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7/27/2019 Good 20 Hotel
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Lawrence Campbell
12/2/12
Case 25
Good Hotel: Doing Good, Doing Well?
Background Information
Joie de Vivre (JdV) is a San Francisco based hotel management company with 16
properties in the city. It was founded in 1987 by Chip Conley.He knows that his
company comes up with unique hotels, with own personality. It has managed to grow to
36 boutique hotel properties. It became the second largest in 2010. JdV had combined
two of their properties, Best Western Hotel Britton and Best Western Flamingo. Pam
Janusz is the general manager for Good hotels. She received a message inquiring that
rumors were true that the owner of Good Hotel and the two other properties that Janusz
managed since November 2009.
Best Western Americania and Best Western Carriage Inn, had foreclosed on their
holdings and sold the three properties, all of which were in JdVs South of Market Street
(SoMa) group to a new ownership group. She will be helping with the transition from one
ownership to another, by evaluate Good Hotel performance along with helping staff to
adjust. When it opened in November 2008 with 117 rooms, it opened as Good Hotel.
Good Hotel is known as hotel with a conscience.
It has a positive approach, eco-friendly hotel, and it known its recycled materials. This
hotel believes in doing good things for the environment. The new group planned to run
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the three hotels themselves and they would end the management with JdV if no problems
arose with the sale at the end of May 2010.
The lodging industry was dominated by twelve leading hotel chains in the United States
in 2009. Out of these twelve leading hotel chains, each one of them has features that
accommodate to one consumer but not to another. One of the bigger hotels may have
more properties with so many rooms with very little to offer but low revenue, but another
hotel with less properties with almost the same amount of rooms, more to offer and have
higher revenue.
In 2009, the lodging industry was suffering from chronic overcapacity. The prolonged
industry downturn was expected to drop occupancy levels by 55 to 56 percent,
representing the worst rate since the Great Depression, according to Standard & poors.
Hotel occupancy had declined by 8.8 percent in 2009, and was forecast to drop by a
further 0.2 percent in 2010.
Strategy
They were geographically focused and product line diverse. Chip Conley had a vision on
how to run his hotels. He says he went into hospitality because he enjoyed commercial
real estate but hated the transactional part. If you get it right and your customer sees the
product as an extension of themselves, youve refreshed the identity of the customers
because they feel that by using the product theyre becoming more of that aspirational
self.
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In 2007 he stated how they feel they are viewed with their branding strategy. We went
through a whole branding process, and what we heard from our customers was that they
loved the fact that we create original hotels. We come up with a personality for the hotel
by thinking of magazines. It is sort of like a good touchstone for personality. He
continues on to say, You can be geographically diverse, but that means you have to be
product-line focused. Or you can be geographically focused and the product line diverse.
Holiday Inn is geographically diverse and product-line focused. We are the opposite of
Holiday Inn.
JdV spent very little on marketing, preferring to rely mostly on word of mouth and social
media promotion on Internet to attract guests to its hotels. Unique monthly visitors to
social travel websites such as TripAdvisor.com and Yelp.com rose by 30 percent between
the first half of 2008. In the last half of 2009, it rose to 15.9 million showing year-over-
year growth of more than 30 percent in the first half of 2009 and 45 percent in the second
half of 2009.
5 Forces model
Bargaining power of Suppliers: The two key suppliers to Joie de Vivre would be labor
and real estate. These suppliers are defined as property owners, developers and real estate
companies, interior design and furnishing companies, architects, marketing companies
and industry consultants. There are a significant number of real estate companies for a
given locality so they have a moderate amount of power. They can make a lot of
substitutes for real estate agents, and designers. Hotels have higher bargaining power and
can easily switch between suppliers.
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Bargaining Power of Buyers: The buyers are the end-users. They fall along the lines of
the lines of leisure travelers, business travelers or customers who require space for
conferences or other events. Buyers are numerous and small in size and losing one
customer is not going to make a difference. Their bargaining power is low. There are
multiple substitutes for given hotel or brand availability. Buyers are price sensitive except
for when it comes to the premium segments so the switching cost is low.
Barriers to Entry: There are high economies of scale, it is very important for JdV to
operate a chain of hotels in multiple locations, especially for premium segments. Hotels
should be highly differentiated for customers to notice a specific hotel. The brand name
and value are very important in attracting and retaining customers. There is a high exit
barrier have specialized assets for the industry.
Threat of Substitutes: There are close substitutes such as informal accommodations
with friends and family. Alternative forms of leisure accommodation such as camping
and RVs. There are also corporate guesthouses for business travelers that take away from
the hotel industry. The switching cost for substitutes is negligible for informal
accommodations. Substitute price value are very high for informal accommodations but
can be moderate for other leisure accommodations. Large hotel chains have greater
bargaining power for profitability over substitutes.
Rivals among Existing Competitors: Among competitors in the hotel industry, there are
a small number of large operators, the industry overall growth rate annually is 13% and it
is a mature industry. It has a low switching cost to similar brands, and overall the tourism
industry is seeing strong growth.
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Driving Forces
The growing interest in and investments made to support sustainability in the
hospitality industry had, by late 2009 moved beyond hotel recycling programs and
energy-efficient lighting.
The long economic recession in 2008 and 2009
The normally soft travel bookings during the winter months
Key Success Factors
The greening of the hotel industry is a large key success factor for Joie de Vivre. In
Hotels magazine there was an article in 2009 that stated, hotels seeking new customers
and growth in difficult economic times could benefit over the long term with investments
in sustainability initiatives including retrofitting existing properties to achieve Leadership
in Energy and Environmental Design (LEED) certification and building new properties to
LEED standards. A travel Industry study reported that nearly half of U.S leisure travelers
expressed a willingness to pay higher rates for services provided by environmentally
friendly travel providers.
There was now a growing demand for green lodging the emerging demographic segment
was identified as Cultural Creatives. They were savvy, sophisticated, ecologically and
economically aware customers who believed that society had reached a watershed
moment in history. They were also known as Lifestyles of Health and Sustainability
(LOHAS).
This segment was estimated by the Natural Marketing Institute to consist of about 38
million people or 17 percent of the U.S. adult population, with spending power of $209
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billion annually. On estimate, 15.4 million visitors visited the city and county of San
Francisco in 2009, more than 4.5 million stayed overnight at commercial
accommodations, making 32,976 hotel room and 215 hotels. Visitors paid 14 percent
occupancy tax, which generated about $210 million for San Francisco city and county
services.
Comparative Demographics; All Consumers versus Green Consumers
Exhibit 3
All Consumer Green Consumers
Average age 44 40
Gender
51% 54%Female
Male 49% 46%
Ethnicity
75% 62%Caucasian/other
Hispanic 13% 21%
African American 11% 16%
College educated 25% 31%
Median householdincome
$58,700 $65,700
SWOT Analysis
Strengths: When Joie de Vivre was founded in 1987 it had grown to manage 36 boutique
hotel properties in California. By 2010, JdV was the second-largest U.S. boutique hotel
operator. The boutique hotels differentiated themselves from branded chain hotels and
motels by providing personalized accommodation and services and facilities. They are
also known as design hotels or lifestyle hotels. They differentiated by creating their
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own theme, style, and aspiration through their newly applied furnished looks, also their
environmental friendly appeal.
Weakness: An industry that relies on the needs of unpredictable travelers. They are
forced to maneuver the way the economy sees fit. If the economy is doing bad people are
less likely to spend money, go on trips, therefore the JdV doesnt make a lot of money.
The economy is doing well, people spend more money, go on more trips and JdV has
access to a larger audience.
Opportunities: The greening of the hotel industry with 38 million people in the LOHAS
segment. That is 17 percent of the U.S. adult population, with spending power of $209
billion annually. JdV need to advertise and make the need for cleaner hotels more known
so that they can accommodate a lot more of those customers in this segment.
Threats: Business travel being a big factor in the industry. Joie de Vivre and the rest of
the industry will get affected by the slowdown in travel during dry spots in the year.
Recessions also hurt JdV because people are less likely to travel and want to spend
money. The hotel industry gets most of their revenue through travelers and vacationers.
The weather dictates what your customers are going to do, also airlines handling potential
customers, flight cancellations or redirections.
Analysis of Financials
In March 2009, Good Hotel numbers started increasing looking better than Peer Group.
In occupancy percentages, Good Hotel current month was 70.3% to Peer Groups 59.3%.
Year-to-date 55.3% to Peer groups 53.4% and in running 3 month Good hotel had 55.3%
to Peer Groups 53.4%. March 31, 2010 Good Hotels numbers were overall better than
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Peer Groups. Running 12 months, the occupancy percent was Peer Group 61.8% to
Good Hotels 76.7%, ADR Peer Group had a better $80.27 to Good Hotels $78.55, and
in RevPAR Good Hotels $60.21 vs. Peer Groups $49.63.
Monthly Operating Statistics: Good Hotel, Jan- Mar. 2010
2010
Jan Feb Mar
Number of rooms 117 117 117Occupancy (%) 56.96 49.54 66.17
RevPAR ($) 40.31 35.39 48.50
Total revenue $4,716 $4,141 $5,675
Managerial Worry list
Managers would have to worry about trying to fill 117 rooms year round. Many of the
rooms will be empty unless there are last-minute or walk-in bookings showed up. Other
factors being long economic recessions where people arent traveling or spending money,
normally soft travel bookings during the winter months, and canceled bookings from
customers which will be a lost in revenue if not communicated quickly so the rooms can
be opened back up to walk in customers. Also need to focus on targeting their emerging
demographic segments such as LOHAS. If that market remains completely satisfied in
their services they are likely to remain successful.
Recommendations
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In the marketing efforts for Joie de Vivre I would recommend that instead of just relying
on word of mouth and social media promotions, they should venture off into TV and
commercial advertisements. A business can have the most elegant infrastructure, the most
extravagant facilities, and the finest food in the world but if no one knows about it then it
is but so much success that business can acquire. They should advocate the need or
benefit that customers can obtain staying at a boutique hotel and gaining that experience.
TV and newspaper ads saying The vacation starts here letting consumers think staying
at the hotel within itself is a vacation.
They should aggressively voice more about the green hotel movement. Position their self
to be a cleaner hotel then any other, the louder you voice your benefits the more
consumers may think youre the only hotel making efforts to continually improve your
cleanliness. They should also start to think about a worldwide expansion. The next five
years they should start to expand more around the nation, and put a lot of their hotels
more overseas where they feel boutique hotels will be appreciated.