A Long-Term Strategy for Sleepy Inn Motel - Case Study Example

HERE YOUR HERE HERE HERE Recommendations for Sleepy Inn Motel Eng Huang has a difficult decision to make regarding whether or not to continue operating Sleepy Inn Motel or join a more well-established hotel chain. After assessing the case study, Huang should make contact with Days Inn and express his interest in becoming a franchisee of the chain. There are many factors as to why it would not make sense to continue to operate Sleepy Inn Motel, including cost of promotion, the highly saturated market by large, well-known competition, and his inability to keep capacity to industry norms. Sleepy Inn Motel is currently in a small town, thus there is not a great deal of local demographics through which to target with promotional materials. Even though it is near a quickly expanding resort region, this represents long-term growth and Huang needs to change his revenue stream much more quickly. Huang faces competition from Hilton Inn, Ramada Inn, and Best Western as well as many other lower-priced hotels similar to his own. His larger competition represents very well-known brands with a great deal of brand recognition and brand loyalty by a variety of mixed demographics. Further, since the only promotional material for this region are two billboards operated by the Tourist Bureau, Huang simply cannot rely on the marketing competency of this agency to fill his capacity rates. Huang maintains a low-cost pricing policy that he had established in the hopes that it would bring enough attention to make travelers choose Sleepy Inn Motel over other well-established branded competition. However, the problem here is that 68 percent of visitors to the region are younger couples and older couples with no children, two demographic groups that typically have much more access to higher financial resources. This is likely the reason why Huang witnesses visitors turn into his parking lot, but never enter the building. Once a hotel has established brand recognition and brand loyalty, it is difficult for a smaller, virtually unknown name to compete effectively without very intensive integrated marketing campaigns that must be managed and updated constantly. Further, the study conducted of local tourist needs identified that 78 percent believed it important to have recreational facilities before choosing to make a purchase. This is a substantial volume of customers and it is likely that Huang’s lack of a swimming pool is the reason why individuals turn in, but then leave in favor of the larger hotel brands. The costs of adding a swimming pool and other recreational facilities, such as a gym or child’s area, would be a budgetary problem for Huang who is currently experiencing lower-than-average occupancy ratios. Days Inn does not require extensive financial investment and this is a very well-known brand with many different loyal demographics, including military, school teams, business travelers, and senior citizens. Days Inn already has their own well-established marketing campaigns that include on-air promotions such as the described promotion with Blue Bonnet margarine and also a senior citizen discount card to invite incentive purchases. Since Days Inn also has a dedicated customer reservation line, a travel magazine, and a website, this represents the best long-term option for Huang under a franchising agreement. Days Inn might also allow Huang to establish his own unique in-house marketing literature if this were required which could be determined at the time of contract negotiation. The amount of money demanded under the franchising agreement, by Days Inn, is only eight percent of total room revenues. To support choosing Days Inn rather than operating his own brand, a brief revenue analysis is required. At $45 per night, with only 55 percent of occupancy, this represents $10,395 weekly in gross revenues. By moving under the Days Inn brand, at $70 per night and 68 percent of occupancy, Huang will earn $20,090 in gross revenues weekly or $80,360 monthly. This is almost double what Huang is earning today as Days Inn rather than as Sleepy Inn Motel. At eight percent franchise fees, only $6,428 will be sent to Days Inn monthly, leaving Huang with a monthly gross revenue total of $73,932. In total, Huang will be earning over $30,000 more monthly as Days Inn even after all franchise costs have been paid than he is currently as the Sleepy Inn brand. Holiday Inn also just is not an option because of the vast short-run expenditures needed simply to upgrade and join the franchise. If Huang wanted to keep the Sleepy Inn brand, he would have to build his own website, create more advertising materials, and start keeping a customer log in an attempt to gain customer loyalty through incentives or other direct mailing. Hands down, Days Inn is the most viable opportunity for Huang. Further, Huang already maintains a staff to handle day-to-day operations, thus there would be no additional costs for labor by joining Days Inn which is another cost advantage. Holiday Inn, a more high-priced hotel chain, would likely have considerable costs associated with employee uniform provision, interior decor changes to fit the main hotel brand’s image, and many other human resources training materials that can cost significant administrative fees. Days Inn is a mid-priced hotel chain with a great deal of customer demographics frequenting the chain without the pomp or excess flair that higher priced hotel chains demand. As a long-term strategy, Days Inn is most feasible for Huang especially since the surrounding resort region is expanding at a rapid pace. This means more potential customers over the next several years who are familiar with Days Inn. Also, Huang already maintains his own operations costs associated with maintenance and repairs under the Sleepy Inn brand name therefore the demands of repair and maintenance with Days Inn are not much of a change or long-term risk. As Days Inn evolves and expands their promotions, if this occurs, Huang will be delivered advertising materials to use without having to absorb the costs of his own complicated and integrated marketing campaign. Since such franchises also have network assistance and owner support groups, Days Inn is the best opportunity for service issues as well as the aforementioned revenue gains to be received by improving per-night pricing policies and raising occupancy rates to industry norms. Read More