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2009-02-10_220220_The_Desert_Palms_Hotel_And_Casino

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Case Study: The Desert Palms Hotel & Casino


             (Your Name Here)

             February 10, 2008




              Name of School

               Name of Class

             Name of Professor
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      Robert Hoffman was a retired 55 year-old man. He was approached by the CEO

of National Gaming, Inc. in an attempt to take over the Laughlin property. The Laughlin

property had fundamental issues, and Hoffman believed that much change was needed

there. There had not been any significant changes to the property in over 6 years.

Also, the casino made nearly $15 million in 1995, but in 2001 in only made $1 million.

In order to remedy the situation, Hoffman decided to reduce property staffing by 20%.

Basically he repositioned people from areas in which were overcrowded to areas that

need further assistance. Hoffman also paid close attention to the operational aspects of

the casino. He wanted to increase speed, service, and overall efficiency at the casino,

and he did via benchmarking. He incorporated ideas from other profitable casinos such

as repositioning service areas and formats to decrease wait times and improve

customer satisfaction. Hoffman also paid attention to the organizational hierarchy. He

got eliminated two levels of management which he deemed unnecessary. In addition,

he reduced marketing and advertising expenses, and as a result, after only 3 months of

his reorganization efforts, property expenses were down an astonishing 40%!


      Hoffman decided to instill a new plan for the casino. This plan consisted of three

phases. The first phase was to include additional amenities. By having additional

amenities, the casino would be able to compete more with their competition. Phase two

consisted of the implementation of new games. He introduced the only 25 cent crap

game that was available in the area. He also lowered the limits of the blackjack tables.

Hoffman also reduced prices of other amenities and brought in new entertainment. In
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order to do all of this he had to reduce the advertising budget. However, he was able to

compensate for this by implementing an aggressive marketing campaign.


       Hoffman’s effect ton the casino was so positive, that one of the biggest concerns

now was the lack of room for their customers. The casino was simply too busy. He

noticed that the casino that neighbored Desert Palms (Regency) was going out of

business. He thought this would be a wonderful opportunity to purchase it in order to

expand Desert Palms. He thought a water park should be placed there and was

confident that it would bring in huge revenues. Hoffman’s next obstacle was to

convince Michael Sharp and Steve Sodergraf of his idea.


       In order to convince Michael Sharp and Steve Sodergraf of his idea, Hoffman

would have to prove to them that the idea would generate profit for them. He would

have to “sell” them the idea. He would have to convince them that this long-term

investment would pay off, and that it would be worthwhile. He would have to remind

them of their competition, and stress the fact that the changes that he had made so far

were attempts to separate themselves from their competition – they were attempts to

become the market leader in the casino industry – and it paid off. This idea, the idea of

purchasing the Regency would also be one of those attempts and it would surely pay off

as well.


       The best way to sell an idea to someone is to present the facts with data

(Mintzberg, 2005). A market analysis is crucial in order to justify any severe actions of

making a large purchase such as the Regency. A risk analysis would also be

appropriate in this situation. The quote that Hoffman received from the National
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Gaming development offices for building the water park within the Regency square

footage was around $10 million. Hoffman would have to come up with some intriguing

data in order for Michael Sharp and Steve Sodergraf to agree to his proposal.


       According to Hoffman’s research (which we will assume is based on real

statistics), the park would attract over 30,000 customers on an annual basis. Out of

those 30,000 customers, 50% of them (15,000) would be staying in the hotel. In

addition, out of those 30,000 customers, 25% of them (7,500) would be new customers.

This would certainly bring in new customers, additional game-play, and increase overall

revenue.


       The costs involved in this would be substantial at first. Hoffman would be able to

build his park for $11,500,000. There are also many risks that come along with this

price-tag. These risks involve how the stakeholders feel about the initiative and the

consequences of the initiative were to fail (Traverso, 2000). If this initiative failed, it

could have detrimental effects on the entire company and its employees and

stakeholders.


       The market analysis that Hoffman conducted showed that most people who are

40 and older opposed the idea. Even though a water park would attract younger

people, the majority of people who come to such a destination are older. The addition

of younger people and greater occupancy would be a deterrent for older casino players.

The younger people that were polled were very into the idea, however. This, however,

does not play such a big factor or carry significant weight since according to Table 3,

the Desert Palms’ customers’ median age is 57. Since this is the case, it is fair to
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assume that a majority of Desert Palms’ customers would not be in agreement with this

proposal. The question now becomes if it is worth making a majority the customers

unhappy in an attempt to gain additional revenue (Kearney, 2001). Even though new

customers will be attracted to the casino, the idea of current customers leaving the

casino was never considered. Before a quality decision is made, this question would

surely need to be addressed through both qualitative and quantitative research.


       Effective risk mitigation strategies and strategic decisions need to be made “in

order to improve the quality of [this] strategic decision” (Mintzberg, 2005). If effective

risk mitigation strategies are put into place, then the “strategic decisions can be taken

with more assurance” (Traverso, 2000). In our case, Hoffman is pursuing his strategic

decisions in an efficient manner and entrusting augmented efforts that are protected by

effective risk mitigation strategies. This strategic decision making structure will

enhance the decision making capability of Michael Sharp and Steve Sodergraf by

clearly identifying the objectives, framework and guidelines within which the decision to

purchase the regency Casino can be made. This strategic decision making framework

will also give them a clear idea of the impact of the decision on the overall strategy of

the organization. Likewise, in the deficiency of such cost-related data, their strategic

decision will most-likely fail since they can go all-in with their spending without focusing

on bottom line efficiency (Mintzberg, 2005).


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                                     Works Cited




Kearney, A. (2001). Total quality management: a business process perspective.


      Kearney Pree Inc.


Mintzberg, H. (2005). The Strategy Process, Prentice-Hall, Harlow.


Traverso, D. (2000). Outsmarting Goliath, Bloomberg Press, Princeton.

				
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