Good Night Motel case study
MEMO
Re: Good Night Motel
Purpose
To discuss the factors which motel owner Justin McGregor’s should consider when deciding on business proposal from a well respected community resident George Alward for 2 nights full house accommodations.
Offer for half room rate, during low occupancy season, for church convention attendees.
Background Summary
Good Night motel is a family owned and operated motel, located near main highways, restaurants and retail shopping in the Canadian town Grand Bend. The town is a summer resort with local businesses exposed to seasonal business patterns. Such is the Good Night motel, which has 30 units and charges $80/nt, rate comparable to the high-end motels in the area.
Due to the global economic recession over the past few years Good Night’s occupancy rates have dropped resulting in lower annual revenues and increased competition for guests. 2012 is the first time in five years with earned profit.
In the “low” period (Oct 16-May 14) the motel is rarely more than a quarter full at any time. During this time the operating and administrative expenses do not vary with the occupancy rate except cleaning supplies ($2.74 rm/nt) and heating ($5 rm/nt).
Important Factors
When making the decision McGregor should consider both macro and microeconomic factors affecting his business.
Global Recession: Currently due to the global economic recession and the appreciation of the Canadian dollar vs US, less people are travelling, their leisure budgets are smaller. Consequentially the revenues are lower and the competition for customers higher. In a competitive environment, customers are not price takers. There are various comparable motels so George Alward can simply take his business to the competition.
Possibility for repeat business: If McGregor accepts the offer he will create an opportunity for possible repeat client next year during slow season. And since Alward is a respected member of the
Re: Good Night Motel
Purpose
To discuss the factors which motel owner Justin McGregor’s should consider when deciding on business proposal from a well respected community resident George Alward for 2 nights full house accommodations.
Offer for half room rate, during low occupancy season, for church convention attendees.
Background Summary
Good Night motel is a family owned and operated motel, located near main highways, restaurants and retail shopping in the Canadian town Grand Bend. The town is a summer resort with local businesses exposed to seasonal business patterns. Such is the Good Night motel, which has 30 units and charges $80/nt, rate comparable to the high-end motels in the area.
Due to the global economic recession over the past few years Good Night’s occupancy rates have dropped resulting in lower annual revenues and increased competition for guests. 2012 is the first time in five years with earned profit.
In the “low” period (Oct 16-May 14) the motel is rarely more than a quarter full at any time. During this time the operating and administrative expenses do not vary with the occupancy rate except cleaning supplies ($2.74 rm/nt) and heating ($5 rm/nt).
Important Factors
When making the decision McGregor should consider both macro and microeconomic factors affecting his business.
Global Recession: Currently due to the global economic recession and the appreciation of the Canadian dollar vs US, less people are travelling, their leisure budgets are smaller. Consequentially the revenues are lower and the competition for customers higher. In a competitive environment, customers are not price takers. There are various comparable motels so George Alward can simply take his business to the competition.
Possibility for repeat business: If McGregor accepts the offer he will create an opportunity for possible repeat client next year during slow season. And since Alward is a respected member of the