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2014

Texas A&M University –Commerce MKT 521-MBA

Stephen Warren

For the owner of the Peaceful Rest Motor Lodge—Triston Knous—it has been an

arduous task of growing his business beyond the initial startup stage and into the stage of

profitability. A lack of marketing the property as well as a lack of promoting the motel’s service

offerings, have led him to a crossroad–one that requires a crucial decision regarding the future of

the business—a decision for which its effects have long-term implications: to make minor

changes in the way he operates the motel or to give up his independence in which to join a

national motel chain. A decision must be made soon as his current operation is losing money.

Critical Issues

1. Implementation of E-commerce site: Seeking out ways in which to encourage “direct

bookings will be one of the most important parts of a marketing director’s job in 2014;” that

is, “travelers are increasingly taking their transactions online,” and a motel’s own website

“needs to become the most important avenue for bookings to gain the highest ROI” (Rauch,

2013).

2. Creation of a content marketing strategy: Rapidly losing value are traditional means of

advertising, with effective content marketing strategies filling the void: “Marketing’s new

mantra, ‘Brands must now act as publishers,’” has surfaced due to social media’s

communication characteristics (Rauch, 2013).

a) Penetration into target markets

Utilizing effective content marketing “drastically reduces investments in traditional paid

media,” thereby implementing such media tools “as blogs, social media, newsletters,

webinars, eBooks, photo or video sharing and shared media” in its place: “Simply put,

[companies] need to create and share content while engaging people if [they] want to be

recognized moving forward” (Rauch, 2013).

3. Customer Relationship Management (CRM)

4. Monitoring Social Media & Blog Contents (Online Reviews): The ways in which

consumers make purchasing decisions have drastically changed; “with the advent of social

media and constant updates, image sharing and online peer recommendations,” it is no

surprise that “61 percent of customers read online reviews before making a purchase

decisions [and] …online consumer reviews are already the second most trusted source of

brand information and messaging, with 70 percent of global consumers” (Tagrin, 2014). The

value that reviews offer the consumer will only increase in weight going forward, and

businesses must devote more time and attention resolving issues and engaging such

customers—or face extinction. Currently, “only about 13 percent of small-business owners

actively invest in online reviews” (Tagrin, 2014).

5. Elimination of budget deficits: Effective content marketing decreases costs while increase

revenue over the long-term; thus, the combination reduces the budget deficit.

Strengths:

Cost Structure—avoiding all unnecessary expenses of the full-service resort motels, price

is 40% below the full-service resort motels and comparable to the lowest-priced resort

area motels.

Highly qualified workforce—Triston, the owner, has previous successes as a production

manager for large producer as well as management expertise within a large-scale

corporation.

Family owned and operated from a customer centric angle; garnered from the owner’s

many years of traveling and staying at countless motels, of which gave him a definite

idea of what travelers look for in a motel, giving the motel a unique ability to think like

their customers.

Recently completed 60-room motel with modern rooms with comfortable beds, fluffy

pillows, standard but modern bath facilities, and free cable TV.

Good Reputation and positive reviews.

Weaknesses:

Currently lacking strong contacts within the hospitality industry—consumer and

Business-to-Business.

Decreases in revenue garnered, in part, from the socio-cultural marketing segments

strategy have fostered an environment of fewer resources with which to develop

strategies in new markets.

Due to the lack of marketing expertise, the motel has been relying upon people to find the

motel as they travel towards the resort area upon exiting the interstate highway, as there

are no signs for the Peaceful Rest Motor Lodge until one have reached the motel

property.

Presently lacking Brand Awareness—or “named brand” such as Days Inn or Holiday Inn

—of which many customers are familiar with and trust.

Limited financial resources

Currently lacking an online presence with which to engage in customer feedback and

respond to potential customers, in real time, managing the motel’s reputation, and to

respond to comments posted on online blogs as well as other websites, such as

TripAdvisor and Yelp.

Currently lacking an E-commerce site, of which allows customers to search service

offerings, to make online reservations, checking room availability, and to make online

payments as well as viewable slideshows: pictures of the motel property and different

rooms offered, which would include rates and special promotional offerings. Further, it

is a venue that stores customer information, tracking customer characteristics and online

behavioral patterns using keywords and cookies, all managed within Google Analytics, in

which to track website pages visited, how long each customer viewed such pages,

bounce rates, and conversion rates, all of which is used to track the success or failure of

marketing campaigns.

Opportunities:

Capture the attention of the high traffic of potential customers coming off the interstate

highway as they head towards the resort area, subsequently garnering a potential for high

rates of customer turnover.

Changing customer tastes as “Millennials become the core customer within the hospitality

and travel industries over the next five to ten years” (Rauch, 2013).

There will be a continued growth in demand for lodging in the coming years, due to the

rapidly expanding resort area, increasing the overall customer base.

Opportunity to join a strategic alliance with a national motel chain—either Days Inn or

Holiday Inn—with a potential to increase overall bookings by 40%.

Move into market segments offering the potential for greatly improved profits for which

Sixty-eight percent of visitors to the area have disposable income: young couples and

older couples without children; 87% with family incomes over $27,000

Expectation of more international visitors

“Average rates and occupancy levels in the U.S. are likely to increase over the

next few years, influenced by a very new market. ‘Leisure demand from abroad,

fueled in part by the new Discover America campaign, will stimulate a new

demand’ according to Arne Sorenson, President and CEO of Marriott Hotels &

Resorts.” (Rauch, 2013)

Threats:

Increasing competition in the near future, given credence by constant rumors of more

motels planned for the area.

Companies that create innovative technologies that garner the competitive advantage,

such as social/mobile applications.

Some competitors have the ability of intercepting potential customers by offering

incentives, such as loyalty programs, which can potentially hinder expansion into new

marketing segments.

Economic downturns could have negative impacts on consumer traveling habits, such as

scaling back the frequency of travel, shortening the duration of stay, or the possibility of

deciding to eliminate their travel all together.

Evaluation of Alternatives

By making minor changes in the operations of the motel, it is possible to turn around the

motel to where it can profitable without losing its independence; however, the time it would take

to do so would be greater than if the motel were to be franchised with either national chain.

However, joining Days Inn, which is growing rapidly and is willing to take on new franchises,

offers advantages as well. A major advantage is that it would not require a major capital

investment. The national chain is looking for lower priced motels, such as the Peaceful Rest

Motor Lodge. Further, joining Holiday Inn as a franchise would require some of the Peaceful

Rest Motor Lodge’s facilities to be upgraded, including adding a pool. Total new capital

investment would between $300,000 and $500,000, depending upon the type of upgrades

performed; however, once these upgrades are completed, room rates at the Peaceful Rest Motor

Lodge would garner $75 per day, an increase of $30 per day/per room. Although, these additions

do not guarantee such higher margins; that is, “hotel occupancy rates and room prices have

rebounded since the economic downturn, other revenues, particularly from meetings, restaurants

and other services, such as spa, golf and retail, are still depressed” (O'Neill & Mattila, 2006).

There are advantages to joining either chain, such as central reservation systems, national

name recognition, nationwide-toll-free reservation lines—of which produces about 40 percent of

all bookings in affiliated motels—as well as offering a website. Although, with little initial

capital, comparable features can be realized without giving up the motel’s independence or the

8% of every dollar; however, acquiring national name recognition as an independent motel

would take significant time and money to achieve.

There are differentiating factors between the two chains, however. Days Inn uses little

TV advertisements and less print advertisements than does Holiday Inn. Days Inn emphasizes

sales promotions. For example, in one campaign, “Blue Bonnet margarine users could exchange

proof-of-purchase seals for a free night’s stay,” of which the promotion “led to selling an

additional 10,000 rooms” (Perreault, Cannon, & McCarthy, 2014). Moreover, Days Inn operates

a September Days Club for travelers 50 years of age and older who receive such benefits as

discount rates and a quarterly travel magazine. However, joining either motel chain requires

sacrifices from the franchisee. Both firms charge 8% of gross room revenues, which works out to

be $8 out of every 5100 of gross room revenue in perpetuity. Further, franchise members must

agree to maintain their facilities and make repairs and improvements; thus, failure to do so would

result in the surrender of the franchise. Thus, monitoring compliance would require unannounced

visits from representatives of either Days Inn or Holiday Inn.

Support of Recommendations

Thus, taking into account all of the aforementioned factors, remaining independent is the best

scenario. Though it will take longer for higher revenues, remaining independent allows Triston

to keep 100% of gross room revenue rather than 92%, which such savings can be invested in

national brand marketing later down the road.

Works Cited

Entrepreneur Media, Inc. (2003, December 11). How to Develop and Run a Marketing

Campaign. Irvine, California, U.S. Retrieved September 19, 2014, from

http://www.entrepreneur.com/article/66016

O'Neill, J. W., & Mattila, A. S. (2006, May). Strategic Hotel Development and Positioning.

Cornell Hotel and Restaurant Administration Quarterly, 47(2), 146-154. Retrieved

September 18, 2014

Perreault, W. D., Cannon, J. P., & McCarthy, E. J. (2014). Basic Marketing: A Marketing

Strategy Planning Approach (19th ed.). New York, New York, United States of America:

McGraw-Hill Irwin.

Petersen, A. (2013, July 11). Hotels Lure Neighborhood Residents With Perks, No Check-In

Required. Wall Street Journal. New York, New York, U.S. Retrieved September 19,

2014, from

http://online.wsj.com/news/articles/SB10001424127887324879504578597631652815320

Rauch, R. A. (2013, December 6). Top 10 Hospitality Industry Trends. Hospitalitynet. San

Diego, California, United States of America. Retrieved September 19, 2014, from

http://www.hospitalitynet.org/news/4063217.html

Tagrin, T. (2014, August 28). 5 Predictions About the Growing Power of Online Customer

Reviews. Entrepreneur Magazine. Irvine, California, U.S. Retrieved September 20, 2014,

from http://www.entrepreneur.com/article/236891