GR Hotel Notes

Topics: Hotel, Hotels, Motel Pages: 8 (1334 words) Published: April 7, 2014

GR Hotels Corporation
To: Andrew Mayd, President and CEO GR Hotels Corporation
From: Chris Mell, CMA
January 30, 2008

Executive Summary
Although GR Hotels enjoyed increasing profits with growing Canadian tourism industry, both hotels performances are under industry benchmark.

Key strategic imitative being reviewed by GR Hotels include upgrading one or both hotels, exercise land option in Montreal and build conference center.

It is recommended that GR upgrade Toronto hotel, exercise land option in Montreal and build conference center. It not only achieves the desired after tax return target of the shareholders but also operating profit required by the Bank of Newfoundland. Furthermore, recommendations on ethical and control issues within hotels in operation, HR issue relating to implementing performance evaluation and incentive compensation systems have been addressed. These steps should allow GR Hotels to have a diversified income streams and enjoy increased financial success in the future.

The purpose of this report is to analyze GR Hotels’ current business situation and business opportunities and to recommend a course of action. This report includes a situational analysis, analysis of alternatives, recommendations on strategic and operating issues and implementation plan.

Situational Analysis
GR Hotels provide clean, comfortable rooms and good quality services to business and pleasure travellers in Toronto and Montreal at competitive prices.

GR Hotels are the hotels of choice for travelers in Canadian cities.

Stakeholder Preferences
Improve the occupancy rates and attract more business travellers

a minimum after-tax return of 15% is required for any proposed investment

The Bank of Newfoundland requires GR Hotels’ operating profit must be at least 11% of revenue each year.

SWOT Analysis
Refer to Exhibit 1

Skilled management team
Good service and special touches
Central and on-line booking
Toronto Hotel is in a key location close to airport
On-line booking is growing in popularity
Business travelers stay at upscale and luxury hotels

Rames ethics questionable (free stay at hotel)
Does not offer room service, dry cleaning, internet access
Internal control (sending cheques to former employee and no record of employment Mayrd requesting market value of hotels recorded on financial statement Worldwide events can seriously impact demand in hotel industry Competition from large brands is growing

Financial Assessment
Liquidity Ratio
Current Ratio has a flat trend, indicating GR Hotels’ current assets meet all of it currently liabilities which is good. Coverage Ratios
LT debt-to-equity has a decreasing trend. GR Hotels carries less debt. The ratio is still relative high; however it is not bad, because GR Hotels takes advantage of good relationship with the Bank. Profitability Ratio

All the ratios have an increase trend indicates that GR Hotels are managed effective and efficient.

Hotel Performance Metrics
GR Montreal performing below average for mid-scale hotels
GR Toronto performing above average for mid-scale hotels but below airport hotels For GR Montreal, revenue per room, average occupancy and gross profit all decreased in 2007. Financing available: $14.2 million from the Bank and Shareholder

Major Issues
Improve occupancy rate and attract more business travelers given the profitability and funding ability from shareholders and the Bank

Upgrading one or both of the hotels to upscale
Exercise land option in Montreal to:
Sell immediately, for quick profit
Build a conference center

Analysis of Alternatives
Upgrading one or both of the hotels to upscale
Well excess of the 11% requirement from the Bank and 15% profitability requirement from shareholders Pro
Good service and special touches
Demand growing at upscale and...
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