Table of contents
1.0 Executive Summary
2.0 Terms of reference
8.0 Preliminary considerations for improvement
9.0 Choosing a strategy
10.0 Evaluation of the strategy
11.0 Achieving and maintaining competitive advantage
1.0 Executive Summary
1.1 The following report will show the failure of the Moroccan theme hotel Sahara which was located in Las Vegas. With the help of a SWOT analysis several internal and external reasons will be explained and evaluated in this report.
1.2 It will also consider how the hotel could have maintained competitive advantage by choosing an appropriate strategy which could have improved the hotels situation.
2.0 Terms of reference
2.1 This report, undertaken in October 2011 shortly after the closing of the Sahara in May 2011, pursues the goals to explain possible reasons for the failure of the Sahara Hotel and to show opportunities how the company could have avoided it by looking at the business and functional level of strategies.
2.2 Furthermore, it will outline the strengths, weaknesses, opportunities and threats of the hotel which can be seen as internal and external reasons for the failure. Tough competitors and management problems were the two leading causes for the closure of the company which will be examined in this report. The long corporate history of the Sahara Hotel will be an important aspect as well to understand the main problems of the resort and therefore the reasons for the hotels closure.
2.3 What will not be dealt with is the corporate level of strategy including financial aspects, the mission statement as well as the creation of value for stockholders because of the difficult access to internal information and the limited scale ofthe report.
3.1 Opened ¡n 1952 by Milton Prell at the north end of the Las Vegas Strip, the Moroccan oriental theme hotel was one of the first resorts on the Strip and became famous for its late night performers like Frank Sinatra, Marlene Dietrich and Liza Minnelli. In 1961, Del Webb bought the resort and added two towers in order to expand.
3.2 In 1982, Webb sold the Sahara Hotel to Paul Lowden for approximately $50 million. Six years later a third tower was added which helped the Sahara Hotel to become a 1,720-room resort with a new race and sports book.
3.3 In 1995, ownership changed again when the hotel was sold for $193 million to Bill Bennett. He tried to rescue the resort by building a roller coaster throughout the whole resort, installing the Sahara Speedworld racing simulation and opening the NASCAR café. (Pratt, 2011)
3.4 After Bill Bennett's dead in 2002, the resort was sold out to Sam Nazarian for approximately $330 million. He was the last owner because on 16th May 2011, the Sahara Hotel closed for the reason that it was not 'longer economically viable'. (Green, 2011)
3.5 As can be seen in the corporate history of the company, there were many ownership changes and each of the owner tried to push the hotel towards something completely different as his predecessor, which will be explained later in this report. Further internal reasons for the failure were the age of the hotel, too less and weak rescue attempts, the loss of its former popularity and glamour as well as the non-existence of profit centres. These internal reasons will be investigated and presented in this report as weaknesses.
3.6 The threats of the Sahara hotel are the external reasons for failure. This includes the general situation in Las Vegas which is getting worse, the inability to adapt prices to the seasonality of the visitor volume, the choice of the wrong target groups, the location at the end of the Strip, bad hotel valuations from former guests as well as the bad image through the media caused by several rumours. This report will also focus on the tough competition in Las Vegas and therefore the Sahara's direct competitor, the Stratosphere, will be presented and compared to the Sahara.
3.7 On the other hand, the Sahara also had positive things which are worth mentioning. However, there is a strong likelihood that these advantages were not used efficiently enough in order to achieve and maintaining competitive advantage as it will be explained later in this report. External opportunities were that the Sahara Hotel was situated in Las Vegas, the city with one of the highest occupancy rates in the world. Moreover, the resort was located near the Las Vegas Convention Centre.
3.8 Internal strengths of the Sahara Hotel were that it offered Unique Selling Propositions, such as its oriental theme and its long corporate history. Furthermore, the hotel offered lot of extra facilities for its guests. Nevertheless, the Sahara probably could not use its strengths in order to achieve and maintain competitive advantage.
3.9 At first, the possible missed chances, explained as opportunities and strengths, will be presented and investigated. Secondly, the possible reasons for the failure, offered as threats and weaknesses, are going to be examined in order to understand how the Sahara Hotel came to its failure.
4.1 According to the Las Vegas Convention and Visitors Authority (2011), 99.3% of Las Vegas' visitors stayed overnight and 95% slept in a hotel or motel during the year 2010. Furthermore, hotels in Las Vegas had an average occupancy rate of 80.4%. In reference to the American Hotel and Lodging Association (2011), the occupancy rate ¡n 2010 ¡n the United States in general was 54.7%. Therefore, it could have been an opportunity for the Sahara that Las Vegas was with 25.7% above average regarding the occupancy rate in America, but it seems likely that the tough competition in Las Vegas made it more difficult for the hotel.
4.2 Before Sam Nazarian purchased the hotel, he stated that 'the Sahara is located close to the Las Vegas Convention Center and is going to be surrounded by high-rise condominiums, which will be a great audience for what we plan to offer.' (Stutz, 2007) Therefore, particularly business travellers would have tended to stay in the Sahara which was located near the Convention Center because this could have increased their productivity. Therefore, the proximity to the Convention Center could have been used better by creating packages and offers for business travellers.
5.1 The Sahara had a Unique Selling Proposition when it was known for its famous stars and its unique oriental ambience. However, in its final years it appeared as being a simple theme hotel with a roller coaster in front of it as almost every hotel in Las Vegas. As one of the first hotels on the Strip with a unique corporate history, the hotel could have stood for tradition, experience and resistance, but it seems likely that it was neglected over the years. Another unique strength was the oriental theme which was the only one of its kind on the Strip (Kanigher, 2011) and could have made it stand out from its competitors. If these two Unique Selling Propositions would have been more promoted and marketed this could have led to a way forward by creating competitive advantage.
5.2 According to vegas-online.de (2011), the Sahara offered a large casino, a racing exhibition, a roller coaster, one steakhouse, two cafes, one pool, a wedding chapel, several conference rooms, a business centre, its own train station of the Las Vegas Monorail and four shopping facilities. This shows what the Sahara tried to offer in addition to accommodation in terms of extra facilities to live up to its guest's expectations. The problem was that the resort tried to adapt to the needs of the guests but without seeking competitive advantage and using its Unique Selling Propositions. Furthermore, there is a strong likelihood that these facilities were not turned into profit centres, as it will be explained later in this report.
6.1 In 2010, Las Vegas could attract about 37 million visitors and in 2007, there were about 39 million tourists. This means a loss of guests of approximately 5%. Furthermore, the occupancy rate sunk. In 2010, hotels in Las Vegas were running to capacity of 80.4%. In relation to the occupancy rate of 2007, which was 90.4%, this is a drop of 10%. There was also a rise of hotel rooms over the years, which could mean that new hotels were built or that other hotels in Las Vegas expanded their capacities. (Las Vegas Convention and Visitors Authority, 2011) If these three factors - fewer visitors, a lower occupancy rate and more hotel rooms than the last five years before - are related to each other, it could be concluded that the Sahara had to deal with a lack of guests while competition was getting tougher.
6.2 In the 1960s and 1970s, according to Kanigher (2011) 'the Sahara was ... among the first hotels to find ways to fill rooms during traditionally sluggish December, such as hosting parties for airlines and their employees'. However, the hotel did not continued these ideas in order to be able to deal with low occupancy rates during months where less visitors were coming to Las Vegas. In 2010, the most visitors - about 32 million - came to Las Vegas during March, May, July and October. These are the months where prices for the Sahara's hotel rooms could have been higher in order to increase revenue. Lower rates should have been offered in months with fewer visitors, like in February, June, November and December with 29 million visitors on average. Therefore, Instead of offering constant prices over the whole year, the Sahara should have adjusted its room prices to the seasonality of the visitor volume.
6.3 Identifying target groups is really important for companies to succeed because demand determines supply. According to the Las Vegas Convention and Visitors Authority (2011), the most important reason for visiting Las Vegas in 2010 was for 51% going on vacation. Gambling took only 9%. The Sahara Hotel should therefore have been more focused on other target groups instead of gamblers. 79% of the visitors who came to Las Vegas were married, which mean that the Sahara could have focused on families and couples. Another possible target group could have been business travellers because the Sahara was located near the Convention Centre.
6.4 The Las Vegas Strip is home to more than 350 hotels and motels. Additionally, there are more hotel rooms in Las Vegas than in any other city in the United States. (Scott, 2007) What can be deducted from these facts is that the Sahara Hotel had to compete with loads of hotels in the same area and in the same branch. Furthermore, it was very hard for the Sahara Hotel to keep pace with its competitors because new hotels were built, like the CityCenter; upgrades and renovations are made very often, like in the MGM Grand Hotel; and the management was changing, like in the Stratosphere. (Newkirk, 2011)
6.5 As a direct 'neighbour' and also with a roller coaster in front of it, particularly the Stratosphere had to compete with the Sahara, but known for the tallest tower on the Strip it had a Unique Selling Proposition and therefore also a competitive advantage against the Sahara. Moreover, the Stratosphere competed with the Sahara for its low room prices with about $35. According to the homepage of the Stratosphere (2011), it offers renovated 'rooms and suites at first rate and packed with amenities' while the Sahara had rooms furnished in a simple and old-fashioned way. (Vegas4you, 2011) Additionally, the Stratosphere was going through a $20 million renovation in 2011 while the Sahara Hotel was showing signs of aging. What can be deducted from these facts is that the Sahara Hotel could not create competitive advantage against its direct competitor which could have led to the failure.
6.6 The location is very important for hotels because it stands for the amount of time guests invest in traffic. Therefore, the Sahara Hotel, located at the northern end of the Strip outside the city centre and 1.5 miles away from the Las Vegas Main Strip, made it hard for its guests to navigate in an unfamiliar place like the Las Vegas Strip. (Pratt, 2011) The north end of the Strip is also home to hotels that are and were failing during the last years of the Sahara. According to Green (2011) 'the Riviera hotel-casinos parent company is in bankruptcy and the Fontainebleau casino-resort project remains stalled.' This could have projected a bad image to the northern end ofthe Las Vegas Strip also influencing the Sahara Hotel.
6.7 Online hotel valuations made by former guests could have reflected badly on the Sahara and could have caused a bad image as the following statement, according to Zoover Holiday Reviews (2011), underlines: 'The rooms are a disaster! Everything was broken, ... the smell of the entire place was rancid, the elevators sound like they are going to collapse ... and the people are very unfriendly'. Moreover, several guests, who have visited the Sahara between 2000 and 2011, claimed that the hotel was aged, carpets in the hotel rooms had stains, mattresses were dirty and the rooms were furnished in an old-fashioned style. (Zoover Holiday Reviews, 2011 and Vegas4you, 2011) Such evaluations in the internet can be read by everyone and therefore guests could have been scared off which could have caused less guests and lower revenue.
- Quote paper
- Alexandra Riepe (Author), 2011, An assessment about the failure of the Sahara Hotel in Las Vegas, Munich, GRIN Verlag, https://www.grin.com/document/191216