IB Business Management SL 6.1.4 Boston Consulting Group Matrix Questions

High Plains PLC (HP)


High Plains PLC (HP) owns 600 budget hotels. It operates in a rapidly growing market and has a 60 % market share of the budget hotel market.
Recent secondary market research on the hotel industry revealed:
- guests of luxury hotels are brand loyal
- 80 % of guests of budget hotels respond positively to a price reduction
- the budget hotel market is growing rapidly
- detailed statistics and information on all hotel chains.
HP's directors aim to increase occupancy rates in HP's hotels from the current 65 % to 80 % by the end of 2024. Each of HP's hotels has 400 rooms. People on business trips account for only 15 % of the hotels' bookings.
HP is considering two options.
Option 1: Price discounts on 100 of the rooms in each of HP's hotels
The discounts would undercut prices charged by its major competitor, Kampfort Inns (KI), by 10 %. HP would also offer a price match guarantee, which means that it would match any lower price charged by KI for any room.
Option 2: Upgrade 100 of the standard rooms in each of HP's hotels
Upgraded rooms, called HP+, would have improved IT facilities, new décor, a coffee machine and a better shower. HP+ rooms would be $\$20$ per night more expensive than standard rooms. Estimated upgrade costs are $\$1500$ per room, and the upgrades would take two years to complete. The HP+ rooms are targeted both at the business traveller market segment and at customers willing to pay slightly more for an enhanced hotel experience.

Construct a Boston Consulting Group (BCG) matrix for HP, identifying the correct segments for HP's standard rooms and its HP+ upgraded rooms if Option 2 is chosen.