 distribution centers.
"They were delivering billions of dollars' worth of products, and as we got rid of our restaurants and in-flight and management services, it became less effective to run the distribution business," Paugh said.
Marriott had distribution contracts with Outback Steakhouse Inc. and Boston Market Corp., but Paugh said that competing with larger, specialized distribution companies was too expensive. The business became a drag on profit and had relatively low margins.
"It was a distraction and a confusion; it makes sense to get out of it," said David Loeb, a hotel analyst at Friedman, Billings, Ramsey Group Inc.
Marriott started to divest its distribution services in the second half of 2002. Now, executives say they are focused full time on their "core" business: running hotels.
And focus will be needed. Marriott's growth hinges on its ability to develop new hotels and persuade owners of other franchises to switch to its flag.
Building new hotels is becoming increasingly difficult given the state of the economy. Marriott's goal is to open 25,000 to 30,000 new rooms each year, most of which are conversions of other branded hotels to the Marriott name.
"The thing now is to get management's attention back on the things that are important to us," Paugh said. "That's lodging."