1. Should Accor become an equity partner in Room Key? Why or why not?

Introduction: The decision for Accor to become an equity partner in Room Key
involves evaluating the potential benefits and drawbacks of such a partnership.
Detailed Solution:
Explanation:
Advantages of Becoming an Equity Partner:
1. Strategic Influence: As an equity partner, Accor would have a direct stake in
Room Key's ownership, allowing for greater influence over the platform's
strategic decisions and direction.
2. Profit Sharing: Accor would potentially share in Room Key's profits and benefit
from its financial success.
3. Alignment of Interests: Being an equity partner aligns Accor's interests more
closely with Room Key, potentially fostering a deeper partnership.
Disadvantages of Becoming an Equity Partner:
1. Capital Investment: Accor would need to invest a substantial amount of capital
to acquire equity in Room Key, which could impact its financial resources.
2. Risk Exposure: As an equity partner, Accor would also be exposed to the
financial risks and performance fluctuations of Room Key.

Should Accor become a commercial partner of Room Key? Why or why not?

Explanation:
Advantages of Becoming a Commercial Partner:
1. Lower Capital Requirement: Accor would not need to make a significant capital
investment to become a commercial partner, reducing financial risk.
2. Flexibility: As a commercial partner, Accor can engage with Room Key on a
more flexible basis, focusing on specific partnerships and initiatives.
Disadvantages of Becoming a Commercial Partner:
1. Limited Influence: Accor may have limited influence over Room Key's strategic
decisions and may not be as closely aligned with its interests.
2. Potentially Higher Commission: Accor may need to pay a higher commission
fee (15%) compared to being an equity partner (10%).
3. What is the ROI of both of these strategies?

Explanation:
Return on Investment (ROI): ROI is a key metric to consider in evaluating these
strategies. It is calculated as:
ROI = (Net Profit / Investment Cost) * 100
For Equity Partnership (10% Commission):
  Investment Cost: The capital invested by Accor to acquire equity in Room Key.
 Net Profit: Accor's share of profits from Room Key.
For Commercial Partnership (15% Commission):
 Investment Cost: No significant capital investment required.
 Net Profit: Accor's profits from its commercial partnership with Room Key minus
the higher commission fee (15%).
The ROI calculation for both strategies would require specific financial data and
projections, including the capital investment for the equity partnership and the revenue
generated minus the commission for the commercial partnership.

The decision between becoming an equity partner or a commercial partner in Room Key
depends on Accor's strategic goals, available capital, risk tolerance, and the potential
ROI of each option. The ROI calculation would provide a quantitative basis for making
this decision, considering both financial gains and capital requirements.

Ans 1: The say that OTAs are a good source for customers, but too expensive to have
all of their bookings come from there. Instead, they want them to “help us tap into new
customer bases in certain parts of the world where we do not have such a prominent
presence.” In other words, it is a great place to start, but then they want them to become
loyal to their brand and book directly with the hotel. They have already started achieving
this by promoting their loyalty system Le Club Accorhotels, which is growing in size. I
believe that they should continue the strategy they have, which is to keep a good
relationship with OTAs for the first stay of a customer, but then work hard to transition
the customer to direct booking.

Ans 2: A way for them to cut out OTAs and have customers book directly through a
hotel’s website after they search to find the price, location, and hotel they want. The
problem is that it still requires a fee and the business would have a hard time surviving
in the high competition arena. I might wait on either option in the text until the company
was sure the business would be a success so that they don’t waste money on
something that doesn’t work. I don’t think they have the expertise needed, but they do
catch customers sometimes. They might not be a good fit for the market that Accor is
interested in. However, if pressed, I would choose to invest as an equity partner
because, in the long run, it would pay off.
Ans 1: The say that OTAs are a good source for customers, but too expensive to have
all of their bookings come from there. Instead, they want them to “help us tap into new
customer bases in certain parts of the world where we do not have such a prominent
presence.” In other words, it is a great place to start, but then they want them to become
loyal to their brand and book directly with the hotel. They have already started achieving
this by promoting their loyalty system Le Club Accorhotels, which is growing in size. I
believe that they should continue the strategy they have, which is to keep a good
relationship with OTAs for the first stay of a customer, but then work hard to transition
the customer to direct booking.

Ans 2: A way for them to cut out OTAs and have customers book directly through a
hotel’s website after they search to find the price, location, and hotel they want. The
problem is that it still requires a fee and the business would have a hard time surviving
in the high competition arena. I might wait on either option in the text until the company
was sure the business would be a success so that they don’t waste money on
something that doesn’t work. I don’t think they have the expertise needed, but they do
catch customers sometimes. They might not be a good fit for the market that Accor is
interested in. However, if pressed, I would choose to invest as an equity partner
because, in the long run, it would pay off.