Amber & Suites Inn Case Analysis
Mene Kude
Dr. Dixie
Marketing 601
November 17, 2010 Amber Inn & Suites, Inc.
Strategic issues and Problem Identification The Amber Inns & Suites, Inc. is a 250 property hotel chain, struggling with net operating lost since 2002, with fiscal year 2005 projected to be its fifth consecutive unprofitable year. The company has projected lodging revenue of $422.6 million and a net loss of $15.7 million for fiscal 2005. Joseph James, the company’s new president and chief executive officer, wants an hour presentation that describes initiatives, expenditures, and outcomes for the past two fiscal years, and a planned initiatives and budgetary needs for fiscal 2006. Mr. James goal for the company is to achieve profitability within two years. To this end, the V.P. of Sales and Marketing and the V.P. of Advertising has to corroborate on resource allocation in their respective budgets. The company would use growth in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) as a corporate performance measure and a basis for determining senior management executive incentive compensation. It should be noted that EBITDA often disguises the financing effects of operations and allows allot of leeway in what is reported. This analysis looks at marketing strategies that best justify potential budgetary objectives that could lead to profitability.
Industry Analysis The U.S. hotel industry recorded revenue of $113.7 billion and grossed $16.7 billion in pretax profit in 2004. As of December 31, 2004, there were 4.4 million hotel rooms in the United States. Approximately two-thirds of all U.S. hotel rooms were affiliated with a brand; the remaining one-third was independently owned and not brand-affiliated. Although companies such as Cendant Corporation, Marriott International, Inc., Hilton Hotels Corporation, Inter-Continental Hotel Group, and Choice Hotels International, Inc leads the industry in having the most hotel rooms in the United States, the
Dr. Dixie
Marketing 601
November 17, 2010 Amber Inn & Suites, Inc.
Strategic issues and Problem Identification The Amber Inns & Suites, Inc. is a 250 property hotel chain, struggling with net operating lost since 2002, with fiscal year 2005 projected to be its fifth consecutive unprofitable year. The company has projected lodging revenue of $422.6 million and a net loss of $15.7 million for fiscal 2005. Joseph James, the company’s new president and chief executive officer, wants an hour presentation that describes initiatives, expenditures, and outcomes for the past two fiscal years, and a planned initiatives and budgetary needs for fiscal 2006. Mr. James goal for the company is to achieve profitability within two years. To this end, the V.P. of Sales and Marketing and the V.P. of Advertising has to corroborate on resource allocation in their respective budgets. The company would use growth in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) as a corporate performance measure and a basis for determining senior management executive incentive compensation. It should be noted that EBITDA often disguises the financing effects of operations and allows allot of leeway in what is reported. This analysis looks at marketing strategies that best justify potential budgetary objectives that could lead to profitability.
Industry Analysis The U.S. hotel industry recorded revenue of $113.7 billion and grossed $16.7 billion in pretax profit in 2004. As of December 31, 2004, there were 4.4 million hotel rooms in the United States. Approximately two-thirds of all U.S. hotel rooms were affiliated with a brand; the remaining one-third was independently owned and not brand-affiliated. Although companies such as Cendant Corporation, Marriott International, Inc., Hilton Hotels Corporation, Inter-Continental Hotel Group, and Choice Hotels International, Inc leads the industry in having the most hotel rooms in the United States, the