International Burch University
Marketing management
Assoc. Prof. Dr. Teoman Duman
Students: Almedin Skopljakovic
Almin Jasarevic
Case study: Amber Inn & Suites, Inc.
Introduction
The Amber Inns & Suites, Inc. is a 250 property hotel chain in the western and Rocky Mountain States. Amber Inn & Suites, Inc. was established in 1979 and is made up of 250 hotel chain properties each consisting an average of 120 individual guest rooms or suite units. Amber Inn & Suites, Inc. can be found in locations among ten western and Rocky Mountain States with two hundred fifty different property hotel chains. On average, each property consists of one hundred twenty individual guest rooms or suite units. Amber Inn & Suites Inc. locates its properties on premium sites on major highways close to suburban industrial and office complexes, airports, and large regional shopping centers.
In order to analyze this case and to present it we will follow all steps from chapter 3, Marketing Decision Making. These decision making processes will help us to increase likelihood of getting better solutions to our problem. These steps are:
1. Defining the problem
2. Enumerating decision factors
3. Considering relevant information
4. Identifying the best alternative
5. Developing a plan for implementing the chosen alternative
6. Evaluating the decision and the decision problem
1. Defining the problem
First challenge that Amber Inn & Suites has to deal with is to determine whether or not to expand their marketing and advertising investments between guests who are on leisure travels and/or business trips. First of all, Amber Inn & Suites advertises their hotels mostly to those on a business journey whose stay only last between one or two nights. Business users are the target market that is in the company mission. After three years of constant loss, it must find a method that will increase the EBIDTA, to growth 7% in 2 years.
Second they have to decide if continue, and if so how, and what to do with the promotion as weekend special (25% discount) or do a free night stay in the weekend and which one will achieve the desired goal.
In order to solve this marketing problem we have to answer some questions:
1. Should Amber Inn & Suites main focus be on business users or should they invest more in promotion and advertising of leisure travelers?
2. Which promotion will achieve better result,
· free night stay or
· weekend special (discount 25%).
2. Enumerating decision factors
In this step our focus will be on two sets of decision factors:
· Alternative course of action and,
· Uncertainties
These two sets can be presented by the SWOT analysis which can be very illustrative.
Strengths:· Location (close to airports, office complexes, shopping centers)
· Good promotions
· Good service to customers
· Good price / Weaknesses:
· Pure business guests hotels
· Underperforming properties in the last few years.
· Bad financials performance
· No correct ad politics
· No hotels in downtown location
Opportunities:
· Increase the amount of leisure travelers during weekend
· Become a full-service hotel
· Attract new first-time guests
· Increase the length of stay per visit / Threats:
· Competition from other hotel chains
· Decrease of travel frequency
· Lower prices strategy
3. Considering relevant information
The next step is leading us to some specific data which will help us to solve these marketing problems. For this situation we will mention some alternatives which can be conducted for this type of problem.
First alternative is to focus on business users and offering them more service like Wi-Fi, conference rooms, self service laundry room etc. Leisure users are price sensitive, so they are not market to focus because small price increase can lead them to switch the hotel.
Second alternative is to focus more on leisure users. They stay longer then business users and in most cases they travel in more than one person (with wife or children). But the only problem is that till now company mission was to focus on business users. According to the statistics we can see that there is an increase by 1% from 2002-2004 and a decrease in business users by 2%.
Third alternative is to stay on the same place, not to change anything but this will lead to loss because company in last 3-4 years had a net loss.
4. Identifying the best alternative
In this fourth step we will choose the best alternative from our point of view based on all the information which we stated. We have mentioned that there are three alternatives for Amber Inn & Suites in order to increase/decrease profit of the organization. First alternative seems the best one, because it is the only one which has potential to make a net profit. Focusing on the business users is the mission of the company and changing that can be negative for whole organization. Leisure users are price sensitive, while business users are more flexible regarding prices. They are focusing more on the location of the hotel and the service of the employees because it is more important to them that the hotels are near the highway or to the location where they travel and Amber Inn & Suites has this advantage of good locations and good services of the employees.
Target strategy
According to the research data, business travelers should be the main customers in Amber Inn and the target strategy will take the single segment strategy.
Financial returns
We can conclude that choosing alternative number one is the better option for the company so the profit is expected in soon period of time.
5. Developing a Plan for Implementing the Chosen Alternative
When we chose the first alternative which is focusing on the business users, now we will try to suggest ways of decreasing cost and focus more on profit maximization in order to meet the board of Directors and CEO’s goal setting of 7 % annual increase in EBITDA.
In this table we can see suggestion of decreasing cost of Marketing and promotion for Fiscal 2006. We can save about $5,500,000 based on Exhibit 7 in textbook
Media / category / Fiscal 2004 / Fiscal 2005 / Fiscal 2006Budget quota
Magazine / Business/Pleasure traveler / 2,780,000 / 3,236,240 / 1,618,120 / Maintain the budget of magazines related to business. Maintain 1/2 budget of 2005.
Newspaper / Business/Pleasure traveler / 3,975,000 / 4,096,965 / 4,096,965 / Maintain the same budget as 2005
Outdoor / Pleasure traveler / 558,500 / 519,700 / 0 / cut the budget
Spot TV / Business/Pleasure traveler / 1,875,500 / 2,340,266 / 0 / cut the budget
Cable Networks / Pleasure traveler / 975,500 / 1,048,589 / 0 / cut the budget
Radio / Pleasure traveler / 425,500 / 257,740 / 0 / cut the budget
Internet / Business traveler / 750,000 / 1,000,500 / 1,000,500 / Maintain the same budget as 2005
Total / 11,360,000 / 12,500,000 / 6,715,585
Promote the frontier strategy which focuses on the business segment.
Second thing which should be replaced in Fiscal 2006 is the “free-night-stay” by “weekend specials”. This was one way of promotion but there wasn’t any revenue and so “weekend specials” will be good substitution for the first option. It will include 25% discount off on the room/suite and it will be used ones a month on Saturday/Sunday night stay.
6. Evaluating the decision
With implementing this strategy the overall goal of companies’ new president and a CEO Joseph James to increase EBITDA by 7 % based on Exhibited 4 in the book can be reached.