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Case Study

The document discusses a luxury hotel chain that has seen declining profits over the past three years despite steady revenues and costs. It provides data on the chain's operations and asks how the client can reduce costs through advertising and supplies, what factors tourists consider when booking, how to estimate revenues, and how to otherwise increase profits.

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ANKIT FRANTIGER
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19 views3 pages

Case Study

The document discusses a luxury hotel chain that has seen declining profits over the past three years despite steady revenues and costs. It provides data on the chain's operations and asks how the client can reduce costs through advertising and supplies, what factors tourists consider when booking, how to estimate revenues, and how to otherwise increase profits.

Uploaded by

ANKIT FRANTIGER
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Luxury Hotels:- Profit improvement

Time Limit: 30 Minutes

Business Situation

Our client is a small chain of luxury, five-star hotels located in New York City. The hotels are
independently operated and the chain promotes itself as an exclusive, premier accommodation for
tourist and business professionals.

Despite intense new competition, the hotel chain has been able to maintain its popularity and prices.
Each hotel features a rooftop pool, retail space ( some of which is currently vacant), a restaurant and
meeting facilities. Roughly 80% of its customers are tourist families who often do little planning before
the trip.

For many years, the business enjoyed an annual profit greater than $10 M, but profiles have started to
deteriorate over the past three years. Pressure has been mounting to reverse the trend during this
upcoming year. While revenues and operating costs have been remained steady, some costs have
increased recently.

Specifically, the hotel chain has incurred significant cost to support:

 Launch of a mass market advertising campaign


 Purchase of more office supplies

Relevant data useful for analysis:

 5 independently operated hotels in the chain


 100 rooms per hotel (500 rooms in the chain)
 75% average occupancy rate (per hotel and across the chain)
 $400 average room rate (per hotel and across the chain, including tax)
 500 guests/night across the chain during weekdays (M-Th)
 1,500 guests/night across the chain during weekdays (F-Su)
 $20/guest per night average on other services

Questions

Q1: What do tourist families consider when booking a hotel?


Q2: How would you estimate the hotel chain’s revenues on an average night?

Q3: For many years, the business enjoyed an annual profit greater than $10 M, but profits have
started to deteriorate over the past three years. Pressure has been mounting to reverse the
trend during this upcoming year. While revenues and operating costs have remained steady,
some costs have increased recently.

Specifically, the hotel chain has incurred significant cost to support:

 Launch of a mass market advertising campaign


 Purchase of more office supplies

What are some of the ways the client can reduce its costs?

What type of research and analysis you would conduct to make these recommendations?
Q4: Looking more broadly at the entire business, what other recommendations can help client
increase revenues?

Q5: The client decides to maximize revenue from its existing space by renovating one of its
vacant retail spaces to attract a new tenant.

If the renovation begin in January, how long will it take to generate $ 2 million in profits?

(Assume rent per month is 50k and renovation cost is $1M)

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