How would you characterize the U.S. hotel industry in early 2005

How would you characterize the U.S. hotel industry in early 2005

Case Questions
Problem
Losing Money: Astor Lodge & Suites, Inc., a 250 property hotel chain, is about to
post its fifth consecutive unprofitable fiscal year.

Requirements:
Prepare Presentation for new President and CEO, Joseph James, describing
each VPS
1) his or her initiatives, expenditures, and outcomes for each of the past two
fiscal years, and
2) planned initiatives and budgetary needs for fiscal 2006.
3) Show how their staffs prior and planned initiatives and expenditures
contributed the company's EBITDA (Earnings Before Interest, Taxes,
Depreciation, and Amortization) – the corporate performance metric recently
adopted by Mr. James and the Astor Lodge & Suites, Inc. Board of Directors.

Astor Lodges Case 1 3
Case Objectives
This case has four teaching objectives:

1. To introduce students to the economics of the U.S. hotel industry.

2. To affirm the fundamental role that segmentation, targeting, and positioning
plays in crafting an advertising and sales program.

3. To alert students to the growing senior management insistence on financial
accountability when preparing marketing, advertising, and sales programs. •

4. To consider the objective-task approach to communication budgeting.

5. To apply contribution analysis in the evaluation of marketing decisions.

Astor Lodges Case 1 4
Case Questions
Assessment (A2)- Case 1 – Due 7 April by 11.59 pm via Turnitin
Astor Lodge & Suites, Inc (10%) – Kerin & Peterson page 338

Case Questions:
1. How would you characterize the U.S. hotel industry in early 2005
2. What is the current competitive positioning for Astor lodges & Suites, Inc
3. How would you characterize the operational (e.g. occupancy rates, prices,
costs per room, etc) and financial performance (e.g. EBITDA – Earnings
before interest and taxes and direct admin expenses)of Astor lodges &
Suites, Inc. You need to be able to link sales and marketing expenditure to
corporate financial metrics.
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?
5. What should Kelly Elizabeth propose in her fiscal 2006 sales and marketing
plan and budget

Astor Lodges Case 1 5

1. How would you characterize the U.S. hotel industry in early 2005

1. Think about size, growth, locational aspects and
segmentation
2. Market Structure
3. Performance metrics used
4. Trends
Astor Lodges Caase 1

2. What is the current competitive positioning for Astor lodges & Suites,
Inc
1. Think about the basis of competition: competitive
positioning may be based on (a) attributes or benefit, (b)
use or application, (c) product or brand user, (d) product
or service class, (e) competitors, and (f) price and quality.
2. Write its positioning statement 6

3. How would you characterize the operational and financial
performance of Astor Lodge & Suites, Inc.?
1. Analyse Exhibit 5 and its implications
2. Analyse and compare Exhibits 3 and 5 and identify
implications (trends in revenues, occupancy, average
daily rates and costs)
3. Analyse Exhibit 4 and its implications looking at EBITDA
4. Think about what determines EBITDA

Astor Lodges Cause 1 Astor Lodges Caase 1 7

4. Given Mr. James' charge to the senior vice presidents, how
would you portray and assess sales and marketing initiatives,
expenditures, and outcomes for fiscal 2004 and fiscal 2005?

1. Analyse Exhibit 2 (2004) AND Exhibit 3 (2005) re the
objectives/motivation/rationale for each year, initiatives, expenditures, sales
budgets (Exhibit 7), and outcomes(e.g. occupancy rates, first-time guests
(Exhibit 6), the average length of stay, pleasure/vacation trips, advertising
awareness for the fiscal 2004 and 2005
2. Think about how to link sales and marketing initiatives and expenditures to
corporate financial performance metrics.
3. Several approaches are possible:
1. Approach 1. One approach for determining the effect of marketing and sales on EBITDA for
fiscal 2004 and 2005 is to perform an incremental contribution analysis. It requires a student
to: (a) calculate room-nights sold, (b) multiply this figure by room dollar contribution (average
daily rate minus the direct cost per room/suite from case Exhibit 5), to determine total
incremental dollar contribution; and (c) subtract the incremental dollar expenditure for
marketing (advertising) and sales.
2. Approach 2. Another approach also uses incremental contribution analysis but focuses on
occupancy in more specific terms: attraction of new/first-time guests at Astor Lodge & Suites,
Inc. properties. Indeed, efforts to broaden the target market to include pleasure/vacation
travelers and the "frontier" the strategy was intended to attract new/first-time business and
pleasure travelers to increase occupancy.

Astor Lodges Case 1 8

5. What should Kelly Elizabeth propose in her Fiscal 2006 Marketing
Plan and Budget?
Major Questions to be considered

a) What emphasis should be placed on the business vs. pleasure/vacation
traveler in fiscal 2006?
b) What is the response to the view, expressed by the Chief Financial Officer,
that " A dollar or so increase in our room rate is probably equivalent to a five
to ten percent increase in occupancy rates in terms of profitability at no out-of-pocket cost to us."
c) Should the "frontier" strategy initiated in fiscal 2005 be carried forward into
the fiscal 2006 plan? (e.g. targets potential "feeder" geographical markets for
new business and pleasure/vacation travellers
d) Should a "week-end special" promotion be recommended in fiscal 2006
plan?

ANSWER.

PAPER DETAILS
Academic LevelCollege (3-4 years: Junior, Senior)
Subject AreaManagement
Paper Type Case study
Number of Pages7 Page(s)/1925 words
Sources8
Paper FormatHarvard
SpacingDouble spaced
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