Hotel Vertu Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Hotel Vertu Case Study Solution

What is the central problem?

This case study revolves around two friends who have graduated and want to start their entrepreneurial career. They both have graduated from the same university and are now thinking to invest in a hotel boutique. They have found a perfect location for this too, peach Tree, an old venture, located in Savannah. The location seems perfect. They need a total of 13$ million money to invest in this hotel. Out of which equity capital would be 6.5$ and investment from other investors would be 6.5$ million. For construction and renovation they also need a sum of $7.77 million. In total they need a amount of 37.86$ million to start this project. The central problem is that now they need to make a decision whether they should invest in Peach Tree or not.

Who are the key players and what is the company’s decision making process?

The key roles in this case study are the two friends Yvonne D’Arcy and Elisabeth Whitting because the whole case revolves around them. They are starting their career and in the end it would be their decision to either make a investment in Peach Tree or not. Another important role could be D’Arcy’s father because he is the one who is introducing them to all the other people who could be interested to make a investment in their venture.

What is the mission of the company?

The mission of the girls is that if they make a decision to invest in Peach Tree, they want to make it a 4 star boutique hotel and instead of attracting customers only who would come and stay there, they also wanted to generate profit from people who will come just to eat from its restaurant. This way they can really maximize their profit. Their vision is to make it the best and most attractive hotel in Savannah in comparison to the other hotels in vicinity.

Identify the core vs ancillary problems.

The problem currently is that they need a huge amount of capital to start the venture. To find people who are willing to invest is not a big deal as xxx father knows a lot of people who can be interested to invest in this. But the problem lies here that if they would be able to generate this much profit as to pay the debts in the future. Secondly there are eight new hotel ventures starting in the sane area and that would definitely impact its sales. Another thing is that they both need to determine their tasks and duties with respect to the venture so that it won’t become a problem later on.

What factors influenced the problem?

The factors that can have an impact on their project are that if all the investment is done by Mr. D’Aracy then he himself will become a part of this venture and he will get control too. Secondly because they are getting investment from outsiders as well, so they will have a portion of power as well. It is important to maintain the sources of finance so that they do not interfere in the internal affairs of the management. Secondly if they set up the venture the tax payments and the other government regulation will impact too.

Financial Analysis:

If we analyze the financial data and project it to see that if the investment would become a cause of profit or loss, we can see that it is a good opportunity for the girls to start their career. The annual growth rate is 5.9% for the next 5 years, which is good considering that it is just a start. But it should be kept in mind that there are new hotel ventures starting up, so to make sure that they attract more customers, they need to be more innovative when it comes to the design and architecture of the hotel. Also they can provide other facilities to the customers to maximize Vertu’s productivity.

Hotel Vertu Harvard Case Solution & Analysis

What are the possible solutions to the problem?

The Possible solutions are that they can either get their hotel financed by Mr. D’Arcy or by bank. In case of Mr. D’Arcy, if they get it financed from him then he’ll influence the venture and might interfere as well. Whereas in case of bank, they will have to repay the loan with a certain amount of interest. But the bank won’t interfere in their internal matters.

They also need to keep a balance between their equity and debt. Too much debt can become the cause of loss in the future.

My recommendation:

My recommendation would be that the girls should go for this opportunity but should take loan from the bank. Secondly they should innovate the renovation of the hotel to have a upper hand in compare to its competitors.

Conclusion:

The project is a good opportunity for the girls to their entrepreneurial success. The profit margin is also good and the venue is also attractive. They should go for it but keeping the balance between equity and debt..................

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