Comprehensive Case Analysis

Good Hotel: Doing Good, Doing Well?

Brief Background Information
Good Hotel was refurbished, renovated and launched as one new hotel by Joie de Vivre
(JdV), a San Francisco based Hotel Management Company in November, 2008. 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. A new ownership group planned to
run three hotels including Good Hotel under JdVs management, and tend to terminate JdVs
management contract at the end of May. General Manager of Good Hotel, Pam Janusz was
requested to evaluate the performance and to provide a recommendation on whether to continue,
expand or discontinue the Good Hotel concept to the new ownership group.
The U.S. lodging industries were dominated by 12 leading hotels. In 2009, the lodging
industry was suffering from chronic overcapacity. The prolonged industry downturn was
expected to drop occupancy levels by 55 percent to 56 percent. Hotel occupancy also had
declined by 8.8 percent in 2009, and was forecast to drop by a further 0.2 percent in 2010.

Good Hotels Mission Statement, Vision Statement and Long-Term Objectives

Mission Statement
Good Hotel is a hip San Francisco hotel to enrich the quality of life for communities with
positive approach to inspire the good in us all as being the most eco-friendly hotel with
constructed recycle materials. As we practice philanthropy and believe in doing good for the
planet, we are committed to operating in an economically, socially and environmentally
responsible manner while balancing the interest of diverse stakeholders, promoting sustainable
lifestyle and differentiating our guests personal experience.
Vision Statement
We endeavor to be a leader in hospitality industry that will exceed expectation of our valued
customer, passionate employees and owners while striving to be a responsible steward of the
environment and sustainable development of society.
Long-Term Objectives

To invite our diverse stakeholders to participate in our effort to protect environment

Become certified green.
Achieve LEED certification.
Create a unique corporate culture
Build up an enthusiastic staff
Develop strong customer loyalty
Maintain a profitable and sustainable business

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Case Exhibits Evaluation

According to exhibit 2, the impacts of an economic recession affected to lodging industry
as declining in both revenues and profits. During 2007-2009 economic downturns, occupancy
levels dropped because of declines in the demand for lodging accommodation. As a result, it led
to declining in both revenue and profits, and dramatically led to decreasing in net income. It was
also because hotel management team were rarely able to reduce operating expenses in response
to declining levels of occupancy and revenue. With strategy of minimizing cost by using
constructed recycled materials, Good Hotel might be able manage the revenue and expenses
during the downturn.
As of Exhibit 3, San Francisco tourism were mostly influenced by Caucasian. As
of 75 % of Caucasian, 62% were green consumers. Responding to green consumers, Good Hotel
can get consumers to thinks of the products as their needs and wants. Also, the consumers can
feel that by staying in such eco-friendly hotel like Good Hotel, they are doing their part to make
life more sustainable. Also, Good Hotel can focus on Caucasian as targeted customers. Exhibit 4
also describe 39.7% of guests visit for leisure and 35.3% for convention. In addition, 53.9% of
guests rely on internet in planning trip. Related to that, Good Hotel and other hotels under JdVs
management rely on word of mouth communication. Good Hotel could advance their internet
website that people will recognize at a glance that Good Hotel is an eco-friendly, comfortable
and convenient to match customers requirement. As most guests travel for leisure, Good Hotel
can take a good opportunity to be more creative and supportive for guests leisure time.
Exhibit 5 told us that during 2008-2010, San Francisco average room rate are decreasing
repeatedly. However, the occupancy rate is increasing. With this chance, Good Hotel can take a
good opportunity to attract and promote marketing to increase occupancy rate when they already
are in low room rate hotel. In Exhibit 7, Good Hotels occupancy rate started increasing in 2009
better than competitive peer group.

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SWOT Analysis
Themes

Customer & Employee

Relation

Business Model

Features

SWOT

Strength

Good customer service.

High customer
satisfaction and loyalty.
Unique hotel design to
attract customer
Cater to a wide variety
of customers needs
and wants.
High employee
commitment and
satisfaction.
Employees are welltrained and aware of
the hotels safety and
green program
Strong Online
customer review

New Demographic
segment LOHAS

Capable management
team.
Emphasis on recycling
and use eco-friendly
materials
Low cost and expenses
thanks to recycling.

Weakness

Opportunit
y

Not aggressive enough in

marketing
Rely heavily on internet
booking.
Potential for staff
turnover after the change
in management
Well-known on online
media which is being
used more and more by
travelers.
The growing demand for
green lodging fits the
theme of the hotel that
targets green consumers.
San Francisco is strong
in tourism.

Good reputation: hotel

conscience, positive
attitude, environmental
sensitive and
philanthropy.
Good location: located at
a revitalizing corner of
SoMa. There are cafes,
bus station, light rail,
cable car and subway
within walking distance.
Competitively priced.

Good Hotel hasnt

achieved LEED
certification yet.

Lower operating cost

through LEED certificate.
New emerging technology

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The new management

Threats

could disband current

concept and identity of
Good Hotel entirely.

The lodging industry is

experiencing one of the
longest downturns.
Occupancy level and
demand are expected to
drop further.
Corporate rates for
meeting and business
travel are already
negotiated so even if
travel picks up more than
last year, it wont shoe in
rates and RevPAR until
2011.
Seasonal factor can affect
the occupancy rate.
Strong growing
competitors.

Industry Analysis
As of October 2009, the U.S. lodging suffered from chronic overcapacity with about 4.8
million roomsapproximately one room per 64 U.S. residents. During the period 2008 2010,
the industry experienced the longest downturn which was expected to drop occupancy level
about 55%the worst since the Great Depression. Since 2009, U.S. hotel rate declined
rapidly8.9% for the year and was estimated to drop another 3.4% the following year. Revenue
per Available Room (RevPAR) also experienced a dramatic fall of 17% in 2009 and estimated
3.6% in 2010. Overall, the industry is doing quite badly due to the effect of the financial crisis.To
analyze lodging industry in San Francisco, we are going to use Five Driving Forces to determine
the nature and strength of the competitive pressures that are involved within the hotel industry.
Threat of Entry
The threat for potential new entrants is considered weak in this lodging industries in San
Francisco and around U.S.A. If there are new entrants to this industries, there are some hurdles
that they must overcome. The barriers to new entrant is due to the high capital investments that
are required to start and operate a hotel. They also need many efforts to differentiate themselves
from those who are already existing, recognized by customers and accomplish customers
loyalty. In addition, the new entrants to start business, they need a strong network in order to
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conquer the challenges of business. Due to those factors, the threat of new entrants is weak for
the lodging industry.
Powerful Suppliers
Hotel business has the advantage of controlling suppliers in their hands. As business is
being hospitality and tourism industry, there are many suppliers that are able to supply hotels
with the essentials needed to operate the business. For example, hotel face low switching if they
want to change the suppliers such as the suppliers of hotels furniture and fixtures, and the
suppliers of food and beverages.
Powerful Buyers
In lodging and hotel industry, buyers have a strong bargaining power. First, the cost of
switching to a competing hotel is low. In addition, the buyers power is strong because the buyers
demand for using hotel rooms have decreased while there are greater number of rooms are
offered. Another thing that makes the buyers power strong is that hotels rely on unpredictable
travelers.
Threat of Substitutes
The threat of substitutes for Good Hotel seem to be strong. It is because there are always
good substitutes that are available to be used by consumers. For instance, there are always the
availability of cheaper priced lodging places. If substitutes offer consumer comparable features
that they would receive at hotel, consumers are more likely to change. Also, the switching costs
to use the substitutes are very low for buyers.
Rivalry among Competitors
This force seem to be strong because the customers switching cost is low. They can
change their mind to stay at a different hotel at any time. Due to economic downturn, hotels
began to notice a declining RevPAR rate. The RevPAR rate offers a convenient way for a
company to see how well the fill its rooms as well as how much they are able to charge for using
them. In fact, the industries RevPAR had declined by 17 percent in 2009 and was expected to
continue dropping in 2010 by 3.6 percent.

Economic Analysis
The period 2008 2010 suffered from the effect of the financial crisis. Unemployment
rose from 4.7% in November 2007 to peak at 10% in October of 2009. American household
wealth has plunged to levels not seen since 1992, with incomes dropping to 1996 levels when
adjusted for inflation. Nearly 50 million Americans (16%) are in poverty, up from 12.1% in
2007. The recovery since 2009 has been weak and both GDP and job growth remain erratic and
uneven.
The hospitality and tourism sector is experiencing numerous challenges as a result of the
economic crisis during 2007- 2010. This crisis created that the U.S. hotel industry experienced an
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Comprehensive Case Analysis

intense and immediate negative impact on occupancy rate, and revenue because of decreased
spending by both corporate and individual consumers. However, it seems like hotels those
focused on catering to leisure and green travelers are less affected while those leading lodging
industry with much larger capacity seems to suffer from financial disorders due to the crisis.

Competitive Analysis
The major competitors of Good Hotel include Accor SA, Best Western, Choice Hotels,
Hilton Worldwide, InterContinental Hotel Group, Marriott International, WIyndham Worldwide.
Among the competitors within San Francisco that also target green consumers, there are big
hotels with LEED certifications such as Hotel Carlton, Orchard Garden Hotel, W Hotel. So in
order to compete with all those big, high-standard hotels during this recession period, Good
Hotel needs to have a strategy to make themselves more attractive to customers.

Key Strategic Issue

Good Hotels key strategic issue is how to maintain sustainable growth in a market of
slowing buyer demand and how to remain superior in a gritty but revitalizing area when
there is a high chance that the change in leadership can have a negative impact on
employees and performance of the Good Hotel.
Themes

Employee and Customer Relation

Suppose that the new manager
decides to change the concept of
the hotels, the culture of the
hotels will be affected and the
morale of the employees may
drop. The hotels can also lose
their regular customers.

Business Model
If the new manager changes
the hotel concept, there is a
high chance of increasing in
operating costs. As a result,
that factor may pull down
the organization along with
the recession.

Strategic Formulation

Our strategy makes use of the strengths and opportunities and reduces the weaknesses at
the same.
Maintain and further develop the hotel concept.
Create different activities and services to please the customers and make them feel that it
is worth choosing Good Hotel. Also, the hotel can earn extra profit from that. For

Comprehensive Case Analysis

example, the hotel can hold seasonal event like Christmas to attract customers even
during winter months with low occupancy rate.
Good Hotel should focus on developing their green programs and their energy-saving
activities in order to reach LEED certification
Create a membership system that allows customers to accumulate points in exchange for
special gifts, services, or a discount.
Use effective marketing as a tool to alternate solution to increase occupancy rate within a
targeted budgeting.
Advance and update the hotels website to attract more customers because most
customers plan their trip using internet.
Employ other low-cost method of marketing.
Open green campaigns within the community to create deeper relationship with local
customers and boost the hotels reputation.
Involve the employee more in the hotels projects and campaign to increase their
commitment and satisfaction.
Try to cut down miscellaneous costs.
Being first movers and invest in new initiatives that might not be fully developed yet.

Subordinate issues

Marketing strategy: Good Hotel spend a small amount in marketing, instead, it rely on
word of mouth communication and social media. Good Hotels operation needs to be
more aggressive while economy is in downturn. Advertisement would play a big role in
competing in challenging economy environment and to attract both local and foreign
guests.
Communication Strategy: Good Hotel went on communicating by email when a huge
transition like informing changing ownership of hotel is addressed.
Leadership strategy: Pam is very important person of Good Hotel since she is a general
manager. Good Hotel should include Pam more in the process of transition before she
walked into receive such a shocking mail.