Case: Motel Location for Nature's Inn Nature's Inn operates a motel chain with two types of motels. Under its brand Comfort Express (CE). it offers a relatively inexpensive, spartan motel. Under its Family Suites (FS) brand, it offers a more expensive motel distinguished by various extra features. Both brands are associ- ated with the latest ideas in green building design, attracting a segment of the customer market that is willing to let considerations of sustainability influence its purchasing decisions. Following a successful first round of expansion in the Northeast region, Nature's Inn is planning another round of expansion, this time into the Midwest region. Working with a real estate consultant, Nature's Inn has identified ten potential sites for the location of new motels. Each site can accommodate either a CE motel or a FS motel (but not both). Using historical data from the Northeast region. the consultant has estimated the net pre- sent value (NPV) of the cash flows attainable over the next ten years at each location, with sep- arate figures for CE and FS. EXHIBIT 6.1 Proximity Data and Economic Estimates Locations Locations CE NPV FS NPV Location within 30 miles within 40 miles ($ million) ($ million) 2. 6 10.147 11.899 12.191 11.242 WA-N 4 13.359 10.731 3. 5 9.344 7.519 4 1 1.388 14.235 9 1. 8. 9 6.935 9.636 8. 10 8. 10 12.629 8.687 7,9, 10 6. 7, 9, 10 13.505 10.293 6. 8, 10 6. 8, 10 9.344 9.709 7. 8. 9 7. 8. 9 8.249 11.461 The consultant has also carried out a survey to explore the extent to which demand might be affected when two motels are located in close proximity. The first finding was that CE customers and FS customers are different segments, for the most part, and little crossover demand occurs. On the other hand. among CE and FS customers, competition occurs when motels are located too close to each other. The data suggest that competition becomes an economic factor for CE motels when they are located within 30 miles of each other and for FS motels within 40 miles of each other. Nature's Inn has therefore decided to respect these distances in their choice of locations: In the Midwest. CE motels will not be located within 30 miles of each other, and FS motels will not be located within 40 miles of each other. The results of the consultant's work are summarized in Exhibit 6.1. The task for Nature's Inn is now to develop a location plan for its Midwest expansion