Case Study: Should a Hotelier Invest in a New Kind of Online Travel Agency?
1-What is the Major Issue or Conflict in the Case?
Making an investment decision
Lotta Tindal, a chief marketing officer of Ervaring Hotels & Resorts, is looking to streamline some investment considerations. Currently, this organization is using the third party to reach customers. The main issue is to streamline the website to have direct access to customers for bookings. It seems cheaper than the traditional process, and it can make the difference regarding revenue and profitability. Well, the issue is doing the partnership with hotelshield. Hotelshield is courting investor from the United States to reduce the cost of online travel agencies. On the other hand, Lotta is not in favor of this huge investment because the marketing budget is limited. Thus, making an investment decision is the issue, and it creates conflicts among key stakeholders of the company. This company depicts a good business model that can absorb change and reduce the cost of the business in an effective manner (Dev and O’Connor).
2-What is the current/existing Strategy of the Firm?
Cost Leadership Strategy
The current strategy of the firm is cost leadership, as it has demonstrated many cost considerations to come up with low rates for customers. However, in the competitive hotel industry, goals are not met effectively. Integration with online travel agencies has increased the cost of operations. Customers are looking to find alternatives causing a big dent in financial streams. However, the company does not have an online platform, and the strategy is to find travel agencies to delegate the booking process. For a while, this strategy is workable. However, due to competitor’s actions in the hotel industry, the company is way behind regarding cost advantage and customer retention. Thus, the management of the company has to choose an effective action plan. CEO of Hotelshield and Ervaring Hotels & Resorts have contradictions regarding the investment decision. Now, despite having the business level strategy, there is a need to think bigger (Dev and O’Connor).
3-Where does the Firm currently choose to play? Does the Major Issue affect where the Firm chooses to Play? If so, how?
Investing in an Online Platform
The online travel agency cost for the company is $3 billion each year. The firm is going to take a big risk. According to the financial analysis, the company will have a negative NPV in the coming three years. However, it is a great opportunity to partner with Hotelshield and enhances the visibility of direct sales. The company wants to invest in an online platform. Customers will experience different alternatives through different pop-up ads. The firm wants to play with perceptions of customers, as they want quality accommodation at low rates. The major issue can create the impact of this decision. For Instance, the major conduct is the investment decision, as some stakeholders want to keep financial reserves. The company is facing financial barriers, and the dilemma occurs when consideration hotelshield as a great opportunity. A stakeholder, especially Lotta, does not like to have loose ends. However, the consideration has been streamlined.
4-How does the Firm currently try to win (Value Proposition)? Does the Major Issue affect how the Firm Tries to Win? If so, how?
Creating Value through Time & Cost
The firm is going to win customer trust by competing with online travel agencies. The management of the company is looking to revisit its pricing structure through this investment decision. Having a customized online platform for customers can provide different alternatives for customers. Along with existing customers, there is a great change for the company to grab the immense range of customers. The most important thing is to make the difference regarding time and cost. The customer can book rooms in no time at low rates as compared to other brands in the United States. It seems the value creation, and it can enable long-term financial stability. The contradiction regarding the investment decision may create an impact, as stakeholders are presenting some alternatives to reduce the cost. The difference between an online travel agency (OTAs) and hotelshield investment is tough to understand. The impact of this value proposition is quite visible (Dev and O’Connor).
5-Who are the Major Players and what are their Motivations?
Different Motivations of Stakeholders
Major players are Lotta Tindal, Gerard Bakker, Dan Carlson, and Curt Schmitt. Being a chief marketing officer of the Ervaring Hotels & Resorts, Lotta Tindal likes to keep the marketing budget and sustain the current business process. He is quite motivated to enable financial stability. He is risk-averse and does not want to make the final decision early. Gerard Bakker, the chief financial officer of the Ervaring Hotels & Resorts, is observing the company’s financial situation differently. Despite estimating negative NPV in coming years, he is motivated to keep profit margins and high revenue streamline. Dan Carlson is CEO of hotelshield. He is motivated to get his new business model in the limelight. He wants Lotta Tindal and other stakeholders to make this investment or partnership happen. Curt Schmitt is a CEO of Ervaring Hotels & Resorts. He is motivated to make some big changes in the company regain growth and financial stability effectively (Dev and O’Connor).
6-What are your Recommendations to solve the Major Issue or Conflict?
Recommending Start-Up
To solve the major issue or conflict, I would like to recommend the slow approach. The chief financial officer had come up with some facts. Interestingly, it is a big risk and profitability cannot be ensured. Instead of investing, I recommend the startup. It seems imperative to bring all major brands onto our own platform. If the company decides to give a tough time to online travel agencies, it has to depict some differentiated facilities and opportunities to customers. To rationalize the investment decision in this particular business situation, it is important to make customers assertive and loyal. For me, initially, featuring rooms is an effective and attractive option for the company. However, Lotta should consider the different concerns of all key stakeholders and take some time to make the final decision. Instead of making the final decision early, the company should also keep prominent financial commitments.
Work Cited
Dev, Chekitan S. and Peter O’Connor. Case Study: Should a Hotelier Invest in a New Kind of Online Travel Agency? 2015. https://hbr.org/2015/09/case-study-should-a-hotelier-invest-in-a-new-kind-of-online-travel-agency July 2018.
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