Sheraton Hotel Case

Executive Summary

La Centre Sheraton Hotel is located in the downtown area of Montreal. It is known as a corporate/convention hotel. It has won many awards such as the "Four Diamond Award" and the "Four Star Award". The hotel has 824 rooms plus a prestigious five-story hotel within the hotel called the Sheraton Towers. Within the hotel it has 3 different restaurants to meet the needs of its guests. The hotel also five lounges 14 function rooms including a ballroom for banquets and receptions. Other features include a glassed-in atrium, an indoor pool, and a health club with a gymnasium, sauna, whirlpool and a masseuse.

The main decision that Georges Villedary the general director of the Le Centre Sheraton, Montreal has to make is to decide weather he should sign a one-year contract with Alitalia for 40 rooms at $42.00. Another problem that they have is regarding their cash flow. Their cash flow in regards to last fiscal year is at a deficit of $2 million and they have a long-term mortgage of $50 million. They also have a $4.2 million in municipal taxes that they have to pay.

Georges Villedary should sign the one-year contract for 40 rooms at $42.00. This will create a steady income of $5958.40 a week that will help with its cash flow problems. Creating a relationship with Alitalia would also be an intangible benefit. It may create further profits in the future.

Le Centre Sheraton, Montreal

Introduction

Georges Villedary the general director of the Le Centre Sheraton, Montreal, has to decide if he is going to sign a one-year contract with Alitalia for 40 rooms at $42 per night. A $25,000 per day crew allowance is also included in this contract. The regular rate for a room is $105.00 and last year they sold out 115 nights.

Issues and Alternatives

Accept or Refuse Contract

Georges has a week to decide if he will accept or refuse this contract. There are 10 other hotels that are competing for Alitalia's business. He understands that if he decides to accept the proposal and satisfies their needs he will have more negotiating power when it comes to decide to renew the contract. By signing the contract he is also creating a relationship with Alitalia that could lead to long lasting business relationship.

Servicing Alitalia

If they agree to the contract they will need to deal with certain logistical issues. They will have to deal with late check-out times and have rooms cleaned immediately upon check-ins. They will roughly have 2-4 hours to clean the rooms before the next crew arrives. This means that the hotel will need to keep extra maids on duty. In addition they will need to deal with changed flight schedules, this will lead to changes in wake-up calls and the distribution of the allowances. Guests who are paying the full rate will pay these extra expenses. In other words they will lose out on revenue from full rate customers because they are compensating for the extra expenses that are incurred by Alitalia.

Revenue Forgone

From previous experiences with other airlines, crews tend to spend less during their stay at the hotel because they are usually only there for one night or if they are staying longer they tend to explore the city and spend money outside of the hotel.

They are also losing potential revenues by giving up 40 rooms for the price or $42 a night