Hotel Ipsum: A Marketing and Commercial Plan for Increasing Sales and Profitability

Discover Hotel Ipsum, a modern luxury hotel in Bogotá

Hotel Ipsum was a modern, luxury 5 stars hotel offering 80 fully equipped rooms in the heart of Bogotá, the capital of Colombia and one of the most dynamic business cities in Latin America. Built in June 2010 and designed in a minimalist relaxing décor, Hotel Ipsum offered personalized services to its customers, who had at their disposal an extensive range of comprehensive business facilities. Companies from a wide range of industries selected Hotel Ipsum as their "home away from home" in Bogotá due to the previously mentioned facilities in addition to its strategic location in the city. Hotel Ipsum became soon a well known “business hotel”, focused on business travellers and with corporate contracts with some of the largest corporations in Colombia like Convergys, Bank BBVA, Bayer, Unysis or Apple. In 2012 Hotel Ipsum was doing quite well, considering the competitive scenario faced in the Bogota’s hotel market, but not good enough to meet the expectations of its shareholders that expected a better return on their investment. The property was owned by a group of investors that have invested around US$14,400,000 in the hotel and expected a return on their investment of 6%, i.e., the expected EBITDA should be above US$864,000 annually. Unfortunately the current return on investment was below that 6% rate and the Board of Directors was considering selling the property. The hotel General Manager, Rafael Escobedo, was being pressed by the Board of Directors to improve the profitability of the hotel and deliver better results in the short term or the property would be sold very soon. Rafael needed to improve both sales and profitability, he needed to improve both occupancy rate and average daily rate, and he knew that in order to do that he needed to increase both new customer attraction and customer retention. Actually what he needed was a marketing and commercial plan to achieve both objectives: customer attraction and customer retention. And he needed to show results in the short term because otherwise the hotel would probably be sold and he would probably lose his job. Rafael had to put all his effort in creating a very successful marketing and commercial plan for Hotel Ipsum if he wanted the hotel, and his job, to survive. * The case was developed solely as the basis for class discussion. The authors do not intend to illustrate effective or ineffective handling of a managerial situation. The company mentioned in the case is fictional. The case is based on public sources of information, the characters, situations and opinions presented in the case are fictional and not based on information provided by the company. All the information presented reflects the authors’ interpretation of public events and published information and serves merely to provide opportunities for class discussion. IE Business School HOTEL IPSUM: A MARKETING AND COMMERCIAL… MK1-149-I 2 THE SITUATION IN COLOMBIA IN 2012 POLITICAL:  For many years until 2002 Colombia was affected from feeling of insecurity because of revolutionary groups such as FARC and the Paramilitaries.  In 2002 Alvaro Uribe was elected president with a broad mandate to restore security to the country. Since 2002, Colombia’s politics had stabilized and the country had become much more stable.  In 2012 there were still some risks of political confrontation between the revolutionary groups like FARC and the governmental forces but these cases are not in the urban regions and are becoming rarer.  For the last decade the government (Uribe and later Santos) had focused on increasing the security of the country and reforming different industries in order to attract foreign investment. Investment from abroad grew from US$2,436M dollar in 2000 to US$13,234M in 2011.  The World Bank´s "Doing Business" 2012 edition, classified Colombia as the fifth best country in the world and best in Latin in protecting foreign investors’ capital. ECONOMIC:  Although the 2009 global recession was a threat, Colombia enjoyed sustained economic growth that created a positive effect due to the larger number of international companies considering Colombia as a strategic destination for their business in LATAM market.  Standard and Poor's, Moody's and Fitch, the top three global rating agencies, have rated Colombia as investment grade since 2011.  The GDP per capita has doubled in the last six years. According to Proexport GDP per capita increased from US$5,826 in 2000 to US$9,920USD in 2011. SOCIAL:  Economic prosperity is fuelling domestic travelling and internal tourism is becoming very common. At the same time a more informed and educated population seeks greater value for their money when traveling, especially when choosing hotels to stay. TECHNOLOGICAL:  Increase use of Internet at the information stage to select hotels and also on the purchasing stage by using hotel's websites to book your desired room and also using Online Travel Agencies like Expedia or Booking.com. THE TOURISM INDUSTRY AND THE HOTEL SECTOR IN BOGOTA Bogota was the capital of the Republic of Colombia, and the main industrial and economic center of the country. In 2012 the capital accounted for approximately 25% of the total GDP and had a steady growth in the area of 10% annually. It was the largest and most populated city in the country with around 8 million inhabitants. IE Business School HOTEL IPSUM: A MARKETING AND COMMERCIAL… MK1-149-I 3 A more stable political situation in the country had been followed by a substantial improvement in the security across the capital's streets, which was fostering business and leisure travelling to Bogota. Many indicators were showing a very positive trend in the number of visitors from other countries, with an important impact from the growing number of tourists from United States.