Good Night Motel Case
Assignment #1 (The Good Night Motel) When making his decision, McGregor should consider seriously the negative consequences that his business will experience if he refuses Alward’s offer to fill the motel for the two weekend nights in October, at half the room rate. If McGregor refuses, during that weekend his motel will be at his usual capacity of less than quarter full. With the church group there, paying half the rate, it will be as if the motel were half-full! In addition, if he refuses, McGregor’s reputation in the community will suffer, and he will also lose all future business from Alward’s group and other church groups, at regular price. Consequently, Justin McGregor should accept Alward’s offer but under the following two conditions: one, guest service will be limited so that McGregor can lower his costs; two, this is a special one-time deal that will never happen again for Alward or anyone else. The quantitative factors involved dictate that McGregor should accept Alward’s offer for accommodations for his church group, at half the room rate, for Friday and Saturday, October 26 and 27. According to the facts of the case, pre-2008, from October 16 to May 14, the motel was rarely more than a quarter full at any time while post-2008, the motel’s occupancy rates fell 7 to 15 percent year round. In other words, if McGregor refuses Alward’s offer, during that weekend, the motel will be at its usual capacity of less than quarter full. However, with the church group there, paying half the rate, it will be as if the motel were half-full! Half-full is better than less than a quarter full, so logic dictates that McGregor must accept Alward’s offer. There will be more guests occupying all rooms at half the rate than if there were regular guests paying the regular price and filling fewer than a quarter of the motel’s rooms. However, this fact means that service costs and maintenance cost will be higher with Alward’s group than with regular customers. In other