1. Using the concepts and theories from Block 3, Session 1 and 3, identify the opportunities for innovation in running the Palm Bay Hotel. How might Palm Bay Hotel use innovation strategies to create value?
2. What are the sources for operational risk at Palm Bay Hotel? What should Palm Bay Hotel do to limit operational failure?
3. One of the 'fundamental goals' of relationship marketing is said to be 'maximising the lifetime value of a customer'. How would you describe Palm Bay Hotel's relationship with its customers?

Reading 14: The Palm Bay Hotel case study Written by Paul Walley for the Open University module B207 Shaping business opportunities with contribution from Sandra Cunliffe 

Introduction In this reading you will look at a case study exploring the experience of guests at the Palm Bay Hotel. It follows Sandra who is staying at the hotel while onabusiness trip visiting a potential client. Although the case study is based on real feedback from internet sources, all the information is disguised, including the name and location of the hotel and those who work there and stayed as guests. Any resemblance toahotel withasimilar name or location is purely coincidental, and this case study is not a review of that hotel. 1 Sandra's experience at the Palm Bay Hotel Sandra was visiting the area on a business trip to meet a potential client. It was just at the start of the summer and she'd had some difficulty finding a hotel room that was conveniently located and at a low price, as most near the seafront were already taken or very expensive. However, a booking agency had found a room for her at the Palm Bay Hotel. Although the price was still quite high, it was not as expensive as most other hotels with the same star rating. On arriving at the hotel, Sandra managed to squeeze her car into the last space, which was furthest from the reception and next to where staff had left rubbish bins ready for collection. She carried her bags through the main door and, as no one was around, rang the wobbly call bell on the reception desk to attract someone's attention. She could hear loud voices arguing in the back office, but no one came. When she rang the bell again someone eventually shouted through 'be with you in a minute'. The reception was dark, with paint peeling off the door to the back office. There was a slight musty smell and the faint aroma of stale food emanated from the carpet. Eventually a rather stressed-looking older man came to the reception and asked Sandra if she was checking in. Sandra confirmed and the man introduced himself as Cedric - the co-owner of the hotel. He checked the booking on his computer, gave Sandra her key and asked her if she wanted to eat in the hotel that night. Sandra reserved a table for 7.30 and went to her room on the second floor. B207 Building long-term success 80 The room Sandra carried her bags up the stairs to the second floor and followed the signs to her room. The room was small and filled with large, old pieces of furniture. A large armchair by the window afforded a nice view of the seafront, but it was tatty and looked quite dirty. The bed, covered by a loud, floral duvet and flat pillow, took up a great deal of space. The room had a small en suite bathroom decorated with plain white tiles. The mirror above the sink basin had a small crack in it and so did some of the tiles next to the bath. Sandra decided to shower before dinner and started to run the water. The hot water took a while to come through due to the low water pressure, but she was able to have a moderately hot shower. Dinner There were about a dozen tables in the dining room and they were nearly all occupied with other guests. A young waitress asked Sandra if she had a reservation. She confirmed, gave her name and room number, and was ushered to one remaining table and handed a menu. The menu provided a very good choice of starters and main courses, and showed a lot of attention to detail in the use of locally caught fish and vegetables from a nearby organic farm, and offeredanicely selected choice of wines. Sandra ordered a starter of locally smoked trout pâté followed by grilled chicken with a Caesar salad, all with a large glass of Sauvignon Blanc house wine. The waitress quickly took the order, immediately fetched the wine and said the food would be brought to her very soon. In contrast with the rest of the building the restaurant area was freshly decorated, light, airy and comfortable. There was a real buzz of people enjoying their food. One couple with children were just getting up to leave and thanked the waitress for a lovely meal. They were staying across the road in another hotel but had come across to the Palm Bay Hotel restaurant on the recommendation of other guests. Sandra's meal was excellent and the service very good. The bar Later that evening Sandra went to the bar and was greeted by Cedric's wife Irene. Sandra explained that she was a consultant visiting a client rather than a holidaymaker. As it was quiet in the bar, Irene started to chat about her and her husband's experiences of managing the hotel and the business advice that they perhaps should have taken when buying it. Cedric and Irene Watson took early retirement from their public-sector jobs five years ago. They had dreamed of owning and running a hotel - so being able to buy the Palm Bay Hotel, which they had honeymooned in many years ago, was a dream come true. Unfortunately it hasn't turned out to be such a dream since. Irene said thatalot of customers were unhappy about their stay and the hotel had received a lot of bad reviews on websites such as TripAdvisor. 81 Reading 14: The Palm Bay Hotel case study There were so many complaints that Cedric and Irene didn't really know where to start in addressing them. They have tried to meet the needs of anyone who wants to stay in the hotel but now they feel as though they are failing to meet the needs of anyone other than older couples without children. Irene commented: The two types of customer want very different things. The elderly couples are happy with a basic, quiet room and love the proximity to the seafront. They tend to be conservative when it comes to food, preferring the simpler, standard British fare, such as fish and chips or steak and kidney pie. They tend to come in the off peak times most, outside of school holidays. The families coming on holiday arrive with large cars stuffed with seaside gear. They want the nearby beaches but also expect clean, spacious rooms - where their kids can run around when they get bored. The work is much harder than we ever thought. We don't know if we want to carry on working this hard. Sandra discovered that Irene was in charge of the restaurant and bar and had recruited a very good, young chef to help her in the evenings. Cooking was one of her passions. Hotel bookings were managed by one administrator who liaised mostly with websites and booking agencies. Cedric took charge of housekeeping and reception. He wasn't really a 'people person' and so generally managed the back office - 'rather grumpily at times', said Irene. 2 Online reviews of the Palm Bay Hotel Sandra said goodnight to Irene and returned to her room. She pondered on Irene's predicament. Cedric and Irene have to make some important decisions quickly if the hotel is to survive in the longer term. Whether or not to focus on older couples without children and how best to meet their needs has been the cause of many of arguments between them and the guests are starting to notice. The hotel had Wi-Fi so Sandra looked up some of the reviews from customers on the Web. Of the 89 hotels on the web, the Palm Bay was listed in 74 th place - not a good result. Sandra read some of the recent reviews. Just the look of the reception desk is enough to put you off. Oldfashioned patterned carpets, stained with who-knows-what. But at least the place is consistent - there were stains everywhere - on the towels, on the bedding. It's not the most expensive hotel but it's not the cheapest - not a lot to ask that it's clean. Didn't try the restaurant - well you wouldn't, would you! Family of four, two children under 10 B207 Building long-term success 82 Don't know where the photos on the website were taken - but not at the Palm Bay Hotel - well not in the last 20 years anyway! Either that or the photographer hadaspecial lens that removed all the dirt and repaired all the rips in the curtains and the bedding. I'd buy one of those lenses if I knew where I could buy one. Couple, mid-30s DON'T BOOK. Not got enough time to tell you all the reasons why - just don't. Lone business traveller, mid-30s The location was great! Right on the seafront - everything we needed on our doorstep. Yes, it could do with a bit of paint here and there but the owners are lovely and were only too happy to tell us about all the things we could do while in town. Couple, mid-60s What a lovely atmosphere - a real family-run hotel. Shame that means that the cleaning isn't to a professional standard, the owners seems to argue with each other at least once a day and the staff act like sullen teenagers. Couple, mid-50s 3 Online reviews of competitor hotels Sandra was able to compare the Palm Bay Hotel with similarly sized and priced hotels in the area. The feedback for the hotels included: . Hotel Excelsior - rating 4/5 ◦ 'Wonderful time, room clean, lovely welcome at reception.' ◦ 'Room clean, but that's more than could be said for the restaurant - have they not heard of a dishwasher.' ◦ 'Just five minutes walk from the railway station, great free Wi-Fi - shame about the room - all justabit tired.' . Paradise Inn - rating 3/5 ◦ 'Clean, light, bright room with an armchair! Good room service at no extra cost. Express checkout madeaquick get away in the morning possible.' ◦ 'Five minutes walk from the railway station - but wouldn't want to walk it on my own at night.' ◦ 'Hotel was heaving - one hour wait from room service and the food definitely wasn't worth the wait!' ◦ 'Would be great if you could actually get any sleep - even on the 5 th floor you could hear everyone leaving the nightclub next door at 1.30 am following at about 2.30 by the sound of breaking glass as the staff threw the empty bottles into the recycling bin!' 83 Reading 14: The Palm Bay Hotel case study . Holiday Haven - rating 3/5 ◦ 'What hotel is this - bears no relation to the reviews I read, I must be in the wrong place - where are those lovely rooms with the freshly laundered towels - someone else must have mine! As for the room service - £10 extra just to haveatray brought up to the room - is that someone's idea of a joke - never ever again!' 4 Comparison of the Palm Bay Hotel with competitors Using the information she found online Sandra was able to compile some data, albeitabit subjective, about the characteristics and performance of each of the Palm Bay Hotel's rivals. Table 1 Sandra's quick comparison of the hotels in the area Hotel Excelsior Paradise Inn Holiday Haven Palm Bay Hotel Price £££ 'Good value for money.' 'Priced about right for what it is.' ££££ 'Certainly not paradise for the pocket!' A few reviewers mentioned it was a bit pricey. ££ 'OK - but would be prepared to pay a bit more if it would get me a safe haven to stay in!' ££ 'Not the cheapest but good value for money.' 'A reasonable deal compared to what the others wanted.' Distance from railway station 5 minute (walk). 5 minute (walk). Directly opposite - literally a minute. 2 minute (walk). Parking Small car park - but no complaints about spaces not being available. Medium-sized car park, with station car park opposite. Guests are asked to reserve a space prior to their stay - no complaints noted. Guests are advised to reserve a space prior to their stay. No complaints about parking noted but I got the last space and it was only about 6 pm. Free Wi-Fi No comments - assume fine. Just one review appreciating that it was free. No comments - assume fine. Judged on my stay - it was fine. Restaurant - choice of food Predominately pizza, burger and nachos type food. Menu available online - à la carte menu. Bar snacks also available. Menu features daily specials and a wide range of food - but mid-market home style cooking with fresh ingredients rather than special occasion. Good choice - à la carte menu features local fresh, organic ingredients. Lots of favourable reviews - good food and more relaxed atmosphere than the Paradise Inn was the general theme. B207 Building long-term success 84 Restaurant - quality of food Quality fine - no adverse reviews. Quality fine, especially relating to special events such as birthdays and anniversaries. Quality fair. Based on my experience - excellent. Restaurant - cleanliness Not so good - two photos of dirty cutlery on TripAdvisor. Rated as fine. Rated as fine. Based on my experience - good. Restaurant - speed of service 'Eat before you go, you could be waiting a while.' 'Make sure you order the garlic bread - as least that arrives quickly.' No specific comments on speed - just comments about how good the service is - so assume fine. Fine. Based on my experience - good. Room availability Checked a range of week day and weekend dates - summer months heavily booked in advance. Checked a range of week day and weekend dates - most weekends in June, July and August already booked out for weddings. Summer weekends fully booked about three months in advance. Good - but website advises booking in advance for the summer months. Courtesy of staff No adverse comments. Reviews all positive - expect experience of special occasions/events helps with this. No adverse comments. My experience - not good to hear owners arguing. Would have liked the offer of help with my bags. Speed of checkout Good. Good generally - a few complaints from people waiting behind a number of guests from an event checking out as a group. Good. Good. Room service 24/7 Yes. Yes. Yes. 7 am - 11 pm. Room service - charge No charge. No charge. Lots of angry reviews about the £10 room service charge. £3. Room - cleanliness Good. Good. Fair. Poor. Room - size OK. Good - double rooms include a sofa. Good - double rooms include a sofa. Small. Room - decor Good - but some rooms would benefit from refurbishment as a little tired. Good - recently refurbished to a stylish, comfortable standard that would suit most tastes. Good - recently refurbished. New design a little basic though. Clean lines, moulded plastic chairs. Poor, tired, worn. 85 Reading 14: The Palm Bay Hotel case study Location - personal safety Good - on a well-lit street. Poor - main approach is via a narrow alley with no street lighting. People standing outside the nightclub smoking can be intimidating. Good - on a well-lit street. Good - on a well-lit street. Location - quiet Good - no adverse reviews. Lots of reviews about the noise at night from the nightclub next door. Good - no adverse reviews. Some noise at night from the main street. Conclusion That night Sandra couldn't sleep very well. There was a lot of noise from drunken youths making their way home after a night on the town. She worried about her car parked next to the road and whether it would be vandalised. Maybe her lack of sleep was partly caused by her worrying about Irene's situation. Sandra thought carefully about the service quality theory she had learned during her MBA and how she could identify the most important aspects of performance the hotel needed to improve from some of the tools she had learned. Could Sandra advise Irene on some improvement priorities?