The Paris Opera Hotel Case Solution & Answer

The Paris Opera Hotel Case Solution

1.      When would you sell the hotel: today (while in construction/redevelopment); on opening day in January 2012; or when stabilized in 2014?

The boutique business model are design too target middle to upper- income customers. It’s very unique properties operated by the companies or individuals with small collections. Perhaps Faus also want to convert their new property into a boutique with more rooms and provide high quality service to their customers.

The Paris property was consisting on the 91 rooms, the plan of the Faus is to redesign the 20 rooms as suites ranging from 35 to 89 square meters and remaining 71 rooms average rang is 25 square meters. In 2011, He invests 38million to redevelopment of the rooms, with the estimation that in 2012 the occupancy rate will be increased by 70% but stabilizes occupancy in 2014 by 85%.

We will not sell the hotel in January 2012, as well as in 2014, as the revenue is increasing from the last years. The market value of hotel is increasing as it was smaller hotel than other hotels in Paris but the occupancy rates were increasing, which led the rental revenue of the hotel.

In 2014, occupancy rate is increased by 85% it shows that there are more growth opportunities in the future; customers will be more attractive with this restructuring, which will increase the rental income of the hotel. In addition Faus also facing on the daily changes like internet, online booking and some other technologies, these facilities also attract more customers, which increased the revenue of the hotel.

2.      Which hotel is best aligning with Faus?

As Faus was trying to make new property into a boutique so he set up a meridian capital in 2007 to acquire the developed hotel around the world. Meridian strategy is focus on making a portfolio and partnership with world leading international brands.

Faus want to restructure The Paris opera hotel so that he can get attractive management team, strong brand recognition and excellent operational and development track records. So he decided to contract with any leading international hotel brand in order to get higher return on the investment by increasing the occupancy ratio, decrease cost and reasonable management fee

Faus whittled down  17 proposals , some were long- term management agreement with 30 years contract while other were much shorter but he finalist 3 bids that is HAR/G, ARD/Garnet and Cheshire, each of the bid has the Pons and cons.

Hotel alliance &resorts

Hotel alliance & resort is publically traded on New York stock exchange, it has largest market capitalization in hotel in the world it based on 14 different hotel brands. This company has global expertise in boutique.

American Resort and development

 It also publically traded on New York stock exchange. American Resorts and development (ARD) ARD was represented in the most major cities worldwide by various brands, the revenue of the company comes from two main segments one is hotel and the other from residual operations. This company is operating worldwide this company is focusing on luxury upscale segment of the company and reducing the investment in real estate. At the end of 2007 the company portfolio held approximately 900 hotels, form that 50% hotels is behalf of third party and other 50% run as franchise.

ARD’s boutique hotel brand was Garnet hotel it started in 1999. The hotel was world class design hotels, this hotel has enjoyed a nine year track records. This company is launched to provide international life style brand. Due to immediate success in this line, the manager of the company decided to launch another boutique hotel brand………….

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