Eng Huang bought Sleepy Inn Motel, a 60-room motel located at the edge of a small town about one-half mile off the interstate highway. Even though Sleepy Inn Motel is 10 miles from a tourist area, the only promotion near the motel is two large signs advertising the name of the area. Over the past two years that Eng has owned and operated Sleepy Inn Motel, its occupancy has been far below the average for other motels with his classification. Eng must make a strategic business decision about how to operate Sleepy Inn Motel. Should he join a national chain such as Days Inn or Holiday Inn, or should he stay independent and make changes to Sleepy Inn Motel to make it more appealing to customers.
Currently, Sleepy Inn Motel is able to offer motel rooms at a very modest price of $45 per night since the motel does not have amenities such as a pool, a restaurant, or a fitness center. After reviewing results from a study conducted by the tourist bureau, Huang began to seriously consider joining a national chain. The two he considered, Days Inn and Holiday Inn, both have advantages and disadvantages of joining their national chains.
In order to attract more customers and stay protected from the increased competition, I believe that Eng Huang should join the Days Inn national motel chain. I believe that this option is the most reasonable option given the current state of Sleepy Inn Motel. First off, Days Inn would not require Huang to make a large capital investment. This is what Huang seems to prefer since Huang wanted to avoid direct competition with full-service motels. If Huang joined forces with Holiday Inn, he would be required to upgrade his facilities and make a major capital investment. In order to increase customers and maintain lower lodging rates, Days Inn would be the fit for Sleepy Inn Motel.
In addition, Huang would benefit from Days Inn central reservation system. According to the study conducted by the regional...