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Astor Lodge & Suites, INC.

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by

John Carey

on 27 March 2014

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Transcript of Astor Lodge & Suites, INC.

Founded in 1979
Had not been profitable for five consecutive years prior to 2005
Two Services:
Astor Lodge: Economy Class Hotels
Astor Lodge & Suites: Midscale Class Hotels w/o Food/Beverage
250 Owned Properties Nationwide:
200 Astor Lodge
50 Astor Lodge & Suites
About Astor Lodge & Suites, INC.
Astor Lodge & Suites, INC.
Above Average Occupancy Rate
Astor Lodge & Suites Inc: 67.1%
Industry Average: 61.3%
High Brand Loyalty
High Revenue Growth Rate
Astor Lodge & Suites Inc: 7.4%
Industry: 7.6%
Limited-Service: 5.8%
Prices are lower than industry averages
Astor Lodge & Suites Inc: $57.52
Industry Average: $61.50

Industry experiencing 7.6% growth
Source of large revenue losses

Major cause of Business Customer complaints about Leisure Customers.
Help increase occupancy rate

Gives deal to families looking for lower cost

Returns portion of lost revenues experienced when providing "Free-Night-Stay" Deal.
Replace "Free-Night-Stay" Deal with "Weekend Special" Deal
Change Allocation to:
60% towards Business Customers
40% towards Leisure Customers

Leisure Customers will be more responsive to learning about deals
Astor Lodge & Suites, INC.
SWOT Analysis
POSSIBLE ALTERNATIVES
ANALYSIS OF ALTERNATIVES
Change Media Advertising Budget Allocation
Remove "Free-Night-Stay" Deal
Replace "Free-Night-Stay" Deal with "Weekend Special" Deal
STRENGTHS
OPPORTUNITIES
How will Astor Lodge & Suites, INC. achieve profitability within the next two years and increase EBITDA by 7%?
Problem/Decision Statement
Complaints from business guest as hotel targeted vacationers
Projected Increase of 2% in direct cost of rented room
Low weekend occupancy rate of 60%
Net Losses for 5 consecutive years
Industry competitors are seeing profits
WEAKNESSES
Challenge from large hotel chains


Travel has slowed since 9/11
THREATS
Room rates are lower than industry averages

Business customers are not sensitive to a higher price

Business customers are booking rooms, while companies are paying for them
Increase Pricing
Focus more on attracting weekend Leisure Customers

Business Customers are returning without need for advertising

Change Allocation to target Leisure Customers slightly more.
Change Media Advertizing Budget Allocation
Increase Prices to:
Astor Lodges:
2005: $58.00
2006: $60.00
Astor Lodge & Suites:
2005: $70.00
2006: $75.00
This will drive Occupancy down, having a negative affect on Net Income
Increase Pricing
Return revenues lost implementing this deal

Will still incur Net Losses (Occupancy held Constant)

Occupancy can be expected to drop.
Remove "Free-Night-Stay" Deal
Increase Pricing
Remove "Free-Night-Stay" Deal
Will Return approximately 50% of revenue lost with "Free-Night-Stay" Deal

Will not incur a significant drop or increase in Occupancy
A hybrid mix of previously mentioned alternatives is recommended

Reallocate Media Advertising Budget to:
60% Business; 40% Leisure

Replace "Free-Night-Stay" with "Weekend Special deal
Returns portion of lost revenues while maintaining Occupancy Rates

Increase prices on an incremental basis:
2005
Astor Lodge: $58.00
Astor Lodge & Suites: $70.00
Recommendations
Top Competing Attributes:
Amenities
Price
Service


Six Hotel Segments
Full-Service Hotels
Luxury
Upper Scale
Upscale

About Hotel/Lodging Industry
Reported a 50/50 split between Business and Leisure Customers
Typical Business Customer: 1 male, 35-54, income $81,000/year, paying $96/room/night
Typical Leisure Customer : 2 adults, 35-54, income $72,600/year, paying $89/room/night
Hotel/Lodging Industry Customer Base
Growth Rates:
Hotel Industry: 7.6%
Limited Service Segment: 5.8%
Astor Lodge & Suites: 7.4%



Limited-Service Hotels
Midscale w/ Food + Beverage
Midscale w/o Food + Beverage
Economy
Business Stay Lengths
1 night: 39%
2 nights: 24%
3 nights: 27%
4+ nights: 10%
Leisure Stay Lengths:
1 night: 45%
2 nights: 28%
3 nights: 20%
4+ nights: 7%
2006
Astor Lodge: $60.00
Astor Lodge & Suites: $75.00
Projected Financial Analysis
John Carey, Chris Savage, Skyler Barcelona, Casey Nelson
Full transcript