Renovating the Hungerford Hotel Case Essay Assignment
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Renovating the Hungerford Hotel Case Essay Assignment
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SHA613: Developing an Asset Management Strategy
School of Hotel Administration, Cornell University
Project: Renovating the Hungerford Hotel
Instructions:
The owners of the Hungerford Hotel are considering whether they should hold the hotel or renovate it, as well as when they should consider selling the hotel. Answer the following questions based on two scenarios for the Hungerford Hotel that are shown on the last page in this document. The first scenario is the base case, which Professor deRoos analyzed in the video on the previous page “Case Study: The Hungerford Hotel.” The second scenario is the renovation case, which assumes that the renovation has been completed. You can assume that the hurdle rate is 14%.
To submit this assignment, please refer to the instructions in the course.
- In what year or years does the holding period IRR for the renovation exceed the holding period IRR for the base case? Provide evidence for your answer.
- The renovation case shows a significant increase in both occupancy and average daily rate (ADR) from the base case. For example, in year 4, the renovation case has a 72.5% occupancy rate and an ADR of $199.39, while the base case has an occupancy rate of 71.0% and an ADR of $190.02. Provide a rationale for how the renovation could result in increases in both the occupancy and the ADR given that these two-revenue metrics are frequently in tension with each other.
- Consider the base case and the renovation case separately. For each case, when would you advise a sale, assuming that the goal was to sell the hotel as long as the marginal rate of return (MRR) is above the hurdle rate of 14%? Provide a brief explanation of your answer.
- For the base case scenario, given that the holding period IRR is maximized in year 1, does it make sense to sell, then? Assume the hurdle rate is 14%. Provide a brief explanation of your answer.
- Assume the Hungerford is renovated. When might it make sense to think about selling the hotel? Provide a brief explanation of your answer.
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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