Question 1: I also agree with you. Referring to the information from the case of Amber Inn &Suite: It seems to show that the US hotel industry in 2005 will be a profitable year. After the 9/11 attacks, the hotel industry in US had suffered from a serious downturn and people were scared of travelling.
The situation was not much improved in the two following years. However from 2003, the economy has evidenced improved performance from the aftermath. In 2004, the hotel industry had recorded revenue of $113. 7 billion and grossed $16. billion in pretax (Chap 6, Pg 332, Strategic Marketing Problems, Kerin and Perterson). All hotel segments also proved to have improved performance on the three most important factors: occupancy, average daily rate and revenue per available room. For that reason, it could be predicted that 2005 will be a year of development and growth for the US hotel industry. Question 2 The current competitive position of Amber Inn & Suites, Inc. , can be considered as out of the market, which means it limits and puts itself in a not very favorable situation.
It positioned as a limited service hotel between economy hotel and full-service hotels. Because of that, their hotels do not include restaurants; lounge, meeting rooms, concierge or room service on the property. And this cause confusion in the competitive hotel industry: it is hard to say if their hotel belongs either to midscale or economy category. Amber Inn & Suites, Inc. ’s direction is that they avoid urban and downtown area. Instead, their properties are located on major highways close to suburban industrial and office complexes, airports and shopping centers. 3.
How would you characterize the operational and financial performance of Amber Inn & Suites Inc.? I would characterize the operational and financial performance of Amber Inn & Suites Inc. as positively improved, however still it has not make full advantage of all its potentials. Although Amber Inn & Suites Inc. has achieved a growth in lodging revenue for 2003, 2004, and 2005, the company’s lodging revenue average of 7. 4% is still a little bit below the hotel industry average of 7. 6%. However, the company was said to have been operating at a net income loss for the third consecutive year.
While the industry as a whole reported profitable operations in the last three years as the economy had recovered from crisis, the operational profit of Amber Inn & Suite was reported as the opposite. Since 2003, the company opened two Amber Inn properties and three Amber Inn & Suites properties, but 12 underperforming properties were closed. For 2005, due to its strategy of “free-night-stay”, the daily rate was expected to gain only 57. 52 dollar, which is believed to have attributed to the decline in revenue per available room and occupancy of fiscal year 2005 compare to that of 2004.
Amber Inn & Suites Inc. ’s net income loss is again not in the flow of growth in the industry due mostly to lodging and corporate expenses. Labor and utility expenses were expected to be higher for 2005. Corporate expenses were expected to increase by $5. 9 million in 2004 because of the increases in compensation, healthcare, information technology and sales & marketing costs. These costs was also added-up because of the recruitment of two national sales representatives and marketing research to study the Amber Inn Suite guest and media advertising which increased to $12. million in 2005. 4. Given Mr. James’ charge to the senior vice president, how would you portray and assess sales and marketing initiatives, expenditures, and outcomes for fiscal 2004 and 2005? I think if I were Mr. James – the senior vice president, I would make Amber Inn & Suites reduce it overall expenditures and set up strategies to gain profit. Which mean, the company is required to be able to define on its targeting customers and then increase their loyalty and brand recognition.
In order to do that, Amber Inn & Suites Inc. , also need to provide customers with better service that it has been missing or cut off over the past years. And to provide good services, they need to invest in some of the amenities that their targeted customers would use. In the position of Mr. James, I would also reduce the expenses for marketing which is already over a million dollars. It seems to me that the marketing strategies and activities that they are doing are not effective enough to attract customers.
Even though the proportion of customers they are targeting 65% for the business travelers and 35% for the leisure travelers is quite reasonable, they still need to have better strategies to make this proportion grow. Question 5: 5. What should Kelly Elizabeth propose in her fiscal 2006 sales and marketing plan and budget? I think she should focus on business travellers, whose travels are mostly paid by their companies. There are also other services added to this type of customers like: free Wi-Fi Internet, special rate for minibar and 24/24 room service.
Another thing that she can propose is doing marketing via the Internet. The strategy of “free-night-stay” should be used in a different way. For instance, instead of giving free night, which is believed to have added up to the company’s loss, the hotel can offer discount for the weekend or long stay (up to 4 days). It’s also important to have good relations with different businesses that often send people to travel and have to stay in hotel: Offer them corporate price throughout the year in every locations that the company operates.