Georges Villedary Case

SHERATON MONTREAL

(Braithwaite) "I will give you my decision in about a week," said Georges Villedary, directeur general of the Le Centre Sheraton, Montreal, as he put down the phone and looked pensively at the letter before him. The letter, dated March 15, 1994, was from Alitalia requesting a one-year contract for 40 room at $42 per night. In addition, the hotel would have to provide a crew allowance of $25,000 per day. Bills are to be paid within seven days of receipt of statement on a weekly basis. The problem facing Georges was a simple one: does he take Alitalia and fill the 40 rooms for 365 days at $42 or does he refuse the business and hope that he can sell the rooms at the full rack rate of $105.00? Last year he had 115 nights sold out.

General Background of the Hotel

Le Centre Sheraton was located in the downtown area of Montreal. It was viewed as a corporate/convention hotel. In 1987 the hotel was named winner of the Canadian Automobile Association "Four Diamond Award" and the "Four Star Award" from the Mobil Travel Guide. The hotel had 824 rooms including the Sheraton Towers - a prestigious five-storey hotel within a hotel. The Towers had its own check-in facilities, lounge, and special amenities. It contained 131 rooms including 16 suites. The balance of the hotel offered a choice of king, queen, and double beds with an additional 24 suites and six rooms specially equipped for people with disabilities. All rooms were equipped with a pay-TV system.

The hotel operated three restaurants. Le Point de Vue on the 37th floor offered gourmet French cuisine and an exceptional wine list. It had a seating capacity of 84. Le Boulevard on the third floor was open for breakfast, lunch, and dinner and had a seating capacity of 259. La Musette was a European-style "express" restaurant on the promenade level for people in a hurry. It had a seating capacity of 60. In addition to the restaurants, the hotel had five lounges and 14 function rooms, including a ballroom that would accommodate 1,100 people for banquets and 2,600 people for receptions. Other features of the hotel included a five-storey glassed-in atrium, a glass-enclosed year-round pool and a health club with gymnasium, sauna, whirlpool, and masseuse. There was indoor parking for 500 cars and boutiques and specialty shops on the promenade level. Other services included a multilingual staff, and audio-visual services. All meeting rooms had cable-TV outlets, audio-visual facilities, and telephone jacks.

Competition

For airline crews, all hotels in the Montreal area were Sheraton's competitors because airlines choose hotels based on price. Nevertheless, for Alitalia, the criteria for selecting a hotel were slightly different. They preferred four-star hotels located near shopping and entertainment facilities. Hence, the competition was limited to about 10 hotels located in the downtown area. Since all 10 hotels met the Alitalia criteria, the decision would be made on the basis of price and service. Georges was well aware that a number of his competitors had expressed interest in the Alitalia business. He was also aware that if he took the contract and satisfied the Alitalia crew, then he would have more negotiating power when the contract came up for renewal next year (i.e., the room rate could be increased). In the hotel business, it was always easier to renew existing room contracts than to solicit new ones.

The Proposal

Sheraton's target market included all forms of corporate groups, professional associations, and conventions. The Alitalia proposal appeared