Good Hotel (Case 25) - Part 25
Good Hotel Analysis What is the stand out economic characteristics of the macro environment of the US hotel lodging industry? - Good Hotel (Case 25) introduction?? There are 12 leading hotel chains which have various branches within those chains. Each accommodate different numbers of guests and different types of guests. Before 2008 there had been massive expansion in preparation for a large upturn in the industry however when the expansions were finished the market was in withdrawal leading to the largest downturn in the lodging industry.
The major economic characteristics influencing the lodging industry have to do with business meetings and conference related travel taking 40% of the business in the whole industry of 2010. The hotel industry is dominated by large branded hotel chains that react to industry factors similarly, this is one of the reasons there was a large downturn. It can be argued the industry predicts its growth in correlation with real GDP. How would you characterize Joie de Vivre’s strategy for its good hotel brand? Is the hotel’s commitment to social responsibility an important component of its competitive strategy?
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Explain She basically took the hotel industry and created niche markets around them then allowed them to develop through word of mouth and social media. The social media marketing was growing causing online sites to provide services and reviews related to the industry. By creating what consumers call “Original hotels” they separated themselves from competition by not appearing publicly like one of the major chain companies. Both business professionals and tourists enjoy the unique atmosphere and the aspect that the hotel is trying to be environmentally friendly; in result it has been drawing a good audience.
They have been adapting their strategy to meet the psychological needs of the consumers to promote return customers fueling word of mouth advertising. They compete strategically opposite to the way Holiday Inn operates. The commitment to social responsibility is what separates them as a company, they want to inspire “good in us all”. This is opposite of most brands that try to buy things in quantity keeping the prices low but having a very generic appearance and feel. Her strategy created a niche that strongly supported her strategy yet she stays competitive with pricing even if offering more value than other competing hotels.
Describe the key strategy implementation efforts at good hotel brand. Has management allocated sufficient resources to the strategy execution effort? exercised strong leadership to propel strategy execution forward? Instituted policies and procedures that facilitate good strategy execution? Originality and uniqueness are what drove the success for this brand originally then shifting focus on being an environmentally friendly yet affordable upscale hotel was how they appealed to even more consumers. Most of the furnishings in the hotel rooms are made from recycled materials in an effort to have a PR appearance of being a “green” company.
The unique niche they found is due to their originality and meeting new types of consumer preferences aside from the basic needs, such as having a homely feel and using recycled materials to be eco-friendly. The unique style of hotels created were purposed for hip, happy, humble, and conscious consumers. The resources allocated to pursue this strategy have clearly been shown when they had such a strong recycling program to furnish their building along with the charitable programs they provide to give back to the community.
They strategically separate themselves from the competition by giving the appearance they care. All their hotels have different looks and or feels to attract various types of customers which can be debated on how effective this could be because tastes and preferences vary greatly from person to person. What is your assessment of the good hotels performance relative to its peers in the san Francisco market? what does a strategic group map for the industry disclose about its competitive position? Competitive pricing while offering more value is a great way to be set apart from the competition.
Inexpensive yet successful marketing has proved effective, word of mouth generating most of the attention. Quality of service and stay are the focus points they should base their strategy on. Problems would be expanding because of having such unique products. Minimal brand recognition because each location is unique which makes it hard for branding unlike the major chains. We can determine its competitive position in the industry by analyzing the financials presented in the case. 2008-2009 showed to be slightly better than its peer group in occupancy, average daily rate, and RevPAR.
For the running 12 month average ending in 2010 regarding RevPar was 10% higher than its compared peer group. The change from 2009 to 2010 showed massive increase in RevPAR compared to the peer group. These numbers indicate that there is consistent growth when looking at good hotel and their financial performance is strong in comparison to the peer group. This allows us to come to the conclusion it has a strong competitive position because its strategy has created more growth than their major competitors in the area.
Have the good hotels strategy and its approach to executing the strategy produced good financial results? Their financial results clearly indicate that they have executed a strategy that closely meets the needs of a large market. By having better RevPAR than the peer group even during times of low occupancy they have been able to keep the financial advantage. This RevPAR calculation is on a per room basis and can be skewed by differences in number of rooms.
When looking at the long run over a few years you can see they were closely comparable from a financial aspect early on but overtime have been steadily increasing their numbers when compared to its peer group, concluding the strategy is currently successful. Even if it showed they were weak at their start it shows over the two year period they had strong growth. Based on your analysis of the company’s situation, does it appear that the good hotel concept worked? does the good hotel need Joie de Vivre or can it continue on its own?
The good hotel concept created a new market of consumers looking for lodging but did not want to have the same experience provided by chain hotels. By coming off more personable they project a homely feel which has large appeal when looking for a place to sleep. They have been effectively competing against the peer group from 2008-2010 and may have been weak at the beginning but have shown they are starting improve closer to 2010 as mentioned before; but it must be considered that the industry suffered many problems in this period.
As long as they continue to have the same organizational appearance and offer the same quality of service they can proceed without her, especially if they keep the values she put into place. Everything depends on how well the turnover of the company transitions; if it is smooth and all the proper steps are taken to insure the same level of quality and organizational values then they can continue. If this transition is not smooth then many problems can arise to complicate its future. What recommendations would you make to Pam Janusz concerning the hotels transition to the new ownership group? ow should she prepare the hotels staff for the transition? should she recommend that the good hotel concept be continued, expanded, or discontinued? Explain There needs to be strong levels of communication within the organization to promote the values and strengths of their business. Pam should have conferences and or presentations with the incoming staff to inform them on why their strategy is working. The transition phase is going to be the most chaotic and a clear set of responsibilities needs to be conveyed in order to maintain the quality and positive performance of the company.
If they lose their excellent public appearance and no longer set themselves apart from existing chains they will lose their edge on the competition. If the transition is a success they will need to focus on branding themselves, researching potential areas to geographically expand, what demographic taste and preferences of the chosen area are common, and how they will train or select employees for future locations. This will be a costly venture because they need detailed information to meet the needs of a specific trend/niche or could risk a large loss.
Another factor to consider is that their marketing worked very well in california using only social media and word of mouth but this will probably differ if they look into other locations; meaning they will have to spend much more marketing and promoting a new location than they did with the initial one. Expanding is potentially a very large expense but if approached properly it could continue to be successful. If there is conflict in the transition it may take much longer than expected and incur much higher costs.
The less problems faced during the transition will mean a higher probability that they can recover from an ownership change. However, if the transition is very problematic it could lead to the downfall of the organization if not closely monitored and controlled. If the transition fails completely they should abandon any thoughts of expansion and focus on restructuring the new ownership to have the same values and quality in a different way. This should happen ONLY if the transition fails because the existing business structure conflicts with the new ownerships management strategy.
In this case the new ownership needs to find a strategy that has the same value and quality of service with a management system that works for them. In all probability the transition will not face too much difficulty because it seems the employees in place understand the ideals/values/beliefs of the organization they work for. As long as they are kept in place they can spread this organization culture through the new incoming owners who will hopefully accept and understand them.