Robby, I really enjoyed your post and your thoughtful comments on the future of the company. I agree with you, the success of the business seems to be largely built on the economics of scale they have achieved. The most compelling argument to me about their success was how they have managed the fleet. The economic benefits of large orders are clear but the fact that they try to use one bus type is an interesting approach to streamlining the whole process. It also seems to make a lot of sense since I would think people do not care about the bus model nearly as much as the contract cost. As you mentioned this is clearly repeatable in airlines but it would be interesting to look at what other contract based services could really cut costs by reducing offering variability.
Another concern I had with their future plan is that working with parents and focusing on services means you are providing things where people may actually start to care more about the quality than just the low cost. Thus they may really need to start pitching themselves on quality not just low cost which seems like a very different business model.
Luthan, I thought this was a really interesting look at an industry and a company in particular that I would not normally associate with strong operations. As you mentioned, they make being unique and local “cool”, which also allows them to cut down on costs since they can focus on upcoming areas of town. The non-standard room designs seem like another way to save money but I would be curious to know how much more of a hassle this is for reservations and pricing. If a lot of the 54 room types in New York are priced on the same tier I could imagine there are people getting different levels of quality for their money. Luckily you can probably assume they do not have the chance to compare to other people’s rooms, but still I would think this becomes a more complicated pricing structure. Another concern I have is that this hotel brand seems like it would appeal much more to the weekend traveler than the business traveler. Thus I wonder if they see far less stable demand on weekdays versus weekends or if the partnerships and conferences they put on help to drive business traffic as well.
Really interesting article and business model Steve. I had seen the advertisements before but as I was not in the market for a mattress never thought to look into it more. They clearly have developed a business model that appeals to our generation who is increasingly comfortable making purchases online. The return policy also works well, and with a product they believe people will love it looks like the actual cost of returns to them will be minimal. Their ability to make mattress buying “cool” with a unique showroom experience that then pushes its own advertisements through social media is great. That being said I wonder how well the showroom model does versus typical showrooms. It seems very cost prohibitive to have that anywhere other than a large city and also allows much less customer traffic than a typical showroom. Personally I would rather spend my time at a place where I can try out different mattresses but I also think I may fall into the skeptic category that 99% of people prefer one type of mattress. That being said looking at their website clearly a lot of work was put into this mattress design and as you mentioned if a friend mentioned it to me I would likely just go test theirs out.