Amber Inn & Suites, Inc. is a 250-property hotel chain with locations in 10 western and Rocky Mountain States. Their market position lies between a limited-service and full-service hotel chain. Joseph James is the newly appointed president and CEO. He initiated an aggressive goal for the senior leadership team (SLT) to formulate a strategy to achieve profitability in the next two years and sustain future growth (Kerin and Peterson, 2010). This case study will offer a summary and analysis of Amber Inn & Suites options and an examination into the company’s strengths, weaknesses, threats and opportunities. Problem Identification
Despite three consecutive years of growth in lodging revenue, Amber Inn & Suites realized four consecutive unprofitable years, and projections show the fifth year will continue the downward trend. Amber Inn & Suites target market is the business traveler. According to American Hotel and Lodging Association, one-half of all guests are business travelers and one-half are for leisure or family vacations (Kerin and Peterson, 2007). The business travelers largely occupy rooms during the weekday from one to three days, whereas the leisure or family vacationers occupy rooms over weekends from one to three days. Additionally a corporate analysis shows business travelers will decrease by 2 percent, adversely pleasure/vacation travelers will increase by 1 percent. The challenge for Amber Inn & Suites’ SLT is to create a marketing and advertising expenditures to expand occupancy of family and leisure vacationers, while maintain their core business traveler. Additionally, they have to decide whether to revamp the frontier strategy initiated in 2005 to grow brand awareness in the South West. Lastly, they must agree whether the -25 percent weekend rate special promotion that replaced the weekend free night stay is achieving the desired goal. Case Analysis
The hotel industry recorded revenue of $113.7 billion and grossed $16.7 billion in pretax profit in 2004. In 2004, there were 4.4 million hotel rooms in the United Stated. Approximately two-thirds of all U.S. hotel rooms were affiliated with a brand; while the remaining were independent and as stated in the Smith Travel Research survey the hotels are segmented by price and service levels. Price is often the function of service levels amenities offered. Full-service hotels account for 1.6 million rooms and are classified between upscale to luxury, offering restaurants, lounges, and banquet facilities. Limited-service hotels account for 1.4 million rooms and are classified between mid-scale to economy. They offer limited services and primarily focus on renting hotel rooms. In 2004, the average occupancy was 61.3 percent with an average daily rate of $86 with a revenue per available room of $53. The market is supposed to grow 7.6 percent in fiscal 2005 (Kerin and Peterson, 2007).
Amber Inn & Suites is a 250-property hotel chain with locations in 10 western and Rocky Mountain states. Amber Inn & Suites feels they are positioned between the midscale hotels with food and beverage, such as national chains Holiday Inn and Ramada, and economy hotels, such as Red Roof Inn and Motel 6. Their approximately 30,000 rooms, clean with nicely furnished amenities, are distributed across 200 Amber Inn properties and 50 Amber Inn Suite properties. The majority of the properties are located in premium sites on major highways, close to large shopping malls, and airports. They avoid urban and downtown locations (Kerin and Peterson, 2007).
Amber Inn & Suites projects lodging revenue of $422.6 million, (7.4 percent) in fiscal 2005, with a net loss of $15.7 million. The 7.4 percent lodging revenue is -0.2 percent under industry average, but maintains a 5.8 percent segment growth rate in limited-service (Kerin and Peterson, 2007). The projected consolidated company occupancy is 67.1 percent with an...