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Case Study – The Oasis Hotel Please read the following case and answer the questions below

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Case Study – The Oasis Hotel

Please read the following case and answer the questions below.

The Oasis Hotel

The location of this property is approximately one mile east of Las Vegas Boulevard, otherwise known as the Las Vegas “Strip.” It is considered just inside the “resort corridor” of Las Vegas Boulevard. This property contains an eight-story tower with 220 rooms, a full-service restaurant, a pool and bar area, a lobby bar, and room service. There is no casino, which the

acquiring company considers a competitive advantage.

 

The property was formerly a midscale branded full-service hotel that catered to the more budget-conscious tourist who wanted to be close to the Las Vegas Strip but did not want to necessarily gamble at a hotel. The hotel’s strategic vision was to capture the budget-midscale market to put their guests as close to the gaming action as possible without offering any of the amenities or comforts that the Strip properties offer. The hotel’s previous management ensured the taxi lane was always well maintained as they did not expect their guests to remain on property during their stays in Las Vegas. The hotel did have a small pool, but no daybeds or cabanas or even a “poolside bar.”

 

The acquiring firm, Desert Rock Hospitality (DRH), is an independent company that purchased the hotel property six months ago and has invested over $18 million in renovations and upgrades to the property in the hopes of capturing the more lucrative, affluent guests who wish to experience Las Vegas without the busy and noisy casino atmosphere. The Oasis claims that since it is a strict non-smoking property, this could be a competitive advantage for the property, since casinos have traditionally allowed smoking, either on the casino floor or in designated areas throughout the property. However, studies have shown that bans on smoking in casinos have a negative effect on demand.

 

The management of the property has come to the conclusion that it should not attempt to compete against the much larger and more gambler-friendly hotels with casinos, but they want to be able to compete on a room-to-room basis with the larger upscale, but not necessarily luxury-class gaming resorts. Accordingly, many upgrades have been made, especially in the pool area, which now has a larger pool that resembles a tropical lagoon, and the construction of VIP cabanas. Also, the hotel, when originally constructed in 1974, had 270 rooms, but Desert Rock decided to reduce the number of rooms in favor of converting to larger rooms to better compete for the more affluent guest. Accordingly, the hotel now has 220 rooms, which are categorized as follows:

 

150 single or double occupancy rooms:

• 440 – 460 square feet

• In-room safe, ironing board and iron

• Coffee maker, hairdryer, closet with two robes and slippers, premium bath amenities

• Two queen or single king beds, sitting area with desk and

reclining chair and table

• End tables and refrigerator and microwave inside an entertainment

armoire with 40” flat-screen television

• Vanity countertop in bathroom; stall shower with rain effect shower head and seat 50 junior suites:

• 640 – 700 square feet

• All amenities of single rooms plus:

• Sitting room with sofa and loveseat

• Bedroom with 50” flat screen television inside entertainment armoire

• Private bath with two sinks and separate vanity counter

• Reclining chair and table

• End tables

 

20 executive suites:

• 1,100 square feet

• All amenities of junior suites plus:

• Living room:

• King size sofa with pull-out bed

• Two love seats

• Two reclining chairs and table

• Writing desk

• Mini bar area

• Dining room table with seating for eight

• Two bedrooms with either two queen or single king beds

 

Property upgrades/new amenities:

• Renovated lobby with marble and Italian ceramic flooring/ walls

• Limited-service bar with pub tables on first floor

• Fitness center for guests with locker rooms

• Full-service restaurant with bar on top floor

• Room service available 24 hours

• Full-service spa facilities

Concierge desk

• Lagoon-type pool with poolside bar with daybeds and cabanas

• Free valet parking; free self-parking; executive shuttle to airport

• 6,500 square feet meeting/conference space

 

Ready to Launch

The Caravan Hotel was a midscale, full-service 300 room nongaming hotel on the edge of what is called the Las Vegas Resort

Corridor in Las Vegas, Nevada. The hotel was recently sold to a hotel developer, Desert Rock Hospitality (DRH). The company has renamed the Caravan to the Oasis hotel. The new hotelier has invested considerable funds into upgrading the property into a more contemporary, upscale resort meant to compete with other non-gaming hotels in the Las Vegas Resort Corridor. The Oasis is scheduled to open in the coming weeks and a new competitive set of hotels remains to be determined by the resorts key management personnel, primarily the revenue manager, Susan, and Brett, the general manager.

 

The determination of a new competitive set (or comp set) needs to be addressed as soon as possible because an accurate comp set is necessary to benchmark the hotel’s performance. The existing comp set contains other midscale hotels that the Caravan used to compete against. Now, with the upgrades to the hotel, the Oasis owners are intent on competing for a more lucrative, affluent guest that does not want to necessarily be in a gaming environment.

 

Brett, meanwhile, is engaged in readying the property for the planned Memorial Day grand opening (actually a soft opening the previous Tuesday before Memorial Day) and is meeting with the heads of the hotel’s departments on a daily basis. He has tasked Susan with forecasting future demand, setting room rates, ensuring the subscription to STR is valid, and choosing a competitive set that will make sense given the renovations that the Oasis has gone through compared to the previous incarnation of the hotel (when it was an economy-scale hotel).

 

Table 1

Key Performance Indicators by Year Comp Set of Former Hotel Owner

 

KPI	2019	2020	2021
Occupancy Rate	63%	68%	70%
ADR	$62.00	$71.00	$74.00
RevPAR	$39.06	$48.28	$51.80

This data exhibits the aggregated results of the comp set of the Oasis under the former owners.

 

Susan contacts the former hotel operator by telephone and by email, obtaining permission for the retrieval of historical data submitted to STR (see Table 1). The hotel’s former operator used a comp set that included five economy hotels in the same general area, encompassing two zip codes. The KPIs are indicated below for the years ending 2019, 2020 and 202021. The former hotel’s actual KPIs for the same years are shown in Table 2

 

Table 2

Key Performance Indicators by Year Actual Results of Former Hotel Owner

 

KPI	2019		2020	2021
Occupancy Rate	56%		59%	62%
ADR	$52.00		$60.00	$63.00
RevPAR	$29.12		$35.40	$39.06

            This data exhibits the actual results of the Oasis under the former owners

 

Susan has access to physical hotel data for properties that report their KPIs in the Las Vegas area via STR reporting. She has the following selection of hotels from which to select for the Oasis’ comp set, as shown in Table 3. The hotels selected have between 174 and 262 rooms. It is important to note that the class ranking of properties is dependent on average daily rate. If the Oasis wants to be ranked with these fi rms, then it would need to have a competitive ADR in the range of these fi rms. This information serves as only a guide to help Brett and Susan find a solution to comp set determination. Assuming that the Oasis will have ADRs within the range of the hotels listed below, and also that all of the properties below are within 2 miles of the Oasis, Brett and Susan are satisfied in choosing five properties from this list to create the new comp set.

 

 

 

 

Some information presentation based on STRglobal STAR report format. Most information contained in this report would be gathered by the Oasis revenue manager.

 

Brett and Susan discuss the hotel type that the Oasis should be competing against. The general senior management meeting is in two days and both Brett and Susan will discuss their ideas about choosing an accurate competitive set based on the amenities of the various hotels to choose from and comparing those with the amenities of the Oasis.

 

The factors that will be brought up for discussion in how to determine a new competitive set will include the following, as compared to the Oasis Hotel, assuming a competitive ADR range is in place for all of the properties listed Table 3:

 

 

 

 

• Age of property (for this study, “Date Opened” may be used)

• Number of rooms and room types offered

• Branding (Oasis is independent)

• Amenities offered (in-room services, spa, pool, fitness center,

meeting space)

• Level of service offered (concierge, VIP desk, valet)

• Food and beverage operations and type

 

 

 

 

Answer sheet

 

Based on the information provided in the case, you are asked to answer the following questions.

 

1. In addition to Brett and Susan, who are the important players (cf., stakeholders) to launch this newly branded hotel, and what are their roles?  Please justify why they are important players and discuss the relationships between them with the use of agency theory (30%).

 

 

 

 

 

 

 

 

2. Given your analysis of Oasis Hotel’s current situation, with justification, suggest the most appropriate functional-level and business-level strategies to adopt. (35%).

 

 

 

 

 

 

 

 

 

3. Provide suggestions on how to implement and monitor your recommended strategies provided in Question 2. Discuss your answer by using the concepts of balanced scorecard and organizational architecture (35%).