Good Night Inn Case Analysis
Night Inn Case Analysis MK610 Professor Hossasin November 4, 2012 Tom Green, Angela Cosner, Ryan Williams, Ramakanth Desai, Todd Ricketts Executive summary Anton Cahoon left a successful career in manufacturing to purchase an independent motel, near an interstate highway exit, a short distance from a rapidly expanding resort area. Mr.
Cahoon relied only upon passersby as clientele with little other advertising. For the first two years operations went smoothly, however the Goodnight Inn had not become profitable. While occupancy rates stabilized near 55%, they were still well below the industry average of 68%.
Anton had run his motel avoiding “unnecessary expenses”, and as a result had a 40% price advantage over the full-service hotels in his market area. Customer surveys found the GoodNight Inn acceptable. After much thought, Anton has begun to consider affiliating with a either Holiday Inn or Days Inn, both offering the advantages of a central reservation system, and their national marketing presence.
Problem Statement Anton Cahoon owns a motel that is losing money due to low occupancy rates. What marketing strategies can be adopted to increase both occupancy rate and profitability? Analysis a.
NAICS Code 721110 Hotels (except Casino Hotels) and Motels b. This U. S. industry comprises establishments primarily engaged in providing short-term lodging in facilities known as hotels, motor hotels, resort hotels, and motels.
The establishments in this industry may offer services, such as food and beverage services, recreational services, conference rooms and convention services, laundry services, parking, and other services. Anton Cahoon is in an interesting situation. There are a lot of factors at play that he can use to his advantage as well as some that he should look to avoid.
Fortunately he is in position with many opportunities rather than one without any choices. His competitors are not choking him out of the market; however they are negatively impacting his revenue. He can also take the “If you can’t beat em’, join em'” approach by affiliating with either Holiday or Days inn.
Being that Goodnight Inn is currently losing money, cash is of concern and he must make a decision fast. Regarding his consumers, he has many different target markets that he can tailor his business to. As it stands now, there are a few avenues he can take that will be relatively inexpensive and increase his customer base.
Some of these options are related to his advertising and booking systems, which are the main appeal of affiliating with a national chain. Strengths • Half mile from interstate • High traffic interstate • 10 miles from tourist “destination” area • In the vicinity of several metropolitan areas • Standard rooms suitable for most customers • Low employee cost • Price 40% below full-service hotels • Patrons happy with their experience • In a growing area Weaknesses • Currently losing money • Lack of restaurants • Same price as resort area motels People drive off after initial impression • No recreational facilities • Other motels being planned for the area Opportunities • More signage along the interstate • Create a more appealing storefront • Attract more business travelers • Install a restaurant • Develop online presence • No other Holiday or Days inn in the vicinity • Option to affiliate with either chain Threats • Run out of capitol • Other more established Hotels Political • Politicians play major role in community development • Governmental construction requires contractor accommodations • Tax rates
Economic • Vacation travel directly related to economy • Business travelers drive more/fly less in poor economy Technological • Ease of web presence • Ease of booking via “apps” • Social networking advertisements Competitor • Local lodging facilities (Hotels, Motels, Bed and Breakfasts) Solo Marketing Expenditures • Website $7,000 (Website includes page management and web presence) • -Hotel photos • Amenities provided • Local points of interests (dining, recreation, night life, travel facilities) • Booking and Payment features • Paper advertising (travel magazine/pamphlets) $6,000
Target Consumer • 68% of visitors are young couples and older couples without children • 40% of the visitors plan their vacations and reserve rooms 60 days in advance • 66% of the visitors stay more than three days in the area and at the same location • 78% of the visitors indicated that recreational facilities were important in their choice of accommodations • 13% of the visitors had family incomes of less than $27,000 per year • 38% of the visitors indicated that it was their first time to the area
Positioning Statement The Goodnight Inn needs to position itself as a cost effective facility providing comfort & convenience with unmatched customer attention.
The Goodnight Inn must leverage their competitive edge – attention to personalized service. While anyone staying should expect reasonably good service, the Goodnight Inn should attempt to set itself apart from the competition by providing an exceptionally high level of service. This will be done through the unrelenting pursuit of personal attention.
At the Goodnight Inn all interactions with the customer will be with Anton & his wife, whom see it as their duty to make the customer feel at home. The feeling of personal attention or more accurately a sense of personal concern, really adds a positive dimension to the experience.
Marketing Strategy Mission The mission of The Goodnight Inn is to provide the finest experience to attract and maintain customers. Their services should exceed the expectations of their customers. Marketing Objectives • Maintain positive, steady growth each quarter. • Experience a growth in new customers who are turned into return customers. Realize an increase in occupancy each subsequent year. Financial Objectives • Increase the occupancy to 68% • Charge higher rate per room • Minimize the investments required Target Marketing Customers can be broadly divided into two groups (please note that it is possible to divide the customers into much smaller groups, but we have chosen not to): • Weekend getaway customers: These people are from the region and are looking to get away so they come to The Goodnight Inn to be pampered and escape.
• Travelers: These people are passing through Eugene Strategy Pyramids
The single objective is to position The Goodnight Inn as a cost effective facility providing comfort & convenience, generally achieving full occupancy. The marketing strategy will seek to • Inform customers of available services • Instill loyalty through positive experiences • Provide customers with services they demand The Goodnight Inn will seek to communicate through a variety of methods. The first will be advertising • Advertise in the travel magazine association newsletter. • Robust website with a comprehensive information • Develop strategic relationships with other information providers
The Goodnight Inn marketing mix is comprised of the following approach to pricing, distribution, advertising/promotion, and customer service. • Pricing: The pricing scheme is based on a room rate.
The rate is arrived at in terms of by its market value. • Distribution: Comfort & convenience services will be provided at the GoodNight Inn • Advertising and Promotion: The most successful traditional advertising will be with the Travel association • Developing strategic alliances with the other travel information providers is a non-traditional method of marketing, but it will be quite efficient. The website will also be used in marketing activities. • Customer Service: Obsessive customer attention is the mantra. The GoodNight philosophy is whatever needs to be done to make the customer happy must occur, even at the expense of short-term profits.
In the long run, this investment will pay off with fierce customer loyalty. Marketing Research During the initial phases of the marketing plan development, • Several Surveys of current customers’ needs to be done to gain insight into the decision making processes of consumers. Focus groups – ( young couples / Couples more than 50 years ) need to be reached out to get more insights • A suggestion card system. The suggestion card can have several statements that patrons are asked to rate in terms of a given scale. There are also several open ended questions that allow the customer to freely offer constructive criticism or praise. • Work hard to implement reasonable suggestions in order to improve their services as well as show their commitment to the customer that their suggestions are valued Alternatives GoodNight Inn
Pros- Anton will maintain his independence, which was one of the main reasons he left his last job and decided to start his own business.
By not joining up with a national chain he can leave his prices at 40 per cent below the local average and keep all of the profit. There would be no initial capital investment like there is involved if he had gone to a Holiday Inn chain, so on the front end he will be saving a lot of money. Cons- Without the access to a central reservation system, hotel locator and national advertising support, Anton would not be able to easily increase his occupancy rate.
It would be expected to remain at a similar rate without any major changes to the motel. Further, a recent study taken by a tourist bureau showed that about two thirds of people visiting the area stay for more than 3 days and about 78% of people say that recreational facilities are an important factor in where they say.
Plus about 40% of visitors are first-timers to the area, this means the use of online advertising, the access to recreational facilities and name recognition are very important factors in the decision process for patrons.
The lack of name recognition, facilities and online booking is devastating to the occupancy rate. Net Present Value of Total Future Revenue = $5,346,000 Days Inn Pros- the Days Inn chain of economy hotels/motels that does not have a location near the market the GoodNight Inn exists currently. If Anton decides to go with the Days Inn Chain he will not be required to make any major capital investments. This will allow him to keep initial costs down will still attaining the name recognition of a national chain.
The biggest positive that would come out of joining the days in franchise is the central reservation system.
This way the 40% of people that are first time visitors to the area would be able to find him before driving past the location. The online booking system would allow for more visibility for the franchise and increase occupancy, especially since it is predicted that more “mom-n-pop” motels will be moving into the area. Anton can take advantage of the promotion campaigns that the Days Inn is well known for too.
Cons- Making the motel into a Days Inn franchise has a few down falls as well. One of the big down falls is that Anton will no longer have as much freedom as he used to have when being the sole owner.
He will now have answer to corporate about everything from facilities to marketing, and if it’s not up to par he must fix it. Another negative is the fact that Anton won’t be able to charge any more per night then he did as the GoodNight Inn, but also pays 8% of all revenues he makes on rooms, so his marginal revenue is decreasing.
Finally, the Days Inn solution is not customer centered. It does not provide what the customers have indicated as important to them. They want a place that they can stay at for 3 or more nights and have things to keep them busy while in town. Days Inn does not have recreational facilities and would not suit a person on an extended stay.
Net Present Value of Total Future Revenue = $6,080,832 Holiday Inn Pros- The second national franchise Anton considered joining is the Holiday Inn family. They do not currently have any locations in the resort area or around the GoodNight Inn.
Anton could tap into the very well recognized Holiday Inn name and there central booking system. First time visitors from outside of the area would be able to find the location on the Holiday Inn website which would increase occupancy. Further, Holiday Inns are known for their quality facilities and family friendly atmospheres, so people would be willing to pay more per night to have access to a pool and other facilities to stay busy if visiting for more than a quick night.
These factors would contribute to the occupancy rate to increase to 68% up from 55%.
If Anton charges the expected $75 per night, giving up $6. 00 for the 8% of room revenue to Holiday Inn, he will make $69. 00 per room per night in marginal revenue, an increase from $45 GoodNight Inn and $41. 40 with the Days Inn. Cons- The biggest down fall to going with the Holiday Inn is the required initial capital investment to improve facilities.
Up front Anton is looking at a $400,000 investment to upgrade his facilities to meet the criteria for the Holiday Inn. He will need to add rec facilities like a pool; this is something that consumers have indicated they want.
Another downfall is the fact that Anton will not have the freedom he embraced when deciding to own his own business. Net Present Value of Total Future Revenue = $9,734,720 Recommendation and Marketing Mix Strategies We recommend Anton Cahoon adopts the Holiday Inn alternative. Product: Full service motel • Restaurant o Featuring a breakfast, lunch, and dinner menus o Offers specials to Facebook followers o Discounts for hotel residents o Allows for room service • Bar (featured in Restaurant) Happy hour o Live music a certain night of the week/month o Music that has a faster beat after 11:30 pm Place: near the interstate • can offer food service to hungry interstate travelers • near a resort area, can offer food to ease the parents of children who are complaining they are hungry while on their way to their lodging if it may be elsewhere • area under development, easy local accommodations would be attractive to contractors of new projects Promotion: • Audiovisual Advertisement on television news shows around weather • Visual o Billboards at 30, 15, and 5 miles before exit o Logo of restaurant on the blue exit feature signs before exit o Advertise in travel magazines focusing in the locale • Joint Promotions o Work with Bingo hall to offer discounts/free services/food • Electronic o Smartphone application ? Use initially for booking rooms ? Once residing in hotel, possible room service order system o Twitter Post every few days o Website ? Offer percent off coupons for the hotel ? Offer free entree/dessert coupons o Facebook ? Post photos of happy visitors ? Post images every few days ? Allow visitors to upload images for moderators approval ? Offer special discounts for followers o Youtube ? Post commercials made of hotel/restaurant here o Advertise on travel sites focusing in the locale
Price: Penetration?? pricing strategy ((I believe most motels use flexible pricing strategy)) • Offer many services/facilities included in the room price o Pool o Hot tub o Business center o Free coffee/tea all day o Free cookies in the afternoon o Fitness center • Offer discounts for resort attractions (create partnerships with resorts) o Tours of the area and attractions for a separate price ?
Historical ? Visual ? Hiking • Offer early reservation and multiple night discounts • Use of coupons for the restaurant o Using the above mentality, slight increase in menu pricing References Appendix Product positioning map – Calculations [pic] ———————– Goal is to improve stay experience and Occupancy % as well D H G Occupancy % Stay Experience Room Sales Service Sales Full Service Limited Service