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MCKINSEY-STYLE PRACTICE
CASE #2  

SOLAMERE  HOTELS  

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Case  2:  Solamere  Hotels    


 

1. Introduction  and  structuring  question  

Our  client  is  Solamere  Hotels,  a  European-­‐based  luxury  hotel  chain.  Solamere  has  23  properties,  with  
the  majority  in  Europe’s  capital  cities.  Solamere’s  hotels  are  grouped  into  three  regions:  Northern,  
Central,  and  Southern.  The  hotels  are  known  for  providing  guests  with  an  expensive  and  luxurious  
experience.      

Solamere  calculates  what  is  called  an  occupancy  rate  by  measuring  the  average  number  of  guests  that  
are  staying  in  rooms  in  Solamere  properties,  and  dividing  by  the  total  number  of  rooms  available.    Over  
the  past  two  years,  Solamere’s  occupancy  rates  across  its  properties  have  been  declining.  The  client  has  
conducted  market  research  of  other  luxury  hotels,  and  competitors  seem  to  have  consistent  or  growing  
occupancy  rates  over  the  same  period.    
 
Solamere  hired  your  team  to  understand  why  their  occupancy  rates  are  dropping,  and  what  they  can  do  
about  it.    

What  are  the  factors  you  would  want  your  team  to  look  at  when  approaching  this  problem?    
[Note  –  at  this  point,  you  should  take  a  break  approximately  1-­‐minute  long  to  write  down  your  answer  to  
this  question,  then  spend  between  2-­‐3  minutes  giving  your  answer  to  your  interviewer  when  you  are  
ready.]  

2. Quantitative  question  

Our  client  wants  to  understand  the  financial  impact  of  the  drop  in  occupancy  rates  over  the  past  two  
years.  Both  the  change  in  occupancy  and  the  price  of  the  hotels  varies  across  the  regions.    
 

Region   Average  number  of   Revenue  per   Variable  costs   Average  number  of  
occupied  rooms  2   occupied  room   per  room   occupied  rooms  today    
years  ago  
Northern   810   €249   €99   730  
Central   1230   €296   €101   990  
Southern   1020   €351   €100   1000  
 
Based  on  this  information,  what  impact  has  the  drop  in  occupancy  had  on  Solamere’s  daily  profitability,  
in  terms  of  fewer  Euros  per  day?    
[Note  –  at  this  point,  you  should  take  a  break  approximately  1-­‐minute  long  to  write  down  your  answer  to  
this  question,  then  spend  between  2-­‐3  minutes  giving  your  answer  to  your  interviewer  when  you  are  
ready.]  
 
 
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3.  Quantitative  question  

Solamere  believes  that  the  Southern  Region  has  been  a  strong  spot,  having  reduced  its  occupancy  by  
only  20  rooms  over  the  past  two  years.    
 
Solamere  is  confident  that  with  the  right  strategies,  the  hotel  chain  can  increase  the  occupancy  rate  of  
the  Southern  region  to  offset  the  losses  in  Northern  and  Central.    
 
How  much  would  the  occupancy  rate  in  the  Southern  region  have  to  increase,  from  its  baseline  of  1000  
rooms  filled  today,  to  offset  the  losses  from  the  drop  in  occupancy  from  the  Northern  and  Central  
regions?    

[Note  –  at  this  point,  you  should  take  a  break  approximately  1-­‐minute  long  to  write  down  your  answer  to  
this  question,  then  spend  between  1-­‐2  minutes  giving  your  answer  to  your  interviewer  when  you  are  
ready.  For  quantitative  questions,  tell  your  interviewer  your  math  answer,  how  you  arrived  at  it,  and  
what  the  implications  of  that  answer  are  to  the  ultimate  problem  that  you  are  solving  in  the  case.]  

4. Creativity  question  

In  addition  to  hundreds  of  boutique  hotels  and  smaller  chains,  your  client  has  two  major  competitors  
with  luxury  hotels  in  similar  locations  across  Europe:  Tagg  Hotels  and  Willard  Holdings.  Your  team  took  a  
market  survey  of  customers  who  stay  in  European  luxury  hotels  to  get  a  sense  for  how  Solamere  Hotels  
is  perceived,  compared  to  its  competitors.    
 
Your  team  found  the  following  results:    

 
 
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What  can  you  conclude  from  this  information?  

[Note  –  this  is  an  open-­‐ended  creativity  question.  Take  about  1  minute  to  study  the  data,  and  then  take  
another  30  seconds  to  1  minute  to  write  down  your  observations  from  the  data  as  they  relate  to  the  case  
problem.  Remember,  the  client  is  trying  to  increase  the  number  of  guests  that  stay  in  Solamere  hotels.  
What  can  you  learn  from  this  data  about  what  might  be  a  good  strategy  to  address  that  problem?]  

5.  Structuring  question  

Solamere  is  interested  in  studying  the  financial  benefits  of  a  partnership  with  a  car  rental  firm  to  offer  
discounts  to  guests  staying  in  Solamere  properties.    
 
 
 
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There  are  many  different  car  rental  firms  in  areas  where  Solamere  properties  are  located.  Some  of  these  
firms  are  international,  while  others  are  regional  or  may  have  locations  in  only  one  European  country.  

What  are  the  factors  that  Solamere  should  consider  when  deciding  which  car  rental  firm  –  or  multiple  
firms  –  Solamere  should  partner  with  for  a  discount  for  its  guests?  

[Note  –  at  this  point,  you  should  take  a  break  approximately  1-­‐minute  long  to  write  down  your  answer  to  
this  question,  then  spend  between  2-­‐3  minutes  giving  your  answer  to  your  interviewer  when  you  are  
ready.]  

6.  Creativity  question  

Stryker  Car  Rental,  a  reputable  European  car  rental  firm  with  locations  near  all  of  Solamere’s  hotels,  
approached  our  client  with  a  proposal  for  a  partnership.    

Stryker  offered  three  options  to  Solamere.  In  each  option,  Solamere  would  suggest  that  guests  rent  
from  Stryker,  and  Stryker  would  recommend  its  customers  stay  in  Solamere  hotels.    

Options:  

A.  Any  Solamere  guest  who  rents  a  Stryker  car  would  receive  a  10%  discount  from  Stryker.    
 
B. Any  Solamere  guest  who  rents  a  Stryker  car  would  receive  a  5%  discount  from  Stryker.  
Additionally,  Solamere  Hotels  would  receive  a  payment  from  Solamere  of  5%  of  the  gross  
revenues  from  all  cars  rented  by  Solamere  Hotel  guests.    
 
C. Instead  of  providing  a  discount  to  customers,  Stryker  would  provide  free  transportation  from  
local  airports  to  Solamere  hotels,  where  Stryker  representatives  would  be  waiting  with  rental  
cars.  Additionally,  Stryker  representatives  would  retrieve  their  rental  cars  at  Solamere  hotels  
and  provide  free  transportation  for  Solamere  guests  –  who  are  renting  cars  from  Stryker  -­‐  to  the  
airport.    
 
Which  of  these  deals  do  you  think  would  be  best  for  our  client?    
 

[Note  –  for  this  type  of  creativity  question,  there  is  no  single  right  answer.  Take  a  1-­‐minute  break  to  
select  one  of  the  options  and  write  down  your  justifications  for  why  that  option  would  be  the  best  for  our  
client,  while  keeping  in  mind  the  ultimate  goal  of  this  case  –  attracting  more  customers  to  our  client’s  
hotels.]  

 
 
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7.  Quantitative  question    

Solamere’s  properties  change  their  prices  based  on  expected  occupancy  rates.  The  more  demand,  the  
higher  the  cost  per  room  for  all  rooms.  One  of  Solamere’s  hotels  in  Brussels  has  seen  a  steep  decline  in  
their  occupancy  rate.  At  this  hotel,  average  occupancy  declined  from  90%  per  night  to  74%  per  night.    

Today,  the  hotel  is  charging  an  average  of  275  euros  per  night  for  its  100  total  rooms  (of  which,  74%  are  
occupied).  For  every  percentage  point  increase  in  expected  occupancy,  this  hotel  is  able  to  charge  two  
percentage  points  additional  per  room  for  all  rooms  in  revenue.    

Solamere’s  variable  costs  change  in  steps,  depending  on  occupancy  rate.  Above  74%,  Solamere  has  
incremental  variable  costs  based  on  occupancy  rates.    

Solamere’s  variable  costs  change  as  follows:  

  75%-­‐80%  occupancy  =  +€3,000  per  night  in  new  costs  

  81%-­‐85%  occupancy  =  +€5,000  per  night  in  new  costs  

  86%  +  occupancy  =  +€11,000  per  night  in  new  costs  

What  would  the  net  impact  be  on  the  property’s  profits  if  the  hotel  were  to  recover  half  of  its  lost  
occupancy?    [Note  –  for  this  question,  do  not  worry  about  regional  variable  costs  discussed  earlier  in  the  
case.  Only  focus  on  the  variable  costs  listed  in  this  question.]  

What  if  the  hotel  recovered  all  of  the  lost  occupancy?    

[Note  –  at  this  point,  you  should  take  a  break  approximately  1-­‐minute  long  to  write  down  your  answer  to  
this  question,  then  spend  between  1-­‐2  minutes  giving  your  answer  to  your  interviewer  when  you  are  
ready.  For  quantitative  questions,  tell  your  interviewer  your  math  answer,  how  you  arrived  at  it,  and  
what  the  implications  of  that  answer  are  to  the  ultimate  problem  that  you  are  solving  in  the  case.  ]  

 
 
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ANSWER  KEY  
 
Candidate  scoring  criteria:  Each  answer  is  scored  by  your  interviewer  on  a  scale  from  0  to  3.    
 
0  –  Clearly  below  the  bar:  candidate’s  answer  is  scattered,  incomplete,  or  does  not  address  the  question.    
1  –  Below  the  bar:  candidate’s  answer  partially  addresses  the  question  but  is  not  structured  and  leaves  
out  key  details.  
2  –  Strong:  candidate’s  answer  is  structured,  comprehensive,  communicated  effectively  and  succinctly,  
and  meets  the  standards  of  an  average  consultant.  
3  –  Excellent:  candidate’s  answer  is  above  the  standard  of  an  average  consultant  and  is  structured,  
succinct,  creative,  and  addresses  the  problem  in  a  comprehensive  manner.  
 
To  pass  an  interview,  a  candidate  needs  a  mix  of  answers  that  score  a  2  and  answers  that  score  a  3  
throughout  the  case.    There  is  no  defined  number  that  guarantees  a  pass,  but  if  a  candidate’s  average  
score  per  answer  is  a  2.5,  they  will  likely  pass  the  case.  
 
1. What  are  the  factors  you  would  want  your  team  to  look  at  when  approaching  this  problem?    

This  is  a  classic  growth  problem.  Occupancy  has  been  decreasing,  and  our  client  wants  to  understand  
why  and  get  the  rate  back  up.  Note  that  the  client  has  asked  your  team  to  address  its  occupancy  
problem,  NOT  a  revenue  problem  –  a  related  but  distinct  inquiry.    

It  is  common  in  cases  for  the  case  prompt  to  ask  you  why  the  client  is  having  a  problem,  and  what  they  
can  do  to  fix  this.  In  a  real  client  situation,  a  team  would  break  this  into  two  related  questions  –  (1)  what  
is  causing  the  problem,  and  (2)  what  are  the  best  strategies  to  fix  it?    That  is  a  good  approach  for  this  
problem  to  show  your  interviewer  you  think  like  a  consultant.    
 

*******  SAMPLE  EXCELLENT  RESPONSE  THAT  WOULD  SCORE  A  ‘3’  ******  


Solamere  hotels  have  seen  a  decline  in  occupancy  rates  and  they  want  to  understand  why,  and  what  they  
can  do  about  it.  I  would  break  this  problem  into  two  parts  –  first,  a  diagnostic  one:  what  is  causing  the  
decline?  We  know  that  our  competitors  are  doing  fine,  so  it’s  not  an  industry-­‐wide  problem.  Second,  a  
design  one:  how  can  we  fix  it?    
 
To  diagnose  the  problem,  I  want  to  understand:    
 
A. Costs  to  our  guests:  
a. Has  our  price  to  guests  changed  recently?  
b. What  about  the  price  of  amenities,  such  as  food  and  drinks?  
c. How  does  this  price  compare  to  other  luxury  hotels?  
d. Are  other  hotels  offering  discounts?  
 
 
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B. Guest  experience  in  the  hotels  –  what  has  changed,  and  what  are  competitors  doing  with:  
a. Building  –  are  there  luxurious  lobbies  that  the  guests  see  when  they  first  enter?  Is  the  outside  
of  the  hotel  up  to  our  guests’  expectations?  We  know  these  are  luxury  hotels,  so  guest  
expectations  are  probably  high.  
b. The  room  experience  –  are  we  still  providing  top  quality  furnishings,  soaps,  etc.  to  guests?  
c. The  food  and  drink  experience  –  have  our  options  changed?  Has  the  quality  changed?    
d. Other  experiences  –  do  our  hotels  have  concierges  to  help  guests  get  restaurant  and  event  
reservations?    
 
C. Marketing  and  acquiring  guests:  
a. How  is  our  client  finding  its  guests  today?  
b.  Has  anything  changed?  
c. Is  our  client  advertising  online?  
d. Is  our  client  partnering  with  travel  agencies  or  car  rental  firms?  
 
D.  Other  external  factors:    
a. Is  our  client  having  problems  with  attracting  guests  because  of  crime  or  terrorism?  
b. Is  our  client  facing  new  competitors,  such  as  AIRBNB?  
c. Are  the  travel  habits  of  our  client’s  customers  changing?    
 

Then,  depending  on  what  we  find  out,  I  want  to  look  for  growth  strategies  across  the  same  dimensions:  

A. Costs  to  our  guests:  


a. Could  we  offer  guests  discounts  to  increase  our  occupancy  rates?    
b. How  would  this  affect  our  overall  revenues  and  profitability?  
 
B. Guest  experience  in  the  hotels  -­‐  Can  we  improve  our  guest  experience  to  make  our  hotels  more  
desirable  to  our  guests  by:  
a. Building:  Would  improving  the  external  building  or  offering  more  amenities  in  the  lobby  
increase  the  satisfaction  of  our  guests,  and  in  turn,  make  them  more  likely  to  stay  at  
Solamere  properties?  
b. Room:  Do  our  rooms  need  a  refresh?  Are  there  new  amenities  that  we  can  offer  to  our  
guests?  
c. Food  and  drink:  Can  we  provide  additional  food  and  beverage  options  to  our  guests  to  
attract  more?      
d. Other  experiences:  Can  our  hotels  partner  with  local  entertainment  firms  and  restaurants  to  
offer  guests  a  better  experience  in  the  city?      
 
 
 
 
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C. Marketing  and  acquiring  guests:  
a. Increasing  amount  of  advertising  –  what  would  be  the  impact  of  increasing  the  amount  of  
advertising  that  Solamere  is  currently  doing?    
b. Changing  the  type  of  advertising  –  are  there  new  advertising  methods  that  we  could  use?  
Are  we  advertising  online?    
c. Tracking  guests  through  a  loyalty  program  –  could  we  give  guests  who  stay  at  our  properties  
rewards  to  encourage  them  to  return?    
 
*******  OTHER  ANSWERS  ******  

Other  acceptable  factors  would  be  structuring  your  answer  to  look  at:  

  -­‐Competition  –  what  are  the  best  practices  of  other  luxury  hotels?  

  -­‐Customers  –  how  are  our  customers’  preferences  changing?  

  -­‐Industry  trends  –  what  is  changing  in  the  broader  hospitality  industry?    

The  best  way  to  score  your  own  answer  on  a  structuring  problem  as  you  complete  this  practice  case  is:    if  
you  had  90%  or  more  of  the  above  factors,  and  your  answer  was  organized  and  succinct,  you  likely  
scored  a  ‘3’.  

Score  2  -­‐  If  your  answer  had  between  66%  and  90%  of  the  factors  in  the  sample  answer  above,  your  
answer  was  likely  a  ‘2’  –  or  Strong.      

Score  1  -­‐  If  your  answer  had  between  50%  and  66%  of  the  factors  in  the  sample  answer  above,  your  
answer  was  likely  a  ‘1’  –  or  Below  the  bar.    
 
Score  0  -­‐  If  your  answer  had  less  than  50%  of  the  above  factors,  your  answer  was  likely  a  ‘0’  –  or  Clearly  
Below  the  bar.    
Your  interviewer  will  also  be  grading  you  on  how  succinct  you  are  and  how  effective  you  are  as  a  
communicator.  This  will  affect  your  score.  For  example,  if  you  had  100%  of  the  above  factors,  but  you  
took  5  minutes  to  explain  your  answer,  and  jumped  around  between  categories,  you  would  not  get  a  ‘3’  
–  even  though  you  addressed  all  of  the  right  factors.  Jumping  around  between  categories,  or  repeating  
factors  can  turn  a  ‘3’  answer  into  a  ‘0’.  

Likewise,  if  you  provided  only  60%  of  the  above  answers  but  did  so  in  a  succinct,  organized  manner,  your  
interviewer  may  bump  the  score  for  your  answer  up  to  a  ‘2’.    

 
 
 
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2. Based  on  this  information,  what  effect  has  the  drop  in  occupancy  rates  had  on  Solamere’s  
daily  profitability?  

This  is  a  straightforward  quantitative  question  that  requires  basic  algebra.  The  trick  is  to  round  numbers.  
Most  important,  as  for  all  quantitative  questions,  tell  your  interviewer  the  implications  of  your  answer.      

*******  SAMPLE  EXCELLENT  RESPONSE  THAT  WOULD  SCORE  A  ‘3’  ******  


 

Region   Average  number  of   Revenue  per   Variable  costs   Average  number  of  
occupied  rooms  2   occupied  room   per  room   occupied  rooms  today    
years  ago  
Northern   810   €249   €99   730  
Central   1230   €296   €101   990  
Southern   1020   €351   €100   1000  
 

To  calculate  the  impact  on  profit,  we  can  compare  the  reduction  in  revenue  in  each  of  the  three  regions,  
LESS  the  reduction  in  variable  costs.    

For  the  Northern  region,  there  were  80  fewer  rooms  (810  rooms  2  years  ago  –  730  rooms  today),  at  
~€250  per  room  –  or  a  decline  of  ~€20,000  in  revenue.  In  the  Central  region,  240  fewer  rooms  at  ~€300  
per  room  for  a  loss  of  ~€72,000.  In  the  Southern  region,  there  were  20  fewer  rooms    –  at  €350  each,  so    
€7,000.    
 
In  total,  the  decline  in  occupancy  has  reduced  revenues  by  ~  €100,000  per  night  (rounding  from  €99,000  
is  fine).  However,  variable  costs  are  also  reduced.  Variable  costs  are  about  the  same  across  each  region  -­‐  
€100  per  room  –  and  there  were  ~340  fewer  rooms  in  total.  That  means  we  can  reduce  the  impact  on  
profitability  to  our  client  by  €100  *  340,  or  €34,000  per  night,  leaving  a  net  impact  on  profitability  of  
€66,000  per  night.    

Implications:  That  is  a  significant  decline  in  profitability  –  about  €24  million  per  year.  But  it’s  worth  
noting  that  the  Southern  region  had  almost  no  drop  in  occupancy.  And  more  than  70%  of  the  drop  was  
from  the  Central  region.  Are  there  lessons  that  the  other  two  regions  can  learn  from  what  the  southern  
region  is  doing  to  keep  their  occupancy  rates  high?  

*******  OTHER  ANSWERS  ******  

For  a  quantitative  question,  you  likely  scored  a  ‘3’  if  you  did  three  thing:.  (A)  you  solved  the  math  
correctly;  (B)  you  identified  the  implications  of  the  quantitative  answer  and  told  your  interviewer  before  
they  asked  you;  and  (C)  you  communicated  in  a  succinct,  organized  manner.    

 
 
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To  score  your  own  answer,  you  can  assign  a  point  for  each  of  the  above  criteria.    
 
Did  you  correctly  solve  the  math  question?  –  Add  1  point.    
 
Did  you  identify  the  implications  of  the  math  answer?  –  Add  1  point.  

Did  you  communicate  your  answer  in  an  organized,  succinct  manner?  –  Add  1  point.  

Combine  the  number  of  points  you  have  to  get  your  score.  

3.  How  much  would  the  occupancy  rate  in  the  Southern  region  have  to  change  to  offset  the  losses  
from  the  drop  in  occupancy  from  the  Northern  and  Central  regions?  

We  can  use  the  information  we  learned  in  the  first  math  problem  to  solve  this  one.  Note  –  don’t  worry  
about  compounding  percentage  increases  for  these  types  of  questions.  The  goal  is  to  make  it  simple,  not  
complicated.    

*******  SAMPLE  EXCELLENT  RESPONSE  THAT  WOULD  SCORE  A  ‘3’  ******  

First,  I  want  to  calculate  the  losses  from  the  Northern  and  Central  regions.  Our  client  is  losing  €61,000  
per  night  from  those  two  regions  (80  rooms  *  ~€250  per  room  +  240  rooms  *  ~€300  per  room)-­‐(320  
rooms  &  ~€100  in  variable  costs)  =  ~€60,000.    
 
To  offset  these  losses,  when  Southern  occupancy  increases  by  1%,  we  have  10  more  rooms  filled,  at  €350  
per  room,  less  the  €1000  variable  costs  (10  rooms  X  €100  per  room)  for  a  net  impact  of  +€2500.    

We  need  to  make  up  €60,000,  and  €60,000/€2500  =  24  –  so  if  we  increase  the  occupancy  of  the  Southern  
Region  by  24%,  we  would  make  up  for  the  losses  in  the  other  two  regions.    

Implications:  However,  this  would  be  a  significant  increase  in  occupancy,  and  it’s  unclear  whether  this  is  
possible.  If  our  occupancy  in  the  southern  region  was  close  to  90%,  it  would  be  impossible  to  increase  the  
occupancy  by  another  24  percentage  points  without  building  more  capacity,  and  that  would  lead  to  more  
costs.    

What  our  client  may  be  able  to  do  is  increase  the  rates  for  these  rooms.  If  the  Southern  Region  could  
charge  higher  rates  as  occupancy  increased,  that  would  increase  revenues,  and  make  up  for  losses  in  
other  regions.        

*******  OTHER  ANSWERS  ******  

For  a  quantitative  question,  you  likely  scored  a  ‘3’  if  you  did  three  things:  (A)  you  solved  the  math  
correctly;  (B)  you  identified  the  implications  of  the  quantitative  answer  and  told  your  interviewer  before  
they  asked  you;  and  (C)  you  communicated  in  a  succinct,  organized  manner.    

 
 
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To  score  your  own  answer,  you  can  assign  a  point  for  each  of  the  above  criteria.    
 
Did  you  correctly  solve  the  math  question?  –  Add  1  point.    
 

Did  you  identify  the  implications  of  the  math  answer?  –  Add  1  point.  

Did  you  communicate  your  answer  in  an  organized,  succinct  manner?  –    Add  1  point.  

Combine  the  number  of  points  you  have  to  get  your  score.  

4.    What  can  you  conclude  from  [customer  survey]?  

This  is  an  insight  and  creativity  question  that  offers  an  opportunity  to  impress  the  interviewer  on  your  
ability  to  think  outside  the  box,  while  communicating  in  a  structured  manner.    
 
A  general  rule  for  this  type  of  question  –  “what  can  you  conclude  from  this  data,”  (as  opposed  to  “what  is  
the  quantitative  answer  based  on  this  data”)  –  is  that  there  is  something  counterintuitive  in  the  data.  
Your  interviewer  is  unlikely  to  present  you  a  chart  showing  revenues  increasing,  and  the  key  takeaway  is  
that:  “revenues  increased.”    

The  counterintuitive  takeaway  from  this  data  was  that  while  only  13%  of  customers  surveyed  cared  
about  partnerships  with  car  rental  firms,  that  13%  could  represent  the  Solamere  guests  who  are  no  
longer  staying  at  our  client’s  hotels.    

For  these  questions,  it  is  fine  to  ask  for  30  seconds  to  review  the  data.  Write  down  your  conclusions  as  
you  review  the  data,  then  organize  them  with  a  governing  thought  before  giving  your  answer.    
 

*******  SAMPLE  EXCELLENT  RESPONSE  THAT  WOULD  SCORE  A  ‘3’  ******  


I  have  four  takeaways  from  this  data  and  a  hypothesis  I  would  like  to  examine.    

First,  it  seems  like  there  are  tiers  of  luxury,  and  Tagg  hotels  are  perceived  to  be  at  a  higher  tier  than  our  
client.  Guests  perceive  Tagg  to  be  a  more  luxurious  experience,  have  better  locations,  AND  be  less  cost  
competitive  –  which  strengthens  the  idea  that  their  hotels  are  more  luxurious  than  our  client’s.  We  want  
to  keep  this  in  mind  if  we  think  our  strategy  to  increase  growth  is  to  increase  the  luxury  experience  –  
Tagg  already  beats  our  client.    

Second,  guests  prioritize  food  and  location,  with  the  luxurious  experience  also  being  important  and  
potentially  a  subset  of  the  first  two  categories.  Our  client  leads  in  none  of  these  categories  and  is  at  a  
disadvantage  to  the  two  competitors.    

Third,  the  category  that  our  client  leads  in  –  price  competitiveness  –  is  only  prioritized  by  half  of  
surveyed  guests,  and  may  not  be  important  to  guests  looking  for  luxury  hotels.  This  would  suggest  to  me  
that  our  problem  is  unlikely  to  be  that  our  prices  are  too  high.    

 
 
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Fourth,  while  only  13  percent  of  surveyed  guests  cared  about  partnerships  with  car  rental  firms  and  
travel  agencies,  our  client  is  WAY  behind  in  this  category.  I  suspect  we  are  not  partnering  with  other  
firms  at  all,  and  if  we  are,  our  guests  are  unaware.    

This  is  only  valued  by  a  fraction  of  guests.  However,  my  hypothesis  is  that  because  this  is  the  category  
where  there  is  a  clear  separation,  this  is  driving  customers  away  from  our  hotel.  What  we  would  need  to  
find  out  to  prove  or  disprove  this  hypothesis  is:  who  are  the  13%  who  care  about  this  category?  Are  they  
former  Solamere  customers?    

*******  OTHER  ANSWERS  ******  

For  creativity  questions,  there  is  no  single  right  answer.  Any  of  the  following  insights  would  be  also  be  
acceptable  and  could  lead  to  a  ‘3’  score:    

-­‐Competitor  Willard  has  a  unique  value  proposition  by  providing  great  food,  yet  still  not  being  
considered  a  luxurious  property  –  what  is  driving  the  disconnect,  and  what  can  our  client  learn?    

-­‐Because  our  client  is  considered  more  cost  competitive,  could  we  target  lower  income  –  non  /  
luxury  customers?  Would  that  damage  our  brand?  

-­‐Could  we  advertise  to  customers  currently  choosing  Willard  hotels  that  Solamere  hotels  are  in  
better  locations?  We  strongly  beat  Willard  in  guest  perception  and  this  is  valued  by  many  guests.    

To  score  your  creativity  answer:  


 
Score  3  -­‐  If  you  had  at  least  four  of  the  above  insights,  and  your  answer  was  succinct  and  organized,  
score  a  ‘3’.  

Score  2  -­‐  If  you  had  three  of  the  above  insights,  score  a  ‘2’.  

Score  1  -­‐  If  you  had  two  of  the  above  insights,  score  a  ‘1’.    

Score  0  -­‐  If  you  had  one  or  fewer  of  the  above  insights,  score  a  ‘0’.  

5.  What  are  the  factors  that  Solamere  should  consider  when  deciding  which  car  rental  firm  –  or  
multiple  firms  -­‐  Solamere  should  partner  with  for  a  discount  for  its  guests?  

In  an  actual  client  setting,  consultants  would  help  a  client  answer  this  question  by  creating  a  scorecard  
for  reviewing  car  rental  firms.  Each  score  card  would  have  factors  and  a  weight  for  each  factor,  and  
would  produce  a  numerical  score  to  compare  options.    
 
An  excellent  answer  would  be  showing  your  interviewer  that  you  would  operate  in  the  same  way.    

 
 
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*******  SAMPLE  EXCELLENT  RESPONSE  THAT  WOULD  SCORE  A  ‘3’  ******  
When  picking  a  car  rental  firm  to  partner  with  our  client,  there  are  four  factors  that  I  would  want  to  
evaluate  for  each  of  our  potential  partners.  The  goal  of  this  partnership  would  be  to  give  guests  an  
incentive  to  choose  Solamere  hotels.    

A. Extent  of  discount  and  benefit  to  our  guests  


a. Will  our  guests  receive  a  percentage  discount  on  cars  rented?  
i.  If  so,  what  percentage?  
b. How  does  the  discounted  rate  compare  to  other  options  for  guests?  
c. Will  guests  receive  other  amenities  such  as  free  GPS  service  or  insurance  products?    
 
B. Convenience  for  our  guests  
a. Does  the  firm  have  facilities  near  our  hotels?    
b. Would  the  firm  provide  transportation  from  our  hotels  to  the  car  rental  facilities?  
c. Could  they  transport  guests  to  the  airports?    
d. Are  our  guests  familiar  with  the  car  rental  firm  and  would  they  be  comfortable  renting  
cars  from  that  firm?    
 
C. Quality  of  cars  available  
a. Our  guests  are  luxury  customers  –  does  the  car  rental  firm  provide  access  to  luxury  cars?    
b. Is  there  a  wide  array  of  car  options  for  customers?    
 
D. Likelihood  firm  will  drive  customers  to  Solamere  hotels    
a. Will  our  guests  be  excited  about  this  partnership?  
b. Is  the  car  rental  firm  a  reputable  firm  that  would  drive  guests  to  stay  in  Solamere  hotels?    
c. Does  the  car  rental  firm  have  partnerships  with  any  of  our  competitors?  If  so,  how  can  
we  be  assured  they  will  drive  customers  to  our  hotels  instead  of  to  our  competitors’?  

Of  these  factors,  ‘A’  is  the  most  important  and  would  have  the  most  weight  in  our  decision-­‐making  
criteria.    

*******  OTHER  ANSWERS  ******  

Other  acceptable  factors  would  be  structuring  your  answer  to  look  at:  

  -­‐Brand  strength  of  the  rental  car  firm  

  -­‐Trustworthiness  /  reliability  of  the  rental  car  firm  

  -­‐Impact  on  Solamere’s  brand  

  -­‐What  rental  car  firms  firms  the  competitor  hotels  are  partnered  with  

 
 
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The  best  way  to  score  your  own  answer  on  a  structuring  problem  as  you  complete  this  practice  case  is:  if  
you  had  90%  or  more  of  the  above  factors,  and  your  answer  was  organized  and  succinct,  you  likely  
scored  a  ‘3’.  

Score  2  -­‐  If  your  answer  had  between  66%  and  90%  of  the  factors  in  the  sample  answer  above,  your  
answer  was  likely  a  ‘2’  –  or  Strong.      

Score  1  -­‐  If  your  answer  had  between  50%  and  66%  of  the  factors  in  the  sample  answer  above,  your  
answer  was  likely  a  ‘1’  –  or  Below  the  bar.    

Score  0  -­‐  If  your  answer  had  less  than  50%  of  the  above  factors,  your  answer  was  likely  a  ‘0’  –  or  Clearly  
Below  the  bar.    

Your  interviewer  will  also  be  grading  you  on  how  succinct  you  are  and  how  effective  you  are  as  a  
communicator.  This  will  affect  your  score.  For  example,  if  you  had  100%  of  the  above  factors,  but  you  
took  5  minutes  to  explain  your  answer,  and  jumped  around  between  categories,  you  would  not  get  a  ‘3’  
–  even  though  you  addressed  all  of  the  right  factors.  Jumping  around  between  categories,  or  repeating  
factors  can  turn  a  ‘3’  answer  into  a  ‘0’.  

Likewise,  if  you  provided  only  60%  of  the  above  answers  but  did  so  in  a  succinct,  organized  manner,  your  
interviewer  may  bump  the  score  for  your  answer  up  to  a  ‘2’.    

6.  Which  of  these  deals  do  you  think  would  be  best  for  our  client?  

Any  of  these  options  could  reasonably  be  the  ‘best’  for  our  client.  What  is  important  is  that  you  pick  an  
answer  that  you  can  defend  with  data  from  the  case.    

What  you  DON’T  want  to  do  is  overly  hedge  and  say,  “we  do  not  have  enough  information  to  know  
which  of  these  is  the  best,”  or  “all  of  these  have  some  strong  points  but  we  need  more  data  before  
selecting  the  best  answer.”    

Be  decisive.  Frame  things  in  terms  of  a  hypothesis.  Be  willing  to  defend  your  answer  if  the  interviewer  
pushes  back  to  test  your  convictions,  which  they  likely  will.    

 
*******  SAMPLE  EXCELLENT  RESPONSE  THAT  WOULD  SCORE  A  ‘3’  ******  

My  hypothesis  is  that  choice  C  would  be  the  best  offer  for  our  client  to  pursue.  
 
What  we  are  trying  to  do  is  increase  Solamere  hotels’  occupancy  rates,  and  I  believe  that  choice  C  would  
best  help  with  that  for  these  three  rationale:  

 
 
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A. Convenience  matters  to  our  customers  
a. Based  on  our  customer  survey,  we  know  that  79  percent  of  luxury  customers  find  it  
important  that  hotel  locations  are  near  desirable  city  sights.  This  suggests  they  care  
about  convenience.  If  Solamere  guests  had  free  transportation  to  and  from  the  airport,  
and  could  pick  up  rental  cars  at  our  hotel,  that  would  provide  convenience.    
 
B. Our  customers  are  not  very  price-­‐sensitive  
a. Options  A  &  B  provide  cost  savings  to  our  customers.  But  the  savings  are  relatively  small  
–  10%  in  option  A.  And  we  know  that  our  customers  are  staying  in  luxury  hotels  and  that  
only  51%  of  luxury  guests  said  that  the  hotel  being  cost  competitive  was  a  priority  of  
theirs.    
b. Further,  option  B  provides  additional  revenue  to  our  hotel,  but  our  client  hired  us  to  
increase  occupancy  rates,  not  revenue.    
 
C. Relationship  could  expand  to  provide  other  benefits  
a. If  the  car  rental  firm  is  offering  transportation  to  and  from  the  airport,  could  they  
provide  additional  transportation  benefits  to  our  guests?  Perhaps  transportation  to  and  
from  other  city  sights  that  are  not  near  our  hotel,  or  to  four-­‐star  restaurants  –  both  of  
which  we  know  are  important  to  guests.    
 

*******  OTHER  ANSWERS  ******  

To  score  your  answer  on  this  creativity  question:  

Score  3  –  If  your  answer  had  at  least  three  rationale,  using  data  from  the  case,  to  justify  your  selection;  

Score  2  –  If  your  answer  had  at  two  rationale,  using  data  from  the  case,  to  justify  your  selection;  

Score  1  –  If  your  answer  had  at  one  rationale,  using  data  from  the  case,  to  justify  your  selection;  

Score  0  –  If  your  answer  had  no  rationale  that  used  data  from  the  case  to  justify  your  selection.  

7.    What  would  the  net  impact  be  on  the  Brussels  property’s  profits  if  the  hotel  were  able  to  
recover  half  of  the  lost  occupancy?  What  if  they  recovered  all  of  the  lost  occupancy?    
 

*******  SAMPLE  EXCELLENT  RESPONSE  THAT  WOULD  SCORE  A  ‘3’  ******  


First,  to  calculate  the  impact  of  this  property  recovering  half  of  its  lost  occupancy  rate:  occupancy  
dropped  by  16%  or  16  rooms  per  night.  Recovering  half  would  mean  that  we  sold  8  additional  rooms  per  
night,  and  increased  rates  for  all  rooms  by  16%  (rates  change  by  2X  occupancy  change).    
 

 
 
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Revenue  per  room  was  €275,  with  a  new  cost  of  ~€315  per  night  for  all  of  the  82  rooms  (when  rounding).  
The  new  revenue  per  night  would  be  €315  *  82  rooms  or  ~€26,000  per  night.    

Before  this  recovery,  the  hotel  was  making  €275  while  filling  74  rooms,  or  ~€20,000  per  night.  We  know  
that  the  increase  in  rooms  has  led  to  additional  variable  costs  of  €5,000  per  night,  so  there  is  a  net  
impact  of  €1,000  per  night  (€26,000  per  night  -­‐  €20,000  per  night  -­‐  €5,000  in  additional  variable  costs  for  
having  80%+  in  occupancy).    
 
Second,  to  calculate  the  impact  of  recovering  all  lost  occupancy:  revenue  will  increase  from  €275  by  30%,  
or  ~€350  per  room,  and  90  rooms  will  be  sold.  Total  revenue  will  be  €31,500,  with  additional  variable  
costs  of  €11,000  per  night.  New  revenue  will  be  €20,500  per  night.    

The  implications  of  this  number  are  that  increasing  occupancy  not  help  our  profitability  because  of  the  
high  variable  costs.  I  would  want  to  understand  why  these  increased  variable  costs  are  so  high  for  the  
client,  and  what  we  could  do  to  lower  them.  If  it  is  not  possible  to  lower  the  variable  costs,  I  would  
suggest  the  client  keep  occupancy  at  its  reduced  level.    

*******  OTHER  ANSWERS  ******  

For  a  quantitative  question,  you  likely  scored  a  ‘3’  if  you  did  three  things:  (A)  you  solved  the  math  
correctly;  (B)  you  identified  the  implications  of  the  quantitative  answer  and  told  your  interviewer  before  
they  asked  you;  and  (C)  you  communicated  in  a  succinct,  organized  manner.    

To  score  your  own  answer,  you  can  assign  a  point  for  each  of  the  above  criteria.    
 
Did  you  correctly  solve  the  math  question?  –  Add  1  point.    
 
Did  you  identify  the  implications  of  the  math  answer?  –  Add  1  point.  

Did  you  communicate  your  answer  in  an  organized,  succinct  manner?  –  Add  1  point.  

Combine  the  number  of  points  you  have  to  get  your  score.  

 
 
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Calculating  your  final  score:  

Add  up  all  of  your  points  from  the  case.    

18-­‐21  points  –  clear  pass  

14-­‐17  points  –  potentially  pass  

13  points  and  below  –  did  not  pass  

 
 
 

 
 
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