Amber Inn Case AnalysisIntroductionAmber Inn & Suites is a top-rated, large hotel chain that was founded in 1979 and now holds 250 hotel properties in many states. The Amber Inn & Suites have a great total of 30 thousand rooms and the companys profits are estimated to be at $ 422.6 million while running a deficit of nearly $ 16 million. Amber Inn tends to attract and to cater to mostly to a professional clientele that is typically traveling on business and is seeking luxury guest rooms at an affordable price. The companys many hotels are located across many convenient locations across ten Western and Rocky Mountain States, with each hotel typically consisting of one hundred and twenty single guest rooms and suites. Amber Inn follows a savvy business maxim of being located near major travel highways and airports as well as near businesses, offices and shopping plazas. Despite a good track record and successful business model in the past, the company lately has experienced a decline in sales and profits and has been running deficits in several million dollars.
Identification of Issues and ProblemsFaced with the issue of declining occupancy rates and thus lower sales and lower profits, the company has to analyze and arrive at a decision with regard to expanding their marketing and advertising budgets to target leisure travel guests and those on business trips. The advertising campaign of Amber Inn is geared toward attracting the business traveler whose hotel stay typically lasts between one or two nights. As part of its mission statement, Amber Inn has positioned itself as a business that caters to the professional clienteles. However, after five running years of no profits, the executive management is seeking to find the correct marketing strategy that will result in an increase in EBITDA and a projected growth of 7 percent in two years. In addition, Amber Inn must decide whether to maintain the frontier technique and what would be the optimal way to handle promotions such as offering a free night stay or other holiday specials and discounts.
Business Environment and CompetitionThe US hotel industry is a large and lucrative sector with a total of 4.4 million rooms and recorded revenues of $ 113.7 billion. Although about two thirds of all hotel rooms are owned by the large hotel brands, with the remaining third being independently owned and operated, there is no single brand or company that dominates the majority of the market shares. As such, the US hotel industry forms a whole spectrum of offerings where different brands have created their niches based on the amenities and services they offer. Room pricing and price segmentation is typically a function of the venues and services offered and they range from the luxury hotels that offer luxury suites with a full range of services, such as restaurant and lounges,
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As the number of high-end accommodations and business activities increases with the advent of smartphones, internet access, and the internet, the market for hotel rooms is growing by the day. Although the most affordable and luxurious rooms in the business market are sold at a low fee across all major hotels, the trend has been for larger, more expensive rooms to be offered at lower prices. This trend continues for many rooms in the business market as it seems that even the most modest rooms cost a fortune more than those on the market. While such a trend continues in other segments, hotel room prices can vary significantly, and the cost of having room rental services is often higher that those for standard room services.
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The reason the hotel room industry is driven by such a large and successful market segment is due to the significant change in the industry’s structure across the different brands operating in the hotel industry, a fact that has been widely attributed and is reflected in their sales. The trends described in this section are largely attributed to the rapidly increasing number of customers who have changed or changed their accommodation arrangements. In addition to more than 150 brands and locations, the new hotels have an estimated $2.4 billion and increased base revenue of $2.54 billion over the 2014 and 2015 fiscal years.[3] Although the hotel industry has never been as successful as before, a small percentage of the current business segment is owned and operated by the major brands, including Marriott, DBA Marriott and Marriott. The same trends play a strong role as hotel hotel pricing and the high cost of room service provide a different narrative to that of our data. In 2014, in fact the rate of occupancy increased from 3,878 room reservations to 4,862. This increased cost of room rental from $26 a month to $39.99 a month. During this same period the average hotel room per capita increase was about 10%, making it a $1 billion industry[4]. At the current rate of occupancy, the new hotels have an anticipated market share of 2.7% but are still facing a substantial decline in occupancy due to rising prices due in part to the increased number of rooms. In fact, this rapid growth of the industry shows that at the present rate, prices for room types in the hotel market are not changing as customers switch to longer term rental options. In order not to make room rental difficult to understand, our data also suggest that people that are considering rooms from the other brands, including Marriott, DBA Marriott and Marriott, do not realize there are even that few hotel rooms available.
Many of the brands and locations in hotels are also heavily owned by major brands. There are only 37 brands and locations within the business market outside the hotel sector, and some hotels are just as profitable as others. Similarly, more locations within the business market are also more accessible such as the majority of hotel hotels have more amenities and services than do brands and locations. If only a small portion of the average hotel room is used for room service at least somewhat, then such a small number of rooms should not result in large price differences