Case :The Excelsior Hotel
A most significant competitive threat was about to affect the four-star Excelsior Hotel. A new luxury hotel was under construction directly across the street. The staff was concerned there might not be enough business to support two upscale hotels in the same market.
Kotler, Philip R., John Bowen, James Makens. Marketing for Hospitality and Tourism, 6th Edition. Pearson Learning Solutions, 03/2013. VitalBook file.
Hotel History
The 305-room Excelsior had operated in the city for 10 years. During these years, it had served as the only upscale hotel in the city. It had an excellent location downtown between a 600-space parking deck and the Convention Center. The hotel featured an indoor swimming pool, a Jacuzzi, two restaurants, a cocktail lounge, and several unique amenities. Many of the rooms had balconies overlooking the garden-level dining area and Greenhouse Café. Each floor was accessed by three glass-enclosed elevators. Other major attributes of the hotel were the ice skating rink located under the hotel and tunnel connecting the hotel with the Convention Center.
The Excelsior was managed by a management group but was owned by the Concept Corp., a real estate and investment company. An interview with the general manager of the Excelsior revealed the following:
•What are your goals for the hotel? "Locally, for the next year, we would just like to be competitive productwise. Our long-term goal is to be one of the leading hotels in our state."
•How do you perceive the increasing competitive pressure? "It has been tremendous. The increase in hotel rooms over the last five years within our competitive market has been unbelievable. The Stouffer will open up on July 1, and a new Sheraton will open up later this year. Radissons are going up left and right. A lot of smaller hotel chains are putting up budget hotels. Right now I would say we are overbuilt until the city gets its convention center expanded so that we can attract larger groups. There is not enough corporate business to go around to supply all of us with a decent occupancy."
•What actions does the Excelsior plan to take within the increasingly competitive environment? "To be competitive, you have to have the product. Once again, that's our first step. We want to bring our overall product of service back up to a competitive level, meaning that we have to renovate and make some other adjustments decor-wise-new rooms, new furniture, and some other things. Those are tangible things."
•Describe the relationship between the management and the hotel owners. "We are a management company. We don't own a nickel here. Our ownership is another company. They have a little different philosophy on how to make money and to provide quality service to the guests. They don't have the same idea regarding bottom-line profits and quality rendered to the guests. Obviously, you have to realize the relation between profit and quality service to the guest. If you put in "turn-down" service, it is costing you money. If you give your employees benefits, it costs you money. Anything you do other than supplying them with one towel and a clean room costs you money. It means that the profit level between what we feel is obtainable provided that we give the guests great service and what our ownership thinks we should make as a hotel is different. They feel we should make a lot more money."
The general manager was perplexed as to what direction the hotel should take. The building is in need of renovation to maintain its attractiveness and "image." There is pressure from the owners to offer less and make more, which is inconsistent with long-standing image. The biggest threat, though, is coming from the increased competition for the lucrative group business from newer hotels and convention centers. However, the city was beginning to enter a "renaissance" period with the planned expansion of the Convention Center, the completion of the Super Block area, and a push for retail stores and businesses to relocate downtown.
DISCUSSION QUESTIONS
• 1.Why should a conflict exist between the philosophies of the hotel Excelsior's management group and its owner, the Concept Corp.?
• 2.What steps in addition to renovation should the Excelsior be taking to prepare for increased competition?