Business Analysis: Motel 6
The paper undertakes business analysis of Motel 6 assessing its generic business-level strategy with specifics. It also explores the firm’s competitive advantage vis-à-vis the industry and its top competitors. The sustainability of the firm’s long-term strategy is also evaluated. In addition, the position of the firm in the industry life cycle is identified. The analysis of the life cycle seeks to establish its influence on the strategies being implemented by the firm.
Business-level strategy “details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market” (Rothaermel, 2016, p.177). The focus is on customer segments to serve, customer needs to satisfy, and ways and means of meeting the customer needs (Rothaermel, 2016). There are generic business-level strategies that determine the market target focus (broad or narrow) and cost (Thompson et al., 2016).
Motel 6 has established itself as a low-budget hotel with no-frills lodging and roadside locations (Karmin, 2015). It offers discount motels in more than 1,300 locations with discounts such as 10% off for seniors (Motel 6, 2019). It offers discounted rates on its motel properties and inherently pursuing a low-cost provider strategy. The firm has developed an infrastructure in terms of locations that enables it to offer competitive pricing relative to most of its rivals.
It also offers similar discounts for military personnel (Motel 6, 2019). Although for the most part of its history (founded in 1962) the firm has pursued a low-cost provide strategy, it has adapted to the blue-oceans strategy. In this strategy, the firm simultaneously pursues a low-cost and differentiation strategy (Rothaermel, 2016). In 2010, the chain revamped its rooms offering additional amenities including large flat-screen TVs and granite countertops (Delollis, 2010).
The changes were made without impacting its appeal and average price at that time of $45.26 (Delollis, 2010). It became the first budget hotel chain to feature 32-inch flat-screen TVs as well as offering Wi-Fi and ports for plugging electronics (Delollis, 2010). Although the prices at the hotels did not change significantly, the product improved dramatically. It highlighted the efforts that the firm pursued to differentiate its offerings from rivals like Super 8.
The intention of pursuing a business-level is to garner and sustain competitive advantage vis-à-vis industry rivals (Rothaermel, 2016). It has broader brand recognition that most rivals such as Super 8 and Red Roof Inns (Delollis, 2010). The greater awareness is due to efforts to make the product more appealing especially among young people while maintaining low prices. The attractiveness among different age groups is instructive (Figure 1, Appendix).
The strong appeal among the younger demographics (18 to 29 years) gives the firm a broader market than most rivals (Statista, 2019). It has more than 1,300 locations in the United States that are strategically located along roadsides (Karmin, 2015). The hotel chain is backed by a strong parent, Blackstone Group. In addition, it offers broader range of products from the basic Motel 6 to the extended stay hotel offerings under the Studio 6 brand.
Motel 6 has continues to institute changes with its products offerings that respond to the evolving customer tastes leading to retention of strong brand recognition (Delollis, 2010). The firm has comparatively high occupancy rate of more 85% relative to industry (Karmin, 2015). The high occupancy rate has been instrumental in generating adequate profitability to support product makeovers and purse its ambition to expand to new geographical markets.
The major driver of sustainability for Motel 6 is its attractiveness to younger people (Figure 1, Appendix). It offers the firm consistent customer base as they are likely to continue to patronage their establishments as they grow older. The firm has always responded to changes in consumer demands and has pioneered significant changes (Delollis, 2010). Even with the broad appeal of product innovations, it has maintained its low prices which are the main attraction.
As a result, it has been able to balance product upgrades and still maintaining the low prices profitably. The ability to profitably manage the balance is instrumental in creating the level of differentiation that promotes strong brand appeal. The hotel chain is pursuing more markets within the Americas with expansion into Panama, Costa Rica, Nicaragua, Honduras, El Salvador, Guatemala, and Belize as part of regional diversification strategy (Karmin, 2015).
Expanding into additional country markets reduces its reliance on the United States market. Unlike the basic products offered under the Motel 6 brand, it is creating an entirely different model for Latin America. It is an expanded version with food and beverage offerings under the Hotel 6 brand. The diversification that responds to different markets and cultures has the potential for enabling them to attain success in new markets unlike standardization.
Industry Life Cycle
There are five stages in the industry life cycle including embryonic, growth, shakeout, mature, and decline (Hill & Jones, 2013). The stages are progressive with varying demand and growth rates. Motel 6 is in the industry shakeout phase where growth has slowed considerably and is approaching saturation levels especially in the home market. It posted increase of Revenue per Available Room (RevPAR) of between 1.1% and 3.6% (Lodging Staff, 2017).
The low growth rate is persistent due to the high level of saturation in the market in the United States with progressive towards market maturity. It is the main driver behind its move to expand into Central America as part of geographical diversification (Karmin, 2015). There is a high level of awareness within the firm that the sustainability of growth in the United States is fairly limited. Therefore, geographical expansion offers the requisite diversification.
Motel 6 has maintained its budget focus but has been modifying its product to create a stronger appeal among the younger generation. It implies that is seeking blue oceans in the increasingly saturated market in the United States. The continued expansion in the home market and internationally boosts economies and long-term sustainability. The industry is increasingly becoming mature prompting strategy shift especially geographical diversification for the firm.
Delollis, B. (2010). Budget Hotels Going More Upscale. Retrieved 27 March 2019 from https://abcnews.go.com/Travel/BusinessTravel/story?id=4491507&page=1
Hill, C. W. L., & Jones, G. R. (2013). Strategic Management: An Integrated Approach (10th Ed.). Mason, OH: South-Western.
Karmin, C. (2015). Low-Budget Motel 6 Gets in on Lodging Growth Boom. Retrieved 27 March from https://www.wsj.com/articles/low-budget-motel-6-gets-in-on-lodging-growth-boom-1425410488
Lodging Staff. (2017). G6 Hospitality Announces 2016 Growth. Retrieved 27 March 2019 from https://lodgingmagazine.com/g6-hospitality-announces-2016-growth/
Motel 6. (2019). Save More for What You Travel For. Retrieved 27 March 2019 from https://www.motel6.com/#/home
Rothaermel, F. T. (2016). Strategic Management (3rd Ed.). New York, NY: McGraw-Hill Education.
Statista. (2019). Share of Americans who Stayed at Motel 6 Hotels in the Last 12 Months in 2018, by Age. Retrieved 27 March 2019 from https://www.statista.com/statistics/227566/motel-6-hotel-guests-usa/
Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland, A. J. (2016). Crafting and Executing Strategy: The Quest for Competitive Advantage, Concepts and Cases (20th Ed.). New York, NY: McGraw-Hill Education.