Forte Case Study

Chara Brown, Ian Moon, Nicolo’ Giacopelli, Elie Trigano

 Background

- Forte Hotels, an established European hotel chain, is expanding in the United States with a
new chain, named Forte Executive Innes
- Forte Executive Innes will be mid-priced, maintain comfort and service associated with Forte
brand, and focus on functionality to target business travelers
- Market research was done to analyze ideal perks and preferences within five key attributes:
room type, business amenities, leisure facilities, conveniences/extras, and restaurants/dining
 Key Attributes

- The “Room Type” attribute contributes most to

customer’s choice in hotels, making up almost
30% of attribute importance
- “Room Type”, “Business Amenities” and
“Leisure” contribute to ~70% of the attribute
importance
- Throughout the analysis, whether restaurant
delivery is present or not (“Restaurant”) does
not seem to lead at all final consumers’ choices.
When generating optimal products, the
software will always present both alternatives
 Key Attribute Levels (aggregate level)

- Within the “Room Type” attribute, the “Small

Suite” has the highest average, indicating a clear
preference and driving the overall attribute
importance
- Internet access is the least preferred for the
“Business Amenities” attribute, while “Room fax”
is characterized by the same mean, even though
with greater variability and maximum, than
“Speaker phone”
- The presence of an indoor pool seems significant
for the overall market preference, both alone or
with an exercise room
 Product Bundles

Forte Hotels is considering four product bundles for Forte Executive Innes.
Business Restaurant
Product Bundle Room Leisure Extras
Amenities Delivery

Room Fruit and

Professional 1 Internet access Exercise room No Restaurant
Office cheese

Professional 2 Small Suite Room fax Exercise room Tape library Restaurant

Exercise room
Tourist Large Room Speaker phone Tape library No Restaurant
+ Pool

Exercise room
Deluxe Large Room Internet access Tape library Restaurant
+ Pool
 Conjoint Analysis
- A conjoint analysis is performed to evaluate the proposed
bundles, as well as the optimal ones
- We ran the conjoint analysis (Fig 1) using the conjoint design
data, which resulted in a decimal approximation of each
attribute level's partworth. Then, we ran the conjoint analysis
based on the decimal values that we substituted into Enginius
- We start by assessing the market share impact of each
candidate bundle proposed by Forte Hotels in a world
populated by 5 competitor products
- Share-of-preference is chosen as the Choice Rule, since we
believe that the market segment (made of business travelers)
take the choice of hotels light-heartedly and may be variety-
seeking
 Optimal Product Bundle (among proposed)
- Professional 2 is the optimal product bundle, based on Professional 2
market share, for the State College area
Small Exercise
Room fax Tape library Restaurant
- Professional 2 is predicted to bring in 16.9% of Suite room
market share, taking a similar percentage (~3-4%)
from the existing competitors
- The bundle has a similar impact to Professional 1 but
has the advantage of offering a “Small Suite” setup
- The launch of any of the other two, Tourist or Deluxe
(~14.5%), is predicted to leave more than 1% of
market share to the competitor Scanticon, which
offers a more business-oriented bundle and is able to
retain (what will prove to be) an entire segment
- The current market is lacking competitors in the
business-oriented space, which explains why the
Tourist and Deluxe product bundles are not predicted
to do as well as Professional 2
 Ideal Product Bundle
- Given the five attributes and their levels, there are a total of 216
(3*3*4*2) unique product combinations
- After comparing all 216 combinations, based on market shares the
suggestion is the following:

Ideal

Small Fruit and No

Room fax Pool
Suite cheese Restaurant

- It is clear how the software proposes as an optimal bundle (aimed at satisfying product profiles that may be
lacking in the market) which fits perfectly into the ranking of the levels’ partworth averaged over the sample. The
ideal bundle is in fact the proposed Prof_2 incorporating the Pool and Fruit and Cheese
 Ideal Product Bundle

- The configuration of the Ideal Bundle is predicted

to capture 18.4% of total market share. This is
achieved by taking away a roughly uniform market
presence from the 5 competitors (~3-4%)
- The second ideal bundle is the exact same
configuration without the Restaurant attribute
which has little impact in general. The difference in
market share is negligible (0.5%) but the impact on
costs and pricing ability may be substantial
 Client Segmentation
- A Segmentation Analysis is performed using as segmentation variables the individual partworths

- The columns (the different attribute levels) are not standardized in order to keep the scales of the attribute importances

- A 2-segment solutions is proposed, even though the error (distance from each segment’s centroid) is significant this setup
provides interesting insights
Client Segmentation

- Two segments of respective sizes 28 (70%)

and 12 (30%)
- Five attributes show statistically significant
differences between the two segments with
respect to the overall sample
- High and low values are opposites since there
are only two segments
- The most important divergences among the
two segments regard ‘Room’ (Large vs Office)
and ‘Leisure’ attributes (exercise room)
 Recommended Product Bundle by Segment
Separating the dataset along the segments in the Preference partworth tables, we ran two conjoint
analyses after keeping the estimates from the entire sample, which resulted in the following
recommendations.

Corporate Cindy - Professional 1 Vacation Vick: Tourist

Corporate Cindy is likely booking for business reasons, which is Vacation Vick is likely booking for vacation, which is
highlighted most by the Room Office highlighted by the Large Room and Exerc&Pool
 Optimal Product Bundle by Segment
Following the same procedure, it is then possible to exploit the software to formulate the optimal bundle
among all possible for each segment separately, together with the estimation for their market shares.

Corporate Cindy Vacation Vick

Ideal Bundle 1 Ideal Bundle 2

Room Fruit and Large Speaker Exercise & No

Room fax Pool Restaurant Newspaper
Office cheese Room phone Pool Restaurant

With 18.6% of total Market share, the optimal bundle for

With 21% of total Market share, the optimal bundle for segment
segment 2 is instead similar to the Tourist bundle proposed by
1 closely resembles the optimal one proposed for the entire
the company, after substituting “Tape library” with “Newspaper”
sample, after simply changing Small Suite with Room Office.
A mention to a Conjoint Analysis using First Choice (in the
This signifies the importance of the type of room (and the Appendix) provides a nice insight regarding this point
segment) in skewing individual’s preferences for a bundle
 Limitations of Conjoint Analysis
- First of all, conjoint analysis is very efficient if only a smaller amount of attributes are taken into
consideration. If the marketing study contains many attributes, the results could become very
complicated with conjoint analysis. It is suggested to use up to a maximum of 7 attributes per
conjoint study.

- Secondly, in order for conjoint analysis to be feasible, a substantial amount of data needs to be
collected from surveys filled by clients or potential clients, which, in practice, is tricky to
collect. Some incentives may be used to encourage clients to fill out surveys, but in general a
self-selecting bias exists.

- Third, accuracy is never ensured. The surveys collected are not necessarily always honestly
filled, and may overestimate or underestimate the true value of certain attributes. Client surveys
must be carefully designed and scientifically measured.

- Forth, consumers can easily express their opinions only on attributes they have already
experienced. It may be difficult to evaluate a revolutionary design.
 APPENDIX
Client Segmentation (with decimals)
- Running the Segmentation analysis after having
substituted the decimal results (obtained after the
first estimation) in the Preference Partworth table
yields slightly more articulated results
- In addition to the those presented above, the
coefficients of “Exercise Room + Pool” and “Fruit
and Cheese” become significant (with opposite
signs), which justifies why we used these attribute
levels to characterize opposite segments of
customers
- The coefficients of “Shoe shine” and “Room fax”
become slightly significant
 Conjoint analysis (First choice)
- In order to have a basis of comparison, in order to evaluate the proposed bundle we also tried to set the
Choice rule to First choice, which assumes that with certainty the consumer will choose the bundle that
provides highest utility from it. In general, this makes the market shares more extreme and stationary.

- The bundles predicted as the best ones among those considered by Forte Hotels are Prof_1 and Tourist,
with an equivalent 12.5% of total market share, while Prof_2 and Deluxe serve now only 10% of it.
We explain this reversal of preferences between Prof_1 and 2 with the extremization of opinions under
the First choice rule

- In fact, Prof_1 and Tourist target customers characterized by two different approaches to hotels, namely
leisure and business-orientation. The former is satisfied by the “Large” room” and the presence of both
gym and pool of the Tourist bundle, the latter enjoys the “Office” framework with Internet access,
accompanied by “Fruit and Cheese”.

- All of this is supported by the Segmentation analysis we illustrated