Lawrence Campbell 12/2/12 Case 25

Good Hotel: Doing Good, Doing Well?

Bac gro!nd "n#ormation $oie de %i&re '$d%( is a )an *rancisco based +otel management compan, wit+ 1properties in t+e cit,. "t was #o!nded in 1/01 b, C+ip Conle,. He nows t+at +is compan, comes !p wit+ !ni2!e +otels, wit+ own personalit,. "t +as managed to grow to 3- bo!ti2!e +otel properties. "t became t+e second largest in 2414. $d% +ad combined two o# t+eir properties, Best Western Hotel Britton and Best Western *lamingo. 5am $an!s6 is t+e general manager #or Good +otels. )+e recei&ed a message in2!iring t+at r!mors were tr!e t+at t+e owner o# Good Hotel and t+e two ot+er properties t+at $an!s6 managed since 7o&ember 244/. Best Western 8mericania and Best Western Carriage "nn, +ad #oreclosed on t+eir +oldings and sold t+e t+ree properties, all o# w+ic+ were in $d%9s )o!t+ o# :ar et )treet ')o:a( gro!p to a new owners+ip gro!p. )+e will be +elping wit+ t+e transition #rom one owners+ip to anot+er, b, e&al!ate Good Hotel per#ormance along wit+ +elping sta## to ad;!st. W+en it opened in 7o&ember 2440 wit+ 111 rooms, it opened as Good Hotel. Good Hotel is nown as <+otel wit+ a conscience=. "t +as a positi&e approac+, eco>#riendl, +otel, and it nown its rec,cled materials. ?+is +otel belie&es in doing good t+ings #or t+e en&ironment. ?+e new gro!p planned to r!n

t+e t+ree +otels t+emsel&es and t+e, wo!ld end t+e management wit+ $d% i# no problems arose wit+ t+e sale at t+e end o# :a, 2414.

?+e lodging ind!str, was dominated b, twel&e leading +otel c+ains in t+e @nited )tates in 244/. A!t o# t+ese twel&e leading +otel c+ains, eac+ one o# t+em +as #eat!res t+at accommodate to one cons!mer b!t not to anot+er. Ane o# t+e bigger +otels ma, +a&e more properties wit+ so man, rooms wit+ &er, little to o##er b!t low re&en!e, b!t anot+er +otel wit+ less properties wit+ almost t+e same amo!nt o# rooms, more to o##er and +a&e +ig+er re&en!e. "n 244/, t+e lodging ind!str, was s!##ering #rom c+ronic o&ercapacit,. ?+e prolonged ind!str, downt!rn was eBpected to drop occ!panc, le&els b, 55 to 5- percent, representing t+e worst rate since t+e Great Depression, according to )tandard C poor9s. Hotel occ!panc, +ad declined b, 0.0 percent in 244/, and was #orecast to drop b, a #!rt+er 4.2 percent in 2414.

)trateg, ?+e, were geograp+icall, #oc!sed and prod!ct line di&erse. C+ip Conle, +ad a &ision on +ow to r!n +is +otels. He sa,s +e went into +ospitalit, beca!se +e en;o,ed commercial real estate b!t +ated t+e transactional part. <"# ,o! get it rig+t and ,o!r c!stomer sees t+e prod!ct as an eBtension o# t+emsel&es, ,o!9&e re#res+ed t+e identit, o# t+e c!stomers beca!se t+e, #eel t+at b, !sing t+e prod!ct t+e,9re becoming more o# t+at aspirational sel#.=

"n 2441 +e stated +ow t+e, #eel t+e, are &iewed wit+ t+eir branding strateg,. <We went t+ro!g+ a w+ole branding process, and w+at we +eard #rom o!r c!stomers was t+at t+e, lo&ed t+e #act t+at we create original +otels. We come !p wit+ a personalit, #or t+e +otel b, t+in ing o# maga6ines. "t is sort o# li e a good to!c+stone #or personalit,.= He contin!es on to sa,, <Do! can be geograp+icall, di&erse, b!t t+at means ,o! +a&e to be prod!ct>line #oc!sed. Ar ,o! can be geograp+icall, #oc!sed and t+e prod!ct line di&erse. Holida, "nn is geograp+icall, di&erse and prod!ct>line #oc!sed. We are t+e opposite o# Holida, "nn.= $d% spent &er, little on mar eting, pre#erring to rel, mostl, on word o# mo!t+ and social media promotion on "nternet to attract g!ests to its +otels. @ni2!e mont+l, &isitors to social tra&el websites s!c+ as ?rip8d&isor.com and Delp.com rose b, 34 percent between t+e #irst +al# o# 2440. "n t+e last +al# o# 244/, it rose to 15./ million s+owing ,ear>o&er> ,ear growt+ o# more t+an 34 percent in t+e #irst +al# o# 244/ and E5 percent in t+e second +al# o# 244/.

5 *orces model Bargaining power of Suppliers: ?+e two e, s!ppliers to $oie de %i&re wo!ld be labor and real estate. ?+ese s!ppliers are de#ined as propert, owners, de&elopers and real estate companies, interior design and #!rnis+ing companies, arc+itects, mar eting companies and ind!str, cons!ltants. ?+ere are a signi#icant n!mber o# real estate companies #or a gi&en localit, so t+e, +a&e a moderate amo!nt o# power. ?+e, can ma e a lot o# s!bstit!tes #or real estate agents, and designers. Hotels +a&e +ig+er bargaining power and can easil, switc+ between s!ppliers.

Bargaining Power of Buyers: ?+e b!,ers are t+e end>!sers. ?+e, #all along t+e lines o# t+e lines o# leis!re tra&elers, b!siness tra&elers or c!stomers w+o re2!ire space #or con#erences or ot+er e&ents. B!,ers are n!mero!s and small in si6e and losing one c!stomer is not going to ma e a di##erence. ?+eir bargaining power is low. ?+ere are m!ltiple s!bstit!tes #or gi&en +otel or brand a&ailabilit,. B!,ers are price sensiti&e eBcept #or w+en it comes to t+e premi!m segments so t+e switc+ing cost is low. Barriers to Entry: ?+ere are +ig+ economies o# scale, it is &er, important #or $d% to operate a c+ain o# +otels in m!ltiple locations, especiall, #or premi!m segments. Hotels s+o!ld be +ig+l, di##erentiated #or c!stomers to notice a speci#ic +otel. ?+e brand name and &al!e are &er, important in attracting and retaining c!stomers. ?+ere is a +ig+ eBit barrier +a&e speciali6ed assets #or t+e ind!str,. Threat of Substitutes: ?+ere are close s!bstit!tes s!c+ as in#ormal accommodations wit+ #riends and #amil,. 8lternati&e #orms o# leis!re accommodation s!c+ as camping and F%s. ?+ere are also corporate g!est+o!ses #or b!siness tra&elers t+at ta e awa, #rom t+e +otel ind!str,. ?+e switc+ing cost #or s!bstit!tes is negligible #or in#ormal accommodations. )!bstit!te price &al!e are &er, +ig+ #or in#ormal accommodations b!t can be moderate #or ot+er leis!re accommodations. Large +otel c+ains +a&e greater bargaining power #or pro#itabilit, o&er s!bstit!tes. Rivals among Existing Competitors: 8mong competitors in t+e +otel ind!str,, t+ere are a small n!mber o# large operators, t+e ind!str, o&erall growt+ rate ann!all, is 13G and it is a mat!re ind!str,. "t +as a low switc+ing cost to similar brands, and o&erall t+e to!rism ind!str, is seeing strong growt+.

Dri&ing *orces ?+e growing interest in and in&estments made to s!pport s!stainabilit, in t+e +ospitalit, ind!str, +ad, b, late 244/ mo&ed be,ond +otel rec,cling programs and energ,>e##icient lig+ting. ?+e long economic recession in 2440 and 244/ ?+e normall, so#t tra&el boo ings d!ring t+e winter mont+s

He, )!ccess *actors ?+e greening o# t+e +otel ind!str, is a large e, s!ccess #actor #or $oie de %i&re. "n Hotels maga6ine t+ere was an article in 244/ t+at stated, +otels see ing new c!stomers and growt+ in di##ic!lt economic times co!ld bene#it o&er t+e long term wit+ in&estments in s!stainabilit, initiati&es incl!ding retro#itting eBisting properties to ac+ie&e Leaders+ip in Inerg, and In&ironmental Design 'LIID( certi#ication and b!ilding new properties to LIID standards. 8 tra&el "nd!str, st!d, reported t+at nearl, +al# o# @.) leis!re tra&elers eBpressed a willingness to pa, +ig+er rates #or ser&ices pro&ided b, en&ironmentall, #riendl, tra&el pro&iders. ?+ere was now a growing demand #or green lodging t+e emerging demograp+ic segment was identi#ied as <C!lt!ral Creati&e9s=. ?+e, were sa&&,, sop+isticated, ecologicall, and economicall, aware c!stomers w+o belie&ed t+at societ, +ad reac+ed a waters+ed moment in +istor,. ?+e, were also nown as <Li#est,les o# Healt+ and )!stainabilit,= 'LAH8)(. ?+is segment was estimated b, t+e 7at!ral :ar eting "nstit!te to consist o# abo!t 30 million people or 11 percent o# t+e @.). ad!lt pop!lation, wit+ spending power o# J24/

billion ann!all,. An estimate, 15.E million &isitors &isited t+e cit, and co!nt, o# )an *rancisco in 244/, more t+an E.5 million sta,ed o&ernig+t at commercial accommodations, ma ing 32,/1- +otel room and 215 +otels. %isitors paid 1E percent occ!panc, taB, w+ic+ generated abo!t J214 million #or )an *rancisco cit, and co!nt, ser&ices.

Comparati&e Demograp+icsK 8ll Cons!mers &ers!s <Green= Cons!mers IB+ibit 3 8ll Cons!mer 8&erage age Gender *emale :ale It+nicit, Ca!casian/ot+er Hispanic 8#rican 8merican College ed!cated :edian +o!se+old income )WA? 8nal,sis Strengths: W+en $oie de %i&re was #o!nded in 1/01 it +ad grown to manage 3- bo!ti2!e +otel properties in Cali#ornia. B, 2414, $d% was t+e second>largest @.). bo!ti2!e +otel operator. ?+e bo!ti2!e +otels di##erentiated t+emsel&es #rom branded c+ain +otels and motels b, pro&iding personali6ed accommodation and ser&ices and #acilities. ?+e, are also nown as <design +otels= or <li#est,le +otels=. ?+e, di##erentiated b, creating t+eir EE <Green= Cons!mers E4

51G E/G

5EG E-G

15G 13G 11G 25G J50,144

-2G 21G 1-G 31G J-5,144

own t+eme, st,le, and aspiration t+ro!g+ t+eir newl, applied #!rnis+ed loo s, also t+eir en&ironmental #riendl, appeal. Weakness: 8n ind!str, t+at relies on t+e needs o# !npredictable tra&elers. ?+e, are #orced to mane!&er t+e wa, t+e econom, sees #it. "# t+e econom, is doing bad people are less li el, to spend mone,, go on trips, t+ere#ore t+e $d% doesn9t ma e a lot o# mone,. ?+e econom, is doing well, people spend more mone,, go on more trips and $d% +as access to a larger a!dience. Opportunities: ?+e greening o# t+e +otel ind!str, wit+ 30 million people in t+e LAH8) segment. ?+at is 11 percent o# t+e @.). ad!lt pop!lation, wit+ spending power o# J24/ billion ann!all,. $d% need to ad&ertise and ma e t+e need #or cleaner +otels more nown so t+at t+e, can accommodate a lot more o# t+ose c!stomers in t+is segment. Threats: B!siness tra&el being a big #actor in t+e ind!str,. $oie de %i&re and t+e rest o# t+e ind!str, will get a##ected b, t+e slowdown in tra&el d!ring dr, spots in t+e ,ear. Fecessions also +!rt $d% beca!se people are less li el, to tra&el and want to spend mone,. ?+e +otel ind!str, gets most o# t+eir re&en!e t+ro!g+ tra&elers and &acationers. ?+e weat+er dictates w+at ,o!r c!stomers are going to do, also airlines +andling potential c!stomers, #lig+t cancellations or redirections.

8nal,sis o# *inancials "n :arc+ 244/, Good Hotel n!mbers started increasing loo ing better t+an 5eer Gro!p. "n occ!panc, percentages, Good Hotel c!rrent mont+ was 14.3G to 5eer Gro!p9s 5/.3G. Dear>to>date 55.3G to 5eer gro!p9s 53.EG and in r!nning 3 mont+ Good +otel +ad 55.3G to 5eer Gro!p9s 53.EG. :arc+ 31, 2414 Good Hotel9s n!mbers were o&erall better t+an

5eer Gro!ps9. F!nning 12 mont+s, t+e occ!panc, percent was 5eer Gro!p -1.0G to Good Hotel9s 1-.1G, 8DF 5eer Gro!p +ad a better J04.21 to Good Hotel9s J10.55, and in Fe&58F Good Hotel9s J-4.21 &s. 5eer Gro!ps JE/.-3.

:ont+l, Aperating )tatistics: Good Hotel, $an> :ar. 2414

7!mber o# rooms Acc!panc, 'G( Fe&58F 'J( ?otal re&en!e

$an 111 5-./E4.31 JE,11-

2414 *eb 111 E/.5E 35.3/ JE,1E1

:ar 111 --.11 E0.54 J5,-15

:anagerial Worr, list :anagers wo!ld +a&e to worr, abo!t tr,ing to #ill 111 rooms ,ear ro!nd. :an, o# t+e rooms will be empt, !nless t+ere are last>min!te or wal >in boo ings s+owed !p. At+er #actors being long economic recessions w+ere people aren9t tra&eling or spending mone,, normall, so#t tra&el boo ings d!ring t+e winter mont+s, and canceled boo ings #rom c!stomers w+ic+ will be a lost in re&en!e i# not comm!nicated 2!ic l, so t+e rooms can be opened bac !p to wal in c!stomers. 8lso need to #oc!s on targeting t+eir emerging demograp+ic segments s!c+ as LAH8). "# t+at mar et remains completel, satis#ied in t+eir ser&ices t+e, are li el, to remain s!ccess#!l.

Fecommendations

"n t+e mar eting e##orts #or $oie de %i&re " wo!ld recommend t+at instead o# ;!st rel,ing on word o# mo!t+ and social media promotions, t+e, s+o!ld &ent!re o## into ?% and commercial ad&ertisements. 8 b!siness can +a&e t+e most elegant in#rastr!ct!re, t+e most eBtra&agant #acilities, and t+e #inest #ood in t+e world b!t i# no one nows abo!t it t+en it is b!t so m!c+ s!ccess t+at b!siness can ac2!ire. ?+e, s+o!ld ad&ocate t+e need or bene#it t+at c!stomers can obtain sta,ing at a bo!ti2!e +otel and gaining t+at eBperience. ?% and newspaper ads sa,ing <?+e &acation starts +ere= letting cons!mers t+in sta,ing at t+e +otel wit+in itsel# is a &acation. ?+e, s+o!ld aggressi&el, &oice more abo!t t+e green +otel mo&ement. 5osition t+eir sel# to be a cleaner +otel t+en an, ot+er, t+e lo!der ,o! &oice ,o!r bene#its t+e more cons!mers ma, t+in ,o!9re t+e onl, +otel ma ing e##orts to contin!all, impro&e ,o!r cleanliness. ?+e, s+o!ld also start to t+in abo!t a worldwide eBpansion. ?+e neBt #i&e ,ears t+e, s+o!ld start to eBpand more aro!nd t+e nation, and p!t a lot o# t+eir +otels more o&erseas w+ere t+e, #eel bo!ti2!e +otels will be appreciated.