The Regal Carnation Hotel, Guam

Analysis: The Regal Carnation Hotel, Guam

Guam is an island that is situated in the Philippine Sea with a population of 175,000 people.  Magellan discovered Guam in 1521 and it was ruled by Spain until 1898.  Then, the island was ceded to the United States.  During WW11, The Japanese controlled the island from 1941 – 1944.  Finally, Guam became a U.S. territory and has established military bases, on the island, accounting for approximately 60% of the islands revenue.

The other income producing industry on the island is tourism.  Tourism grew at a quick pace from 1967, when President Kennedy lifted travel restrictions, until 2007, when it appeared to have reached its potential.  Hotel occupancy reached an all-time high in the 90’s and has been steadily falling ever since.  Another aspect to the decline has been world events, such as typhoon’s, post-9/11 War on Terror, invasions of other countries and the SARS scare.

The hotels, presently, accommodate approximately 1 million visitors each year.  They range from one star to five star hotels and include brands like Sheraton, Hilton, Marriott, Hyatt Regency, and Westin.  The occupancy rates on the beach stay at 80 – 85 per cent and the inland hotels have an occupancy rate of 60 – 65 percent.  80 percent of visitors arrived from Japan and of that amount most spent 3 – 4 days and most of them would never return.  The next group of visitors came from Korea and only 20 percent of them would ever return.  American tourists made up a small amount of the annual tourists.  Many of the Americans traveling to Guam either work on the U.S. military bases or come to the island to visit the WW11 heritage.

The Regal Carnation Hotel was built in the 80’s after many of the other hotels were already built.  It has 150 rooms but is not beachfront.  The hotel is 300 feet from the beach and guests must purchase beach front access, from other beachfront hotels for $25 -$30 per day.  The owners of the hotel have other hotel interests in Hawaii and therefore, spend only 6 months a year at the Regal Carnation Hotel.  

Steve McKenzie and his wife were guests of the Regal Carnation Hotel in 2007 during Easter holiday.  Although, they were satisfied with the island, their satisfaction with the Regal Carnation Hotel was wrought with dissatisfaction.   There were several issues that led to the unpleasant experience and led them to believe that the Regal Carnation Hotel, in its present state, is not a good fit for the tourist industry.

When Steve McKenzie and his wife arrived at the airport in Guam, there was nobody there from the hotel to greet them.  The advertisement from the website promised complimentary airport pick-up at the airport.  It was only by coincidence that they happened into the front desk manager at the airport.  He had only been there to pick up another guest arriving 45 minutes later, on another flight.   Of course, this delayed the McKenzie’s from getting to the hotel, after the long flight from the United States.  Upon leaving the airport, Mr. McKenzie noticed that the front desk manager was using his privately-owned vehicle, McKenzie’s 25 minutes for the process, even though there were 2.73 employees per guest, at the time.  The desk staff was composed of young inexperienced Japanese intern girls, who spoke very little English.  So, there was a language barrier that added to the slow check-in process.  

After checking in at the front desk, the McKenzie’s went to their room, only to find that it too was not what they expected.  It was different from how the website had advertised it.  The carpet was stained and torn and there were no luggage racks, to name a few problems.  When Mrs. McKenzie asked the front desk for a luggage rack, she was asked to describe how it looks, for them to know what she was needing.  She also requested additional pillows, that never came.  Adding to the issues, was the improperly maintained bathroom.  

Throughout the hotel, the McKenzie’s noticed issues.  For instance, “the breakfast room reminded them of a self-service university canteen.” (Jim Kayalar) The website showed a buffet style breakfast, not a breakfast that was missing much food to eat and items.  The main issue was that there was no breakfast attendant present.

Hypothesis 1: The website enticed the McKenzie’s to stay at The Regal Carnation Hotel.  As in this case, there is a real danger in “over promising and under delivering.”  The Regal Carnation Hotel will generate more return visits by making the improvements that are needed to match the website.

        Pictures are worth a thousand words!  Whenever we are looking for something on the internet, it’s the images that draw out attention to the websites.  The management at The Regal Carnation Hotel looked appealing, to the McKenzie’s.  Ever since the milestone was reached in 1967, when the first Pan Am World Airways jet landed in Guam, carrying Japanese visitors, the tourism industry was improving.  The tourism industry was in the stage, on Guam, by 2007.  This is where we find Steve McKenzie and his wife, landing in a 747, on the island of Guam.

        Now that the Easter vacation was over, Steve was not fully satisfied with the stay at The Regal Carnation Hotel.  Although, Steve and his wife had fond memories of the island during their visit, he thought that the hotel overpromised and underdelivered.  In Steve’s research for a hotel there was 30 -35 hotels to choose from on the island.  The hotels were rated one to five stars.  Several of the hotels had beachfront, which the most desirable to stay with.  Hotel drive boasted the best beaches in Hagatna and offered the finest choices that the city had to offer.

        Based on the website, the McKenzie’s found themselves full of excitement about their vacation to Guam.  They soon found out that things were different from the website.  The hotel gave a flashy feeling of an expensive, sophisticated and chic.  Everyone looking at the website would get the impression that their stay at the hotel would be nice, affordable and located at the beach and relatively close to the city center.  Therefore, to deliver on the promises of the website the hotel needs to make some changes.  To satisfy future guests, the hotel needs to arrive at the airport on time for pick-up, replace the furniture in the lobby and offer the cleanliness and services that are traditionally offered by a quality hotel.  It would be much better for The Regal Carnation Hotel to under promise and over deliver than to disappoint the guests.  With hotel competition for tourist dollars, we can understand the temptation for a hotel to lure guests on flashy websites.  However, to be successful in the future, it is important for The Regal Carnation Hotel to deliver at least everything that they say they will on the website.

Hypotheses 2: The Regal Carnation Hotel could drastically make a positive impact on their revenue stream, if they could attract repeat customers.  Improving their rating to a 4 – 5 star could attract more guests to return and attract new visitors from other countries, like the United States.

        One of the major problems with the hotels of Guam is the inability to create a return rate of customers.  The guests that are coming to the hotel are unlikely to return for a second visit.  However, the Koreans have a better return rate than the Japanese with about 20% of them returning for another visit.  The economic impact is dire for not only the hotels, but also the island.  It will not be possible for business to be sustained at this rate.

        The Regal Carnation Hotel can become a five-star rated hotel by delivering five-star service.  Providing this service will automatically start to improve the return rate of the tourists of the island. Tourists like to know that their travel destination is what they expect and much more.  The hotel will need to make capital improvements, to qualify for a higher rating.  

        It will also be possible that with a higher rating, the hotel might be able to be considered by major branding.  If they could eventually franchise to a brand name, then they would get additional help for branded supplies and services.  Of course, much of the branding comes with tried and true proven management training, something that is most lacking at The Regal Carnation Hotel.  When potential guests see these changes then there is excitement generated that permeates in a multinational way.  Star ratings and brand names are recognized globally and could be a real game changer is the profitable life of The Regal Carnation Hotel.