Bidding for the Legacy Hotel

3 Pages Posted: 21 Oct 2008

See all articles by Samuel E. Bodily

Samuel E. Bodily

University of Virginia - Darden School of Business

Abstract

The task is to prepare a sealed bid against one opponent for a hotel that has an appraised value and a specific, higher value for a company. There is data about the ratio of bids of the other bidder to the appraised value in similar sealed bids. Students will learn to give up many unfounded notions of how to bid and to develop a strategic approach to finding the best bid.

Excerpt

UVA-QA-0696

BIDDING FOR THE LEGACY HOTEL

“You have suggested every possible bid amount imaginable. Isn't there some standard optimal bidding strategy we can use?” Colton Jergensen asked the other senior officers and staff at Meetings and Conference Solutions, Inc. (MCS). She was finalizing their sealed bid for the Legacy Hotel, an established and well-maintained hotel built in 1958 between the arts and business districts of Baltimore, Maryland. The hotel had always been in private hands, and was currently operated by Sheramar Hotels. With 105 rooms, the Legacy had recently been appraised at $ 15,112,000. Based on a comprehensive report the staff had just reviewed, MCS valued the Legacy at about $ 17,380,000, primarily because of the option MCS held on property about a block from the Legacy for development of a conference center. The conference center's facilities would be totally state-of-the-art in video, computing, exercise, discussion-room design, and support but would have no sleeping rooms.

The aging owners of the Legacy had offered the hotel, by sealed bid, to the highest bidder. There had been a qualifying process wherein the owners performed due diligence on the potential bidders' financial soundness and on their plans for the Legacy, inasmuch as the owners wished to ensure that it would continue to contribute to the Baltimore community. Only two bidders remained: MCS and Sheramar Hotels (current operator of the hotel). Each bidder was to provide a written bid by 9:00 a.m. on the following Monday morning. The higher bidder would then pay the winning bid amount and become the new owner. If MCS won the bidding, it intended to retain Sheramar as the hotel's operator.

The following conversation took place in the meeting of senior officers and their staff:

Melanie Bradley, vice president of marketing: “We should offer an amount just below our $ 17.38 million value. We want to be sure to get this property.”

. . .

Keywords: decision analysis, bargining/bidding, competitive bidding, negotiation

Suggested Citation

Bodily, Samuel E., Bidding for the Legacy Hotel. Darden Case No. UVA-QA-0696. Available at SSRN: https://ssrn.com/abstract=1284269

Samuel E. Bodily (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4813 (Phone)
434-293-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/bodily.htm

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