Summer

INDIVIDUAL CASE ANALYSIS

CASE: Good Hotel

Name: NGUYEN THANH HAI

Class: Advanced Accounting Intake 52

National Economics University

 July 6, 2012 Case Individual

1. What are the stand-out economic characteristics of the macro-environment of the

U.S. hotel lodging industry?

There are several stand-out economic characteristics of the macro-environment of the

US hotel lodging industry. The general economic characteristics of the macro-environment
would include such items as rate of economic growth, unemployment rates, inflation rates,
and interest rates. To commence with, the U.S lodging industry was overwhelmed by the
larger and branded hotel chains. There are 12 leading hotel chains in this industry, which
have different hotel branches within that chain as well as accommodate different amount of
employees, properties and rooms. Some may have fewer amounts of properties and a lot more
rooms to offer so have more revenue like the Marriott and others offer more properties with
almost the same amount of rooms as the Marriott but have less revenue. Identically, the
lodging business was cyclical, this means that hoteliers tended to begin building capacity
during the upturns while that capacity came online just in time for the downturns. As a result,
this industry suffered from chronic overcapacity: as of October 2009, the U.S lodging
industry comprised approximately 4.8 million rooms at more than 50,000 properties, this
means about one hotel room for every 64 U.S residents.

Equally significant, the lodging industry witnessed one of its longest downturns since
industry data first became available in the late 1960s at the beginning in the second half of
2008 and continuing through the first quarter of 2010, resulting to a further decline in hotel
industry performance as well as several side-effect that lead to low occupancy rate of 2008
and 2009 such as headline unemployment, declining business and conference travel,
relatively unchanged real GDP, and rampant foreclosures. As a results, not only hotel
occupancy had declined by 8.9 percent and was forecast to drop by a further 0.2 percent in
2010, but also revenue per available room (RevPAR)- a key industry statistic declined by
17 percent in 2009 and was anticipated to decline by a further 3.6 percent in 2010 according
to Smith Travel Research.

Additionally, there are several growth opportunities existed for innovative and green
boutique hotel operators: in 2008, nearly half of U.S leisure travelers expressed a willingness
to pay higher rates for services provided by environmentally friendly travel providers, and of
those willing to pay more for green lodging, 60 percent said they would pay up to a 9
percent premium, and 28 percent of U.S. business travelers were willing to pay a 10 percent
premium to stay in a green lodging facility.

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2. How would you characterize Joie de Vivres strategy for its Good Hotel brand? Is
the hotels commitment to social responsibility an important component of its
competitive strategy? Explain.

Good Hotel was known in the industry as the first to be branded as a hotel with a
conscience encompassing a positive attitude, environmental sensitivity, and philanthropy.
The Good Hotel is intended to be the first hotel with a conscience. Its philanthropic and
positive approach is designed to inspire the good in us all. It practices philanthropy and
believes in doing good for the planet, and attempt to become eco-friendly hotel which decor
features reclaimed and recycled construction materials.

Good Hotel targets customers who value sustainability. One major market segment
consists of consumers supporting Lifestyles of Health and Sustainability (LOHAS) which
has defined sustainability as meeting needs of the future without compromising the ability of
the future generations to meet their own needs. This segment sought a better world for
themselves and their children. They were savvy, sophisticated, ecologically and economically
aware customers who believe that society had reached a watershed moment in history owing
to increasing public scrutiny of corporations environmental and ethical practices.
Additionally, the case illustrates that the Green or LOHAS segment comprises an estimated
17 percent of the U.S. adult population, it is not clear what percent of this segment would
actually patronize Good Hotel given the generally high income and educational attainment
levels of tourist visitors to San Francisco, not to mention the generally upscale U.S. LOHAS
consumers.

Good Hotel had focused on the on best cost provider. Good Hotels emphasis on low
cost/price based on its operations, location, and low room rates, which begin at $67.

The hotels commitment to the social responsibility is an important component of its

competitive strategy thanks to several resons:

The Good Hotels room design is very special- the theme-based style. It can be seen
as an upscale youth hostel with furniture and beddings made from recycled materials
and water and energy saving features. For example, platform beds made of the
reclaimed pine were draped with fleece blankets made of recycle soda bottles. The
pillows were made from old bedspread salvaged from the previous hotel.
There is also an absence of expensive amenities found in more upscale boutique
hotels. In evidence, the case states that each room has a chandelier made of empty

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Voss water bottles, a recycling bin, a fold-down metal desk just big enough for a
laptop.
Good Hotel also shared management and hotel staff that among three different hotel
properties which help it to save large amount of money spending on salaries.
Their active program is energy efficiency, recycling and water use. In evidence, the
bath-rooms had featured a Japanese style toilet-top sink: the gray water from the sink
was collected in the toilet tank, saving water.

This strategy supplied the Good Hotel some competitive advantages in lodging
industry: saving cost because of energing efficiency, recycling features and saving water.
Therefore, the Good Hotel should continue the social responsibility, especially, attempt to
achieve the Greeen Business Certification standard in green lodging industry.

3. Describe the key strategy implementation efforts at Good Hotel brand. Has
management allocated sufficient resources to the strategy execution effort?
Exercised strong leadership to propel strategy execution forward? Instituted
policies and procedures that facilitate good strategy execution? Explain.

According to this case, there are three keys strategy implementation efforts at Good
Hotel brand.

Initially, the first strategy is Allocating sufficient resources to the strategy

execution effort which means that JdV distributed much efforts in order to push the Good
Hotel to the development ways.

JdV refurbished existing Best Western motel and an adjacent property, Hotel Briton
before reopening as the Good Hotel in November 2008. It located at the corner of
Mission and Seventh Streets in which the immediate vicinity were buildings with
single-room-occupancy housing, the futuristic-looking San Francisco Federal
Building, and s sleek plaza lined with coffee with mass transit- including bus, light
rail-cable car-subway- was all within walking distance.
Good Hotels lobby showcased many environmentally and socially conscious
features, including:
A bench made of recycled felt blankets, a vending machine branded by Ready
Made magazines that dispensed wallets fashioned out of FedEx envelops ($15)

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and other goodies; wall art by developmentally disabled artists; and an orange
phone that connected to a philanthropy concierge.
Investments in platformbeds made of reclaimed pine were draped with fleece
blankets made of recycled soda bottles. Moreover, the rooms was furnished by
the pillows made from old bedspreads salvaged from the previous hotel, a Best
Western. Each room had a chandlier made of empty Voss water bottles, a
recycling bin, a fold-down metal desk just big enough for a laptop.
Addition of in-room free Wi-Fi, 26-inch flat-screen TVs, and iPod docking
stations.
Addition of business center equipped with iMac computers.
Creation of a spacious fitness center and outdoor heated pool at the sister
property located across the street from the Good Hotel.

The second strategy of Good Hotel is Exercising strong leadership to propel

strategy execution forward.

Pam Janusz received an MBA from the University of Texas, and she initially was
responsible management of three of JdVs smallest boutique hotels. She has the
knowledge in serving as the general manager of special projects relating to
transitional hotels, a role in which she was responsible for assisting new JdV hotels
and restaurants in acclimating to the culture, processes, and operational standard of
the company.

Pan Janusz worked in may capacities at her prior location, Hotel Carlton, including
the safety task force, green committee, Green Dreams web site development, and the
advisory panel. She led the process at Hotel Carton to install solar panels that
provided 9 percent of the energy used on property, and spearheaded the hotels
application process to become certified by the U.S. Green Building Council at the
Gold level for LEED-EB.

Janusz educated staff about JdVs green initiatives and safety programs while
conducting a tour of Good Hotel in March 2010. She also had spent a good deal of
her time training the management team in an effort to increase the standards of
sevices at the hotel and, in turn, guest loyalty.
Janusz was attempting to convince JdV owners to apply for LEED certification for the
Good Hotel.

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Januszs effort to get to prove for the 130 part-time and full-time employees about
the change in ownership and possible future direction of Good Hotel and to know her
interest in employee training had helped improve employee satisfaction.

Equally significant, the third strategy of Good Hotel is Instituting policies and
procedures that facilitate good strategy execution.

Employees were provided safety training to help alleviate guest concerns about the
transitional neighborhood.
The management team was trained to better understand the standards of service
expected for the hotel, in turn guest loyalty.
4. What is your assessment of the Good Hotels performance relative to its peers in
the San Francisco market? What does a strategic group map for the industry
disclose about its competitive position?

Assessment of the Good Hotels performance relative to its peers in the San
Francisco market:

According to the case from the time of opening in march of 2008 the reading shows
that they was at advantage for occupancy up to until the running for 12 months they was a bit
below the competitor for the ADR and for RevPAR for that year they were leading again up
to until the running for the 12 months period; however, they contimue to increase their sale
on a continued basic throughout the years with reading of occupancy, ADV and RevPAR
increasing by a large numbers. For example, the peer group was leading originally but as time
goes on the Good Hotel group was at a much better financial standpoint than its peers. Which
is the whole idea when a company has a working strategy, its supposed to increase as time
continue which is what the Good Hotel brand did based on the case.

A strategic group map for the industry disclose about its competitive position:

As mentioned before, Good Hotel had applied the low cost provider strategy for their
operation so that in the strategic group map, their position must be low according to the
vertical axis which defines the price of the group. With the started price at $67 per night,
Good Hotel is considered as a hotel with a gratifyingly low room rate. Their price can be seen
as low as those of some peers such as Hampton Inn or Holiday Inn.

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In addition, the hotel compromise to perform the green model which is considered as
sustainability-focused. However, compare to some big hotel who were reflected as the
initiators in this area such as Ritz Carlton or Hilton Hotels, Good Hotel still at a lower level.
Thus, their position is a little far from the highest point of sustainability practices. We assume
that the Price is plotted on the vertical axis and Sustainability Practices on the horizontal axis, hence,
according to this analysis we have the strategic group map for Good Hoteland its Competitors
in the San Francisco Market in the figure 1 below:

Figure 1: Strategy Group Map for Good Hotel and its Competitors in the San Francisco
Market

You can see the position of Good Hotel's competitors in Figure 1. Figure 1 provides
one potential mapping of Good Hotel's competitors in comparison to Good Hotel. The
strategic group map lists many of Good Hotel competitors which have different strategies and
different position in strategic group map, that can be used during the positioning activity.

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5. Have the Good Hotels strategy and its approach to executing the strategy produced
good nancial results?

The Good Hotel strategy and its approach to executing the strategy produced good
financial results from March 2008 to the end of March 2010 compared with peers in three
indexes namely occupancy, ADR and RevPAR (S). It seem like that Good Hotel able to stay
on the top, and in 2008-2010, they have been had more occupancy and a far significant
RevPAR than their competitors for a certain times in the year, even though they were a little
difficult at the beginning but started quickly development in 2010.

The Hotel Britton, which was refurbished and reopened as the Good Hotel in
November 2008, had occupancy rates, ADRs, and RevPARs far below its peer group in
March 31, 2008: occupancy of Hotel Britton was 45,4 % that far significant lower than
occupancy of Peer group by 22,5 %; and the ADR of Hotel Britton and Peer group were
$79,38 and $83,68 correspondingly. Additionally, by March 31, 2009, Good Hotels
occupancy rate had improved from 45.4% to 70.3%. In addition, Good Hotels occupancy
rate exceeded that of its peer group by a substantial margin. Good Hotels ADR
approximated that of its peer group in March 2009, and its RevPAR exceeded that of its peer
group in March 2009. Even though Good Hotels occupancy rates fell between March 31,
2009 and March 31, 2010, its ADR and RevPAR both noticable increased: the ADR
increased by $7.48 from of $65,82 in March 31, 2009 while RevPAR increased by
approximately 3,52%.

As you can see in figure 2, Good Hotels occupancy and RevPAR increased by
considerably between March 31, 2008 and March 31, 2020, while the ADRs and RevPARs of
its peer group declined over the same time period. Also, Good Hotels decline in ADR based
on current month figures was not as great as that of its peer group. In conclusion, Good Hotel
has good financial results in the duration of 2008-2010 and itss strong financial performance
is an indicator that the hotel possesses a competitive advantage over its rivals in the San
Francisco market.

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FIGURE 2 Compounded Annual Growth in RevPAR and Occupancy Rate for

Good Hotel and its Peer Group, March 2008 March 2010
(Based on current month figures)

Occupancy ADR RevPAR

Good Hotel 20.8% -3.9% 16.0%

Peer Group -9.1% -6.2% -14.7%

6. Based on your analysis of the companys situation, does it appear that the Good
Hotel concept worked? Does the Good Hotel need Joie de Vivre or can it continue
on its own?

Based on the analysis of the companys situation, it appears that the Good Hotel
concept worked thanks to the incorporation between the needs and wants of a target segment
that wanted to see that corporations become environmentally friendly, and the customer
responded to idea of having hoteliers eco-friendly. In evidence, according to a 2009 article in
Hotels magazine, in order to seeking new customers and growth in difficult economic times,
hotels could benefit over the long term with investments in substanability initiatives,
including retrofitting existing properties to achieve Leadership in Energy and Environmenttal
Design (LEED) certification and building new properties to LEED standards. Firstly, we get
insight into the major driver for the growing demand for green lodging, its an emerging
demographic segment that consisted of consumers identified as Cultural Creatives and
Lifestyles of Health and Sustainability (LOHAS). This segment were savvy, sophisticated,
ecologically, better-world seeking and economically aware customers who believed that
society had reached a watershed moment in history owing to increasing public scrutiny of
corporations environmental and ethical practices. They concern about the environment
protection, climate change, personal development, sustainable living and social justice; and
were estimated consist of about 38 million people, or 17 percent of the US adult population
with spending power of $209 billion annually. Secondly, its the interaction of customers to
the eco-friendly hoteliers and the Greening of the hotel industry. To demonstrate, a late-2008
Travel Industry Association study revealed that nearly half of US leisure travelers expressed
a willingness to pay higher rates for sevices provided by environmentally friendly travel
providers as well as of those willing to pay more for green lodging with 60 percent said they

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would pay up to a 9 percent premium. An other survey from A Deloitte in 2008 reported that
28 percent of US business travelers were willing to pay a 10 percent premium to stay in a
green lodging facility. Hence, thank to which, the Green housing industry has the numerous
opportunities to overcome the difficult economic times as well as to expand these business
and market share, to generate the tremendous revenues.

I think that the Good Hotel need Joie de Vivres help because of Good Hotel developed
based on the investments of JdV from it was established that we mentioned before.
Additionally, Good hotel are also attempting to achieve the Green Buiding certification, that
fit with the competitive strategy of JdV in lodging industry in the future. Hence, in order to
become more successful, its essential for the combination of Good Hotel and JdV in
attempting expand the businesses and to become certified by US Greeen Building Council.

7. What recommendations would you make to Pam Janusz concerning the hotels
transition to the new ownership group? How should she prepare the hotels staff
for the transition? Should she recommend that the Good Hotel concept be
continued, expanded, or discontinued? Explain.

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According to this case, it states that Pam Janusz wondered what she would say about
the change in ownership and possible future direction of Good Hotel to her 130 part-and full
time staff members, who serviced 308 rooms among the three properties, including 117
rooms at Good Hotel. She also trained the management team in an effort to increase the
standards of service at the hotel and, in turn, guest loyalty. She also prepare her valuation and
recommendation to the new ownership group as to whether to continue, expand, or
discontinue the Good Hotel concept.

Several things that Pam should consider carefully before reported to the new owner.
Firstly, the transition to the new ownership group is something that must be explained to
everyone in organization. Secondly, Pam Janusz should set up and create a meeting with an
interactive presentation in order to promote clarity and support among the staff. In addition,
She must also create a resistant to change program for those that might have problems in the
transition stage. She could also create a call center for those employees that might have
questions or problems. Finally, the hotel has been know as a hotel with a conscience
because of its positive attitude, environmental sensitivity, and philanthrophy; this concept
should be transmitted to everyone in order to succeed among the lodging industry.

Additionally, during the remaining six weeks, Janusz should consider what is the
possible future direction of Good Hotel, should it continue, expand, or discontinue its
concept. In order to achieve this purpose, Janusz should consider the Pros and cons analysis
to consider whether Good Hotel to continue or discontinue, or expand the original strategy.
Figure 3 provides the pros and cons discussion to get the right direction for Good Hotel
strategy.

FIFURE 3 Pams Alternatives with Pros and Cons

Alternatives Pros Cons

Discontinue the Good Hotel Minimize risk of new Decrease customer base
concept concepts
Decrease in occupancy rates
No debt
No sustainability program
No investor risk or philanthropic image

No special management No growth

policies for sustainability

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Continue the Good Hotel as Minimize investment risk Customer growth is flat
it is no change
No debt Competitors imitate theme

No cost to re-brand

Maintain diversification of
themes among hotel
properties

Expand the Good Hotel Increase customer base Over expansion

concept to new or re-
branded hotels Higher occupancy rates Low demand projections

Higher RevPar potential Increase debt and/or need to

raise equity from investors
Higher profit potential

According to the figure 3, the performance success of the Good Hotel would be
satisfied when Janusz decides to continue or to expand the Good Hotel concept in order to
maintain the good quality and performance of the company. Under both options, many of the
key strategy execution principles that Joie de Vivre has fostered would most likely be
preserved.

With the development of the trend in the Greening of the Hotel industry, in which
customers expressed a willingness to pay higher rates for sevices provided by environemtally
friendly providers, and of those willing to pay more for green loding facility, so another
possible implementation step for new ownership would be to obtain Leadership in Energy
and Environmental Design (LEED) certification for the Good Hotel and when expanding to
build new properties to LEED standards. In the long-term and for a relatively modest cost due
to the small size of the property, LEED certification for Good Hotel would provide further
differentiation attributes and also allow the new owners to charge about 10 percent premium
to stay in a green hotel property.

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Another recommendation would be to increase the marketing / promotion budgets for

the Good Hotel and any additional properties that will follow the sustainability concept to the
Lifestyles of Health and Sustainability (LOHAS) consumers. One specific and potentially
low incremental means to do this is through cause-related marketing efforts, such as joint
promotions with a well-known and nationally or internationally recognized charitable
organization.

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