An article in the Wall Street Journal report that large hotel chains such as Marriott are tending to reduce the number of hotels that they franchise to outside owners and increase the chain owns and manages itself. Some chains are requiring private owners or franchisee to make upgrades their hotels, but they are having a difficult time enforcing the policy. Marriott says this upgrading is important because we've building our name on quality.
1. Discuss the nature of the agency problem facing Marriott.
2. Discuss why would a chain such as Marriott tend to own its hotels in resort areas, such as national parks, where there is little repeat business and franchise hotels in downtown areas, where there is a lot of repeat business?