Question

GoodNight Inn case study

Anton Cahoon is trying to decide whether he should make some minor changes in the way he operates his GoodNight Inn motel or if he should join either the Days Inn or Holiday Inn motel chains. Some decision must be made soon because his present operation is losing money. But joining either of the chains will require fairly substantial changes, including new capital investment if he goes with Holiday Inn.

Anton bought the recently completed 60-room motel two years ago after leaving a successful career as a production manager for a large producer of industrial machinery. He was looking for an interesting opportunity that would be less demanding than the production manager job. The GoodNight Inn is located at the edge of a very small town near a rapidly expanding resort area and about one-half mile off an inter- state highway. It is 10 miles from the tourist area, with several nationally franchised full-service resort motels suitable "destination" vacations. There is a Best Western, a Ramada Inn, and a Hilton Inn, as well as many mom-and-pop and limited-service, lower-priced motels-and some quaint bed- and-breakfast facilities-in the tourist area. The interstate highway near the GoodNight Inn carries a great deal of traffic, since the resort area is between several major metropolitan areas. No development has taken place around the turnoff from the interstate highway. The only promotion for the tourist area along the interstate highway is two large signs near the turnoffs. They show the popular name for the area and that the area is only 10 miles to the west. These signs are maintained by the tourist area's Tourist Bureau. In addition, the state transportation department maintains several small signs showing (by symbols) that near this turnoff one can find gas, food, and lodging. Anton does not have any signs advertising GoodNight Inn except the two on his property. He has been relying on people finding his motel as they go toward the resort area.

Initially, Anton was very pleased with his purchase. He had traveled a lot himself and stayed in many different hotels and motels-so he had some definite ideas about what travelers wanted. He felt that a relatively plain but modern room with a comfortable bed, standard bath facilities, and free cable TV would appeal to most customers. Further, Anton thought a swimming pool or any other non revenue producing additions were not necessary. And he felt a restaurant would be a greater management problem than the benefits it would offer. However, after many customers commented about the lack of convenient breakfast facilities, Anton served a free continental breakfast of coffee, juice, and rolls in a room next to the registration desk.

Day-to-day operations went fairly smoothly in the first two years, in part because Anton and his wife handled registration and office duties as well as general management. During the first year of operation, occupancy began to stabilize around 55 percent of capacity. But according to industry figures, this was far below the average of 68% for this classification motels without restaurants.

After two years of operation, Anton was concerned because his occupancy rates continued to be below average. He service resort motels. He stressed a price appeal in his signs and brochures and was quite proud of the fact that he had been able to avoid all the "unnecessary expenses" of the fulling at a very modest price-about 40 percent below the area motels. The customers who stayed at GoodNight Inn said large number of people driving into his parking lot, looking study by the regional tourist bureau. This study revealed the rooms more than 60 days in advance. motels were being planned for the area. After some investigat though they each have about 2,000 units nationwide. economy lodgings. It has been growing rapidly and is willing was far below the average of 68 percent for his classification- motels without restaurants. After two years of operation, Anton was concemed be- 655 decided to look for ways to increase both occupancy rate and profitability and still maintain his independence. Anton wanted to avoid direct competition with the full- service resort motels. As a result, Anton was able to offer lodg- full-service hotels and comparable to the lowest-priced resort they found it quite acceptable. The hotels online reviews at sites like TripAdvisor, while not numerous, were generally pretty positive. But he was troubled by what seemed to be a around, and not coming in to register. Anton was particularly interested in the results of a recent following information about area vacationers: 1. 68 percent of the visitors to the area are young couples and older couples without children. 2. 40 percent of the visitors plan their vacations and reserve 3. 66 percent of the visitors stay more than three days in the area and at the same location. 4. 78 percent of the visitors indicated that recreational facili- ties were important in their choice of accommodations 5. 13 percent of the visitors had family incomes of less than $27,000 per year. 6. 38 percent of the visitors indicated that it was their first visit to the area. After much thought, Anton began to seriously consider affiliating with a national motel chain in hopes of attracting more customers and maybe protecting his motel from the in- creasing competition. There were constant rumors that more ing, he focused on two national chain posibilities: Days Inn and Holiday Inn. Neither had affiliates in the area even Days Inn of America, Inc., is an Atlanta-based chain of to take on new franchisees. A major advantage of Days Inn is that it would not require a major capital investment by An- ton. The firm is targeting people interested in lower-priced motels, in particular, senior citizens, the military, school sports teams, educators, and business travelers. In contrast, Holiday Inn would probably require Anton to upgrade some of his facilities, including adding a swimming pool. The total new capital investment would be between $300,000 and $500,000, depending on how fancy he got. But then Anton would be able to charge higher prices, perhaps $75 per day on the aver- age rather than the $45 per day per room he's charging now. The major advantages of going with either of these na- tional chains would be their central reservation systems and their national names. Both companies offer nationwide, toll- free reservation lines, which produce about 40 percent of all bookings in affiliated motels. Both companies also offer Web sites (www.daysinn.com and www.holiday-inn.com) that help find a specific hotel by destination, rate, amenities, quality rating, and availability. A major difference between the two national chains-is their method of promotion. Days Inn uses little TV advertis- ing and less print advertising than Holiday Inn. Instead, Days Inn emphasizes sales promotions. In one campaign, for exam- ple, Blue Bonnet margarine users could exchange proof-of- purchase seals for a free night at a Days Inn. This tie-in led to the Days Inn system selling an additional 10,000 rooms. tain their facilities and make repairs and improvements as Further, Days Inn operates a September Days Club for travel- ers 50 and over who receive such benefits as discount rates and a quarterly travel magazine. Days Inn also has other membership programs, including its InnCentives loyalty club for frequent business and leisure travelers. Other programs targeted to business travelers in- clude two Corporate Rate programs and its new Days Business Place hotels. Not to be outdone, Holiday Inn has a member- ship program called Priority Club Worldwide. Both firms charge 8 percent of gross room revenues for belonging to their chain-to cover the costs of the reservation service and national promotion. This amount is payable monthly. In addition, franchise members must agree to main- required. Failure to maintain facilities can result in losing the franchise. Periodic inspections are conducted as part of super- vising the whole chain and helping the members operate more effectively. Evalaate Anton Cahoon's present strategy. What should he do? Explain.

Answer 1

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 t

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.