Question: Identify TWO target segments for the NOBU brand and briefly describe each using the relevant concepts covered in this course

Traveling in Nobu Style: Converting Restaurant Patrons to Hotel Guests

The name “Nobu” is synonymous with an exceptional Japanese dining experience, perfected by chef Nobu Matsuhisa over a more than 30-year career. Matsuhisa, together with actor Robert De Niro and restaurateur Drew Nieporent, opened the first Nobu restaurant in 1994 and to date, there are now 38 Nobu restaurants worldwide.

But if you talk to Trevor Horwell, the CEO of Nobu Hospitality, Nobu represents much more than just a restaurant experience. It’s a true lifestyle brand that also encompasses a relatively small, but growing portfolio of luxury hotels, too — eight of which are open now, and eight more are in the pipeline.

Horwell’s primary focus as CEO is to continue to grow the Nobu Hotels brand and as he opens up diners’ eyes to the fact that cannot only eat at a Nobu but stay at one, too, he hasn’t forgotten the brand’s origins in the process.

“We don’t normally do a hotel unless we think that a Nobu Restaurant can do well in that location,” said Horwell. “That’s very important because what we want to do first and foremost is to make sure there is a draw for locals, and that really comes down to the Nobu Restaurant.” Horwell said the majority of his Nobu hotel restaurant diners — 80 percent on average — are local residents, not hotel guests. “It’s not like a tourist restaurant. We like to attract the locals. We want that built-in customer.”

“We are defined by the restaurant, in a way,” he said. “We play to our strengths. If you look at the hotel business today, the majority of hotels are suffering because they don’t lead with food and beverage. don’t have strong food-and-beverage concepts, and a lot of hotels are losing money. Today, we play to our strengths because that is one area that we do very, very well, and we bring in locals.”

The idea to launch Nobu Hotels, he said, came from the fact that when Nobu Restaurants were located inside of a hotel, they “were the draw for the hotel and we were bringing in customers.”

“If I only convert 5 percent of my customers in Nobu Restaurant to stay in our hotels, then at the end of the day, we’re filling out hotels. It’s not a tall order to do that, and you can do that very well and very quickly if you offer the right product.”

Nobu Hotels has the advantage of having built its brand over a 24-year period with its restaurants first, followed by the first Nobu hotel that opened within Caesars Palace Las Vegas in 2013.

“The first focus for us, really, is to expose the brand to our restaurant customers,” Horwell said. “We touch all types of Nobu customers. And we also provide instant identity. If you put ‘Nobu Hotel’ on a hotel, the word ‘Nobu’ says something and it attracts a certain type of customer.” Horwell said that, for example, when the first Nobu opened, the hotel had “more than one billion media impressions.”

So, what’s next for the brand, and how does Horwell plan to grow Nobu Hotels? He explained, “We’re not driven by reservations systems because we’re small. It isn’t as if we need a huge reservations system to fill a 400-room hotel. That’s why a lot of these corporations do well, because they have the reservations platform to fill the big hotels.” Nobu Hotels, by comparison, average anywhere from 100 to 150 rooms generally.

“The reason why those young lifestyle brands have emerged is because they’re like us. They are entrepreneurial, they’re unique because it’s a concept that’s come from the heart, from whoever is the original founder. But when it’s absorbed by a corporation, the whole thing changes. At the end of the day, the specialness is lost because then the corporation’s running it, and then, I think you lose what your original concept was all about. I think that’s the biggest issue.”

Horwell also doesn’t necessarily think of Nobu Hotels as occupying a place in luxury hospitality, instead referring to the brand as “special.”

“I look at our hotels not as luxury,” he said. “I look at them as special. I like us to be special, in each location we’re in. ‘Luxury’ is a word that’s used too much in terms of ‘everything is luxury today.’ For us, we’re ‘special.'”

“That’s why I’m saying, from a company perspective, we’re very entrepreneurial.

Today’s evolving luxury traveler is seeking “youthfulness” no matter what age they are, and they are “very curious and very adventurous. Because of that, it’s important for hospitality brands, Nobu included, to not just say they’re unique but to really offer unique experiences. He pointed to Nobu Ryokan Malibu in California as an example. The 16-room retreat overlooks the beach and is right by the ocean, and right next door to the Nobu Restaurant in Malibu. It becomes a destination, and that’s something Nobu wants to offer.

It’s also a different concept from what the other Nobu Hotels have. While Nobu Hotels are places where there’s an emphasis on bringing in the locals, the Ryokans are meant to be more private.

“The Ryokan is actually a place where people don’t want to necessarily be seen,” Horwell explained. “It’s a hideaway, a retreat. You can only book through a general manager and it’s a special place.” He added, “We will do more Ryokans, definitely, in locations that we think is right.”

A major focus for Nobu Hotels is to grow the company and the brand with the right talent and partners, as well as make sure that the Nobu Hotels brand is reaching the right consumers.

“The most important thing, from our perspective, is to build a relationship with our existing customers,” he said. “It’s about, first and foremost, on digital, working our databases. We like to do that through email, through a lot of channels. We just brought on a new head of digital. Capturing data is very, very important now, and that’s something that is a main focus and her team.”

“I think the main thing for us is the customer relationship management (CRM) because you can do so much with it,” he said. “You can know your customer. It’s one part of the business that we are heavily focused in in and we can extract a lot of information from that.”

In addition to beefing up its customer relationship management system, Nobu is also testing out a loyalty partnership, of sorts. The Nobu London Shoreditch joined Design Hotels last year, giving the property access to distribution on Design Hotels’ site, as well as a connection to the Starwood Preferred Guest loyalty program. Three Nobu hotels are also members of Leading Hotels of the World. “A lot of our customers aren’t driven by points,” he said. “When I travel, I don’t go for points. I want to stay in a hotel where I enjoy the staff, the food and beverage, the products — all of that — and I will pay a premium for it.”

Appendix A
Additional Information about NOBU

Nobu Hotels

"A Place to go and be seen"

By “wrapping” the concept of a luxurious boutique hotel around energized public spaces, Nobu Hotels creates powerful stages for shared experiences of excitement and escapism. Featuring the best of everything with imaginative new restaurants, high- energy bars, relaxing rejuvenation, distinctive service, remarkable retail and an air of celebrity, Nobu Hotels will afford guests and privileged owners the most exclusive entry into unparalleled experiences that lay at the crossroads of innovation and imagination.

Source:

Excerpted from ‘Nobu Hotels CEO on a Restaurant-First Approach to Hospitality’ by D. Ting. Skift – March 22, 2018. +Experts and image from Nobu restaurant and hotel website

Problem 26-01
Investment Timing Option: Decision-Tree Analysis

Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $16 million. Kim expects the hotel will produce positive cash flows of $2.72 million a year at the end of each of the next 20 years. The project's cost of capital is 12%.

1. What is the project's net present value? A negative value should be entered with a negative sign. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
   $ million
   
2. Kim expects the cash flows to be $2.72 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tax. One year from now, Kim will know whether the tax will be imposed. There is a 50% chance that the tax will be imposed, in which case the yearly cash flows will be only $1.44 million. At the same time, there is a 50% chance that the tax will not be imposed, in which case the yearly cash flows will be $4 million. Kim is deciding whether to proceed with the hotel today or to wait a year to find out whether the tax will be imposed. If Kim waits a year, the initial investment will remain at $16 million. Assume that all cash flows are discounted at 12%. Use decision-tree analysis to determine whether Kim should proceed with the project today or wait a year before deciding.
   -Select-It makes sense to proceed with the project today.It makes sense to wait a year before deciding.

Perry plc is a large conglomerate company structured on a divisional basis. It seeks to maximise investor wealth. Head office avoids day to day involvement in divisional affairs and only intervenes if performance is considered unsatisfactory. Divisional performance is measured by residual income.

One of Perry’s larger divisions operates a chain of high-class hotels throughout the United Kingdom. The division’s mission statement is ‘To be the hotel of the first choice for business users and tourists’. Although the chain has generally been popular with tourists it is not proving quite so popular with business users and conference organisers. Competition in the top segment of the hotel market is fierce, with customers expecting the highest standards of facilities, service, and catering. Over the last two years, the division has invested a large amount of money in modernising its hotels including the improvement of bedrooms and public rooms, installation of gymnasia and swimming pools and the information technology features required by business travelers. A large amount of money has also been spent on staff training to improve service levels and on a television advertising campaign to promote improved hotels to business users.

Head office is concerned that the performance of the hotel chain appears to have declined over the last few years despite this expenditure.

         The following figures are available

The cost of capital applicable to the hotel division is 20% per annum

Required:

1. Calculate the residual income for the hotel chain for each of the three years.
2. Discuss three advantages and four disadvantages of residual income as a divisional performance measure.                                                                                                     ( 7 marks)

Problem 13: Sam's Cat Hotel operates 52 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $11.70 per bag. The following information is available about these bags.

Demand = 90 bags/week

Order Cost= $54/0rder

Annual Holding cost = 27% of cost

Desired cycle-service level = 80%

Lead time = 3 weeks (18 working days)

Standard deviation of weekly demand = 15 bags

Current on-hand inventory is 320 bags, with no open orders or backorders.

Suppose that Sam's Cat Hotel in Problem 13 uses a P system instead of a Q system. The average weekly demand is d = 90 bags and the standard deviation of the weekly demand is σ= 15 bags.

a. What P (in weeks) and T should be used to approximate the cost trade-offs of the EOQ?

b. How much more safety stock is needed than with a Q system?

c. It is time for the periodic review. How much kitty litter should be ordered?"

Fred and Bob own a medium size water delivery firm named W Corp. and they are each 50% partners. They have a 10,000 square foot factory with rent of 12k per month. They currently lease 3 trucks at $850 each per month and have 3 salaried employees they pay 25k each annually to operate their trucking routes. Sales are 800k per year, Contribution Margin is 500k per year and EBIT is 250k. They have no debt.

A. What is their DOL?

B. How can the DOL be lowered?

C. What will most likely happen to the firm if sales drop by half in regards to DOL and chapter 11 risk

A hotel has 210 units. All rooms are occupied when the hotel charges ​$90 per day for a room. For every increase of x dollars in the daily room​ rate, there are x rooms vacant. Each occupied room costs $ 36 per day to service and maintain. What should the hotel charge per day in order to maximize daily​ profit?

Regarding Anne Moody's autobiography answer the following questions:

Why didn’t more southern blacks join the movement?

2. Why did Anne Moody become a civil rights activist?  Was it a case of nature or nurture?

3. What were Anne Moody’s frustrations with the civil rights movement?  Why had she become disillusioned by 1963?

4. How has Anne Moody’s autobiography added to your understanding of the history of race relations in the South during the 1940s and 1950s as well as the civil rights movement’s efforts to improved conditions?  Be specific.

Prepare Governmental Activities Journal:

Riverside began work on an outdoor amphitheater and concession stand at the city's park. It is to be financed by a $3,500,000 bond issue and supplemented by a $500,000 General Fund transfer. The following transactions occurred in 2017:

1. The General Fund transferred $500,000 to the Park Building Capital Projects Fund.

2. A contract was signed with Restin Construction Company for the major part of the project on a bid of $2,700,000.

3. Preliminary planning and engineering costs of $69,000 were vouchered for the Great Pacific Engineering Company. (This cost had not been encumbered.)

4. A payable was recorded for an $18,500 billing from the Water and Sewer enterprise fund for the cost of extending water pipes to the new concession stand.

5. An invoice in the amount of $1,000,000 was received from Restin for progress to date on the project.

6. The $3,500,000 bonds were issued at par.

7. The amount billed by the contractor (see Transaction 5) less 5 percent retainage was paid.

8. Temporary investments were purchased at a cost of $1,800,000.

Please prepare Governmental Activities Journal, not General Fund.

Riverside began work on an outdoor amphitheater and concession stand at the city's park. It is to be financed by a $3,500,000 bond issue and supplemented by a $500,000 General Fund transfer. The following transactions occurred in 2017:

1. The General Fund transferred $500,000 to the Park Building Capital Projects Fund.

2. A contract was signed with Restin Construction Company for the major part of the project on a bid of $2,700,000.

3. Preliminary planning and engineering costs of $69,000 were vouchered for the Great Pacific Engineering Company. (This cost had not been encumbered.)

4. A payable was recorded for an $18,500 billing from the Water and Sewer enterprise fund for the cost of extending water pipes to the new concession stand.

5. An invoice in the amount of $1,000,000 was received from Restin for progress to date on the project.

6. The $3,500,000 bonds were issued at par.

7. The amount billed by the contractor (see Transaction 5) less 5 percent retainage was paid.

8. Temporary investments were purchased at a cost of $1,800,000.

A survey of 1320 people who took trips revealed that 108 of them included a visit to a theme park. Based on those survey results, a management consultant claims that less than 9 % of trips include a theme park visit. Test this claim using the ?=0.05

significance level.

Find

(a) The test statistic

(b) The P-value

(c) A or B in conclusion
A. There is not sufficient evidence to support the claim that less than 9 % of trips include a theme park visit.
B. There is sufficient evidence to support the claim that less than 9 % of trips include a theme park visit.