The Cases La Hacienda del Sol La Hacienda del Sol is a Mexican hotel located in

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The Cases La Hacienda del Sol

La Hacienda del Sol is a Mexican hotel located in the Baja Peninsula that caters primarily to American tourists, most notably from Los Angeles and San Diego. Juanita Garcia, a member of the family that owned the hotel, served as the vice-president of administration. Her primary concern was that the hotel achieved full bookings each summer during the vacation season but had far less occupancy during the winter months. Perceptions by local Mexicans that La Hacienda del Sol was primarily an American hotel and that locals would feel less welcome would need to be overcome. Also, room prices eliminated many potential guests. Ms. Garcia knew the hotel would have to develop a successful advertising and promotions program in combination with price discounting to reach a new potential market-local Mexican tourists and guests.

Shoppers Stop-Targeting the Young

The nation of India holds a unique marketing position in the world economy. As an emerging economy, the number of consumers with funds to make more elaborate purchases rose annually. At . the same time, however, most of these newly affluent consumers were younger citizens. Nearly 70% 'of the nation’s population was under the age of 35. Shoppers Stop had achieved its success in the highly fragmented retail market by focusing on customer service geared to urban consumers with disposable income. In order to sustain growth in the coming years, the company’s marketing man~ pagers recognized that the chain would need to End ways to attract and retain the younger segment Over. time while not alienating current customers. It was the morning of January 7, 2004, and Juanita Garcia, vice-president of administration of La Hacienda del $01, a resort hotel in San Felipe, Mexico, was reviewing the local 2003 financial records. The hotel catered primarily to American tourists during the country’s hot summer months, but it had experienced another winter of low sales levels. Garcia had this problem each winter season and wondered how to better promote the hotel. Garcia considered targeting the Mexican market to improve sales levels in the off-season.‘

San Felipe

La Hacienda del Sol (Hacienda) was located in San I Felipe, Baja California. San Felipe was approximately 230 miles2 from the United States/Mexican border. See Exhibit 1 for a map of Baja California. Due to its location in the northern part of the _ California Gulf, San Felipe attracted tourists who I ‘SnagIt and enjoyed a beach vacation of two to four days in length. The city was known for its ,

Activities and Events

Hacienda offered a wide range of activities to tourists of all ages including swimming, surfing, jet, skiing, parasailing, jogging, and whale-watching. 0n the beach itself, there were many independent vendors who sold hair braiding services, horseback rides, ATV" rentals, and souvenirs. The hotel’s premises included two outdoor swimming pools, _ children’s playgrounds, pool tables, table tennis, _ racquetball courts, gardens, and shopping facilities. , Additional activities during the summer months

includes bingo games, contests, and arts and crafts, 7 to name a few.

Dining Facilities

There were two restaurants and. three dining halls located on-site. One of the restaurants offered both American and Mexican food, with the focus mainly on traditional Mexican meals, This restaurant served food in two locations: a full-service sit-down room and a buffet-style room with both rooms providing a wide variety of foods. The sit-down location had a casual atmosphere, and customers could come in and out of the restaurant at their convenience, The buffet-style location had specified hours for breakfast, lunch and dinner. During the summer months, there were often regular pet’s romances on a stage during dinner (e.g., traditional Mexican dances) and, on some nights of the week, the room served as a nightclub after dinner. Consequently, it characteristically exhibited a fun and energetic atmosphere.

The second restaurant, adjacent to the hotel’s main building, focused on a fine-dining experience and served French and Continental cuisine for lunch and dinner only. The restaurant was located , in the founder’s original mansion, with most of the mansion’s original drapery, carpets, floors, lighting and furniture originating from the 19205. Occasionally, a pianist would play on a grand piano to create a mellow ambiance.

In addition to the two restaurants, the hotel had three bars. The bars were the seconding’s source of income, representing 25 percent of revenue.5

The Spa

The hotel’s European-style spa offered a variety of services, which were growing in popularity even though many customers were unaware of the hotel’s spa prior to arrival. Garcia recently intro: duced a promotional offering that included a room and spa deal which helped encourage the growth in spa sales. The spa, located in the second half of the founder’s mansion, offered hairstyling, waxing, 'over 10 different types of body treatments, reflexology, manicures, pedicures, and facials. The pleasant

gervice, pastel-colored walls and furniture, and 50.3 music playing in the background added to the spas Matting atmosphere and sophisticated ambiathE

Many wedding packages were made available b)’ the hotel to suit customers’ needs. For examples a package that included a three-course meal for 50 8118335, champagne, a reception site by the garden or ocean, soft drinks, linens and seat covers, waiters, and flower arrangements for the reception tables cost $1,260.6 Between the months of My Mid October, the hotel held, on average, one wedding per week. Many brides and their bridal parties took advantage of the spa before their wedding ceremony at the hotel.

Hotel Rooms

The price of the rooms changed each season depending on the expected demand. See Exhibits 3 and 4 for a breakdown and prices of the rooms. Each room included a full bath, telephone, cable television, and bottled water. The price of the room also included one margarita per person and dinner for two from the hotel’s Special Getaways menu. For families with up to two children, the children were given free accommodations and three meals each day from the children’s menu. Rates were also

lowered for seniors. Parkjn w . customers at $3 per car pef nigivadabl‘ 0n The hotel operated at a 90 pen“ at“ occupancy rate from the last Week ”0100 first week of September, The Wake of mating? ally fully booked, while Some r00mnds were; is! during the weekdays, Due to the s e: WEre “at?“ business, the hotel depended on its sodality, and August to carry it though the [slices in It}, After Limbo Day Weekend); Occults finely dropped dramatically, reaching 30Pancy I“: weekdays and between 60 Percent to alternant 0;
. We some weekends From November to captaincy averaged 20 percent all weekdays-;h’%‘ would reach 90 percent occupancy Only due long weeks that college students had their spring the holiday (typically in late Ferry); the ho [8le tined to average an Occupancy rate of 20 ‘3 Con. between the end of spring break and the 1353::

of June. U.S. holidays typically put the $501121th capacity regardless of the time of year.

Juanita Garcia

The hotel had been a private, family run busing; for over 75 years. Juanita Garcia was the third.

generation family member to operate the business, '. With her father holding the position of chief executives 0950? (CEO) for over 20 years. Garcia’s father,
his two daughters. and his three sons were the only . shareholders of the business. . ~ Garcia and cherishing’s were approached)’ . their father to take Over the family business in hotel, creating new summer of 1999. Juanita Garcia was the , interested, since the~ other children knew how 'dif. faculty the task would, be from witnessing the number of hours worked by their father. She stepped" " into the role of vice-president of administration and was initially responsible for promoting the I marketing .~ strategies,
Mexicali

Mexicali, the capital of Baja California, was 124 miles from Hacienda and was well known for its agriculture and Maquiladoras;8 however, half the working population was employed in the tourism industry with 44 percent employed by hotels and restaurants. Of Mexicali’s 813,853 population, 14 percent lived in rural areas. See Exhibits 6 and 7 for additional information on the Mexicali population. Mexicali was also known for its extreme cli mate.

Residents were always looking to get away during the hot months. Those who could afford it generally owned a second home where the climate was not as uncomfortable.

Hotel Rates

Mexicans viewed the hotel as overpriced, so Garcia knew that she needed to come up with a package deal to attract these customers to the hotel; nevertheless she was uncertain whether a lower rate should be offered just to Mexicali residents. A marketing manager who used a similar strategy in another hotel suggested advertising at a rate equal to half them son’s average monthly temperature {in Fahrenheit) for a garden View room The rates oi all other room would have to be priced accord High Garcia wanted to consider this pricing start~ 'egg due to the hotel's many rates. She did not want to tens”: her analysis to this pricing strategy end has an -n to an) automatizes.

Promotion Timing

Garcia also needed to decide when to offer such a promotion. She wanted to focus only on one of the seasons initially: summer { June to August), autumn (September to November). winter (December to February), or spring (March to May). Consider~ action would need to be given to the $20 daily cost to maintain each room, regardless of size, which included employee wages, linens, electricity, water, sewage costs and any other amenities. These costs were only incurred while the room was occupied.

Promotion

The hotel spent, on average, $150,000 to $200,000 on advertising during its off-season each year. Currently, Hacienda promoted through newspaper, press releases, radio and on its website. The hotel could not afford the expensive television advertising in the United States.

The hotel’s website was the first of its kind to be listed on the Internet in Mexico. Although the site was not aesthetically appealing, it was known as being user-friendly and received approximately 1,000 hits per day. It had been the most up-to-date hotel website in Mexico until December 2003 when one of its competitors had upgraded its site. Garcia suggested to her father on numerous occasions that the website should be upgraded, but he remained unconvinced. He thought that since the hotel reached 100 percent capacity during the summer months, the website upgrade could not be justified from a financial perspective.

Approximately five percent of the Mexicali population had access to a computer. Garcia ester‘ mated that only one percent of the population in Mexicali had access both to a computer and to the' Internet and, of those who had access to the Inter‘ net, 0.5 percent of targeted consumers would visit the hotel by viewing the hotel’s Web site, per season.

Television was very common in Mexicali, regardless of the income level of the household. Garcia estimated that 85 percent of Mexicali residents

She predicted that 15 percent of targeted television ‘ viewers would visit the hotel TN the summer months and 2.5 percent would visit during off-season ‘. There were two local television stations. in Mexicali. 1f Hacienda were to advertise on television, tiara thought it would be best to pay for airtime during the peak times of the day: 7 A.M. to 8 AM. and 7 RM. to 9 EM. During these time periods, the cost was at its highest: 5413.5" for each 30-second advertisement.

There were also two popular radio stations to consider. Each 30-second ad cost $10.50. Statistics indicated that 45 percent of the population listened to the radio. Garcia predicted six percent to 8.5 percent of targeted listeners would visit the hotel in the summer, and one percent would visit the hotel in the off-season.

Although newspaper was a popular form of advertising to Americans, Garcia believed distributing flyers in a local mall would be a more viable option. Since there was only one air-conditioned mall in Mexicali, a large portion of the population shopped at this mall during the hot months. The cost to produce 1,000 flyers would be $2.30. For every 1,000 Hyeres, there was an additional distribution cost of $27.50. A response rate between two percent and three percent of the target market was expected per season.

'Garcia needed to as

' to in order to promote e of f she wanted to initially use one type P

‘W to medium for one season to test the 0; we to spend knew that her father would not g

‘ ' nil to. More than $50,000 per season on Addition P

end the motions. She had to assess how best to SP

4 or budget on radio ads, all on telethon ads, $10,000 per season on flyers.

Decision

Garcia knew that the hotel needed a solutl0 h her low sales in the off-season. She wondered w CT d it was viable to target the Mexicali mark’s an

whether it was a good fit with the come 5 marketing strategy. If so, she needed to decade on the room rates, the type of promotional media to use and when to start advertising. She knew she radio give some incentives to the Mexicans to entice them to come to the hotel in addition to heavily promoting specific services that would cater to this new market. She had to have a convincing argument to give to her father if some positive changes

were to be made to the company's current hankie position

CASE QUESTIONS

1. Should Juanita Garcia consider the possibility of promoting La Hacienda del Sol to US. "snowbirds" wishing to travel south during winter months rather than promoting to local Mexicans, using the logic that the hotel could charge higher prices to US. citizens looking for a warm place to spend some time? What cost considerations would be involved in such a strategy?

2. Assuming La Hacienda del Sol offered major discounts during the off-season, should they be given to both locals and any US. citizens wishing to visit the hotel during the off-season? Why or why not?

3. Which traditional advertising media do you believe would be most effective in reaching the local Mexican ,1 market and potential hotel guests in that market? Which would be the least? Defend your response.

4. If asked to develop an advertising and promotions campaign directed at the local Mexican market, what would be the size of your budget? What would be the theme of the campaign?

5. What types of alternative media would be most effective in enticing the local Mexican market to visit the hotel during the winter? EXplain your chorces.

Explanation / Answer

Answer to 1:

The two cities of US are the target markets for hacienda, the total population includes families, people over the age of 65 etc. this target population has income of $101 billion, income per month is $2250. Considering Mexicali whose target market income is $3.5 billion and per month income is $830 per month.

As the current structure gives a luxury vacation with cost of $500 per day in the summer season, people from Mexicali will come to spend their weekend in san Felipe with limited income and taking to consideration the high cost they will incur for the visit. This will be a waste of resources to hacienda to target the locals during off season unless they can revise and introduce a friendly structure in the off season.

Answer to 2:

If hacienda wants to introduce a cost friendly system, then it must be for everyone who is visiting. Because the hotel wants more number of people during the off season and the discounts make sure that the employees don’t have any work without the visitors because the restaurants and spa will remain idle demotivating the employees.

When only the locals are given discounts and not the US, then it creates a geographical discrimination which can affect the hotel’s reputation and they may also lose the customers affecting the business in the long run.

Answer to 3:

The best advertising option for hacienda is to reach through press, as television is the one which prevails in Mexicali and more number of people watch it regularly, it gives the largest reach in the local market.

The least affective media is the newspaper flyers distributed locally. There is only one mall which is air-conditioned, a large percentage of population come for visit in the summer season, there is no estimated percentage of people who can be targeted which is assumed that the target percentage is 20% which is least affective.

Answer to 4:

As 15% visit during summer months and 2.5 visit during off season there are two television stations in mexicalli if hacienda wants to advertise through television. During peak times that is from 7 to 8 am and 7 to 9 pm the cost was $41.25 for every 30 second advertisement

Garcia needed a reasonable budget to promote the market and want to use only one type of media initially. She knew that her father won’t allow more than $50,000 per season on additional promotions. Hence she has to decide on how best to spend on budget if it is television, radio or $10,000 on flyers.

Answer to 5:

Although newspaper was popular form of advertising for the Americans, Garcia believed that distributing flyers in the local market would be even more a good option. Since there was only one air-conditioned mall, a large number of people visit it during the hot season, which can help in attracting more customers and thereby increasing the business for the hotel.

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