McDonald’s Adventure in the Hotel Industry

1. Golden Arch Hotels
by McDonald’s
Chintham Ashish (008)
Ipsita Pradhan (019)
Arokia Rexton (028)
Pranjal Yadav (037)
Ragavendra R. (038)
Vaishnavi C. (056)
Gaurav Kumar Singh (096)
By
TEAM RIES

2. • 1954 – Milk Shake seller – Raymond Croc
• Fast and Friendly
• Donald Brothers – San Bernardino
• First McDonald – Franchisee
• 1967 – Outside the US – Canada, Japan, Holland, Australia
and Great Britain
• 1970s – Germany, Hong Kong, Sweden, the Far East, and
Latin America
Introduction

3. • 1976 – Swiss – 142 – 7200 Employees
• 1989 – Eastern Europe – Russia, Poland, Hungary, and the
Czech Republic
• 2005 – 30,000 QS Restaurants in 122 Countries
• Relationships with its Neighbors, Local Communities ad
Clubs
• Built in “PlayLand”

4. • 1965 – IPO – NYSE
• Market Saturation
• Diversification Strategy
• The Swiss Strategy
• The Hotel Project
• 4 Star Hotel – The Golden Arch

5. Uniqueness of The Golden Arch
• Competency center
• Luggage Handling – Custom made trolley
• No rush in Check-in & Check-out – Self, Credit Card at the
Airport Terminal would do
• Curved Walls in rooms – Patented
• Futuristic Shower

6. • Spirit of Mc. D’s- “hospitality philosophy”
• McD’s USP-
 Burger and fries at one price
 Clean environment
 Fast and friendly service – Zero waiting time
 Consistency in quality , rate & taste
• Relationship with customers, neighbors, local
community and clubs.
• Ambience :
• 1/4th of the restaurant – play land for kids
• McD’s clown – educate and entertain children
• Target customers: children centric
Mc Donald’s Brand image

7.  Service sector- quality food
 Associated with social benefit
 Cheap place to hang around
 Family gathering
 Children recreational place
Mc D perceived as

8. Customer Experience at Golden Arches
• Signage of the hotel was not prominent
• Unfriendly front-desk employees
• Comfort
• Ambience
• Brand reinforcement at every turn

9. • Wireless keyboard was too advanced in 2001
• It was relatively isolated
• 4 star rating did not correspond with hotel image
• Only eating option is McDonald’s
• The name Golden Arch does not translate into the
German language
Customer Experience at Golden Arches

10. Customer Reactions
1
0
The room was exceedingly
cheerful and I found the
headboards witty rather
than annoying.
- Fred Bernstein
As I think about this hotel visit in retrospect,
the entire feeling was one
of oddity and discomfort.
- Nancy Stephens(Arizona)
It would have never
crossed my mind that
a Mc Donald’s restaurant
would qualify
as a four-star hotel.
-Daniel Deutscher
Given the low occupancy,
there was little effort to
sell the rooms to us and the
front-desk person was not very
friendly or welcoming either.
-Upendra Dixit
Quotes
I Usually stay in five-stars. But if
there isn’t one around,
why not stay at Mc Donald’s?
-Erwin Brunner

11. Deep / Broad Brand
Awareness
PoP & PoD
Positive accessible
reactions
Intense & Active
loyalty
Role of PoP & PoD in the Brand Building
Performance
- How well functional needs are met ?
- Question marks: Food & beverage, Guest
services, Recreational facilities, Business
needs like large conference rooms
Imagery
- Way people think about a brand abstractly
- Question marks:
- “I can’t imaging staying at a Mc Donald’s hotel on
a business trip”
- “expected the hotel would be one or two star”
- “having a picnic than having a drink in a bar”

12. Expectations @4 star hotel?
Comfort Ambiance
Recreational
Facilities
Food and
beverages
Service Cleanliness

13. Are the points of difference
compelling?
Curved wall
Gadget
(keyboard)
Movable
beds
Futuristic
Shower
Automation
Custom
made trolley
Deliverability?
Desirability?

14. Porter 5 forces analysis
• No such threat at that point of timeThreat from substitute
• Competition with four star hotels
• World’s fastest growing hotels
• Compared with other hotels, far from airport
Intensity of rivalry within
industry
• Tours and Airlines (major customer segment) – demand
long term relations and lower price. (Bargaining power –
HIGH)
Bargaining power-
Customers
• HR scarcity in SwitzerlandBargaining power- Supplier
• Increasing nos. of new hotel
• Growth rate 40%, 3000 new rooms
• In past, increased growth drop in occupancy rate
Threat – new entrants

18. Hotel Life Cycle at Swiss
Swiss Hotels

19. • Loyal currentcustomers
• The new products have a good quality and are well
promoted and priced.
• Moreover, the new products are marketed to the same
economic environment as the existing products.
• McDonald’s Customer group -> Economical and Upper
middle Class
• Golden Arches’ Customer group -> Upper class people
When to Horizontally Diversify???

20. • Customer Confusion:
 Surprised to see Golden Arches Hotel (not much advertising)
 OMG!!! McD is a 4 Star hotel???
 A 4 star hotel with no bell boy, no receptionist, looks deserted!!
Where are the friendly customer support executives??? Safety
factor!
 A 4 Star hotel with only a burger joint???
Internal Problems Faced

21. • Bar ambience
• ‘Arches’ in German sounds awful.
• Noise from the airport.
• Comfortable multi position adjustable bed looks like a hospital
bed to some customers. (Actually McD has satisfied customers’
needs, wants and went one step forward to satisfy desires)
• Shower in the Bed room!
• Out of McD’s core competency
• POD (High end technology) doesn’t seem to be relevant
Continued..

22. Problems
• Segmentation and Targeting
• Failure of Brand Value support
• Irrelevant PODs
• Market is expected to mature very soon and tough
competition existed!
• Faster service was preferred over friendly service.

23. BCG Matrix
Better liquidate
it, it might hurt
the parent brand

24. Ansoff’s Matrix
Diversification

25. • The corporation has already exploited all four cells of Ansoff’s matrix:
• Market penetration –
McDonald’s saturated its home market (the USA) a number of years ago
• Market development –
The company has managed to duplicate its fast-food success worldwide
• Product development –
From burgers ‘n fries to breakfast, from salads to ice cream, the
corporation has innovated in almost every edible direction
• Diversification –
McDonald’s control land holdings and own processing facilities, logistics
operations, franchising/financing operations, training facilities, and now
hotels.
Ansoff ‘s Matrix

27. • From a price perspective McDonald’s could match the
segments of Mid-price, Economy and Budget.
• The segment chosen has a high impact on the price
because Hammers himself told about this.
• Focusing much on families.
Segmentation

28. • Lack of Clarity between Segmented and
Targeted Customers
• McDonald can make use of the advantage that it is
recognized as a family restaurants and attracting that
kind of consumers to the hotels.
Targeting
31%
42%
27% 0
Customers
Business
Traveller
Tour Operators
Individuals &
Layovers

29. • Good Quality at Cheap price
• Overriding its core competency
in case of hotels.
• Planned a different name
for the hotel chain.
• But the name symbolizes Mc. Donald’s
• It sounds different in German.
Ref: http://blueprintcreative.info/MyServices/
Positioning and Naming

30. Features

33. Investment in Hotel Tot loan for hotel Annuity
Payment out
standing
$
28,800,000
$
23,040,000 ($8,145,339.57)
pmt interest principal $23,040,000.00
Yr1 ($8,145,339.57) $691,200.00 $7,454,139.57 $15,585,860.43
Yr2 ($8,145,339.57) $467,575.81 $7,677,763.76 $7,908,096.67
Yr3 ($8,145,339.57) $237,242.90 $7,908,096.67 $0.00
It is a 3 year mortgage loan and Golden Arches was not able to generate funds to pay it
back. Plz download the case memo also for more detailed explanation.

34. Sources to pay back Liability
• Debt by debt (reduces credibility)
• Cost restructure (funds from parent brand)
• Internal Funds (not sufficient)

35. • Target Market: Travel vacationers and lodging guests. Age 0-50
with children. Prefers to travel by car and enjoys various kind
of entertainment
Segments: The Mid-price and Economy segments. Focusing
much on families, building on the parent brand attracting
consumers from both segments.
•
Hotel Features: In-room
appliances, Internet, Newspapers, breakfast/lunch restaurant
with recognizable McDonald’s products.
Location: Currently Located near highways, in vicinity of theme
parks, golf courses, and shopping malls.
Key Recommendations

36. • Use what works In food Industry for McDonald’s and use
the family oriented and value based business model to
create a unique hotel experience that everyone could
enjoy.
Be Unique
-McDonald's can incorporate their
Play Place and other game room
activities like coin operated
arcades.
-Not only does provide
entertainment, but it also
provides revenue from guests that
if they were in other hotels would
not spend more than the room
fee.
-Include a unique dining experience that
includes much of what they provide already
while adding multi-cuisine food in the
menu.
Shall give a reason to look forward to for the
customers.

37. Alternatives
• 2 or 3 Star Hotel
 Focus on families with
children
 Low-cost budget
 Economy class
 Limited amenities
• 4 Star Hotel under a
different Brand
 Different logo
 Interior Design
 Ambience
 Multi-cuisine restaurant
 Customer Engaging Activities
 Trained Service staff

38. What happened to this Hotel?

39. THANK YOU 