Whale Hotel

McKinsey | Round 2 | Consumer

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B E H AV I O R A L
INTERVIEW
WHALE HOTEL QUESTION:

McKinsey | Round 2 | Retail

As a consulting
Prompt: professional,
Our client is a real estate company that owns and operates luxury hotels you will often
around the world. They’ve previously owned 3 resorts in Dubai and are have to resolve
considering building a fourth, targeted specifically at high net worth conflict within
individuals – called whales. t e a m s . Te l l m e
about a time you
successfully
resolved conflict
Clarifying Information: Note: Provide this only if corresponding questions are asked. in a team
setting.
1. What’s the payback period? 5 years

2. How long is the construction period? 2 years

3. What is the tourism industry in Dubai like? Very ritzy and highly seasonal (25% increase in the summer)

4. Does the company currently own hotels in Dubai? No – ignore cannibilization

5. Are there any similar resorts in Dubai? Yes, the King’s Palace, the Belzor, and the Egyptian

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EXHIBIT 1

Resort # of Off-Peak Off-Peak Rate Pool Peak* Peak*

Rooms Utilization Whales % Quality Utilization Whales %

King’s 5000 80% 25% $2000/night Poor 80% 25%

Palace

Egyptian 4000 75% 25% $2000/night Good 95% 37.5%

Belzor 8000 75% 33.3% $2500/night Excellent 100% 50%

Note: Peak season runs from June – August 173

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Question 1 – Hand the candidate Exhibit 1

• After looking at Exhibit 1, calculate the total number of whales at expected at each hotel each night.
• Prompt the candidate to do Peak and Off-Peak separately

Exhibit Guidance: Whales Per Night, Off-Peak Whales Per Night, Peak
King’s Palace 5000 * 80% * 25% = 1000 5000 * 80% * 25% = 1000
Egyptian 4000 * 75% * 25% = 750 4000 * 95% * 37.5% = 1425
Belzor 8000 * 75% * 33.3% = 2000 8000 * 100% * 50% = 4000
Total 3750 6425

• Interviewee should identify that:

• Correlation between whale % and swimming pool quality
• Impact of seasonality on overall demand (great candidates will notice that Belzor is at 100% utilization, meaning that there could be
additional demand (for a hotel with an excellent pool) that is not being met
• Steer the interviewee towards the conclusion that the hotel must have an excellent quality pool
• Ask the interviewee what a reasonable rate to charge a whale for a new hotel would be – any rate is acceptable as long as it is supported
logically
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Question 2 : Market research indicates that a hotel with an excellent quality pool charging $2,500 a night would capture
100% of the whales who stat at the King’s Palace and the Egyptian as well as an additional 250 whales per night during the
off-season and 1575 during the peak season. What is the expected demand for the potential new hotel?

Exhibit Guidance:

• Nightly Whale Demand, Off-Peak = 2000

• 1000 (King’s Palace) + 750 (Egyptian) = 2000
• Nightly Whale Demand, Peak = 4000
• 1000 (King’s Palace) + 1425 (Egyptian) + 1575 (new) = 4000

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EXHIBIT 2

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Question 3 – Hand the Candidate Exhibit 2

How many stories will the new hotel require?

Exhibit Guidance:
• Interviewee should recognize that, in order to meet demand of 4000 rooms per night in peak season, the hotel must be at
least 3 stories tall

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Question 4: Annual operating expenses are $250M per 1500 rooms. Land acquisition is $2B. What is the total initial
investment and would you recommend moving forward with the hotel.

Exhibit Guidance:
• Initial investment:
• Land - $2B
• Rooms - $3B – (3 stories)
• Pool - $.5B – (excellent quality)
• Total - $5.5B
• Annual Revenue:
• $2,500/night * 30 nights = $75K per whale monthly
• 4000 whales * $75K per whale = $300M (peak, monthly) * 3 Month Peak Season = $900M Peak
• 2000 whales * $75k per whale = $150M (off – peak, monthly * 9 Months = $1.35B Off – Peak
• Total Annual Revenue = $2.25B Annually
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Question 4 (continued): Annual operating expenses are $250M per 1500 rooms. Land acquisition is $2B. What is the total
initial investment and would you recommend moving forward with the hotel.

Exhibit Guidance: • A good candidate will realize that:

• Annual Profit:
• We don’t break even in 5-years
• Annual Revenue - $2.25B
• We will turn a profit, 8 months into year 5
• Annual Opex - $750M ($250M per 1500 rooms * 3)
• We haven’t considered additional revenue
• Annual Operating Profit - $1.5B sources or a potential exit opportunity
• Payback Period: • If time allows – consider asking them how to
raise additional revenue
• 2 years of construction
• 3 years of revenue (3*$1.5B) = $4.5B
• After 5 – years, $5.5B cost - $4.5B revenue

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Question 5: The real estate company’s CEO is on his way in – what do you recommend?

Exhibit Guidance:
• A candidate can recommend either moving forward with the deal or foregoing the opportunity,
• If they recommend moving forward, they should include that they are evaluating additional revenue streams that will
bring the company closer to a 5-year payback period
• A candidate might choose to turn-down the hotel because of:
• Issues with the payback period
• Competitive response from the King’s Palace, Egyptian, or Belzor

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INTERVIEWER FEEDBACK FORM Case Name _________________________ Interviewer ___________________________

Case Book ____________________ Case Type ____________ Difficulty ____________

Case Execution:
❑ Clarifying Questions + Framework
❑ Good Questions
Feedback:
1 2 3 4 5
❑ Structured
❑ MECE
❑ Creativity
❑ Exhibits + Quantitative Ability
❑ Accuracy Feedback:
❑ Speed 1 2 3 4 5
❑ Insights Presented
❑ Errors / Guidance Needed

❑ Brainstorm + Conclusion
❑ Creative & Structured 1 2 3 4 5 Feedback:
❑ Good Business Judgment
❑ Recommendation Strength

❑ Presence & Non-Verbal

❑ Confidence
❑ Poise / Posture
Feedback:
1 2 3 4 5
❑ Clear & Concise
❑ Body Language
❑ Coachability

Total: _____ / 20
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12 | CASE: WHALE HOTEL - APPENDIX

EXHIBIT 1

Resort # of Off-Peak Off-Peak Rate Pool Peak* Peak*

Rooms Utilization Whales % Quality Utilization Whales %

King’s 5000 80% 25% $2000/night Poor 80% 25%

Palace

Egyptian 4000 75% 25% $2000/night Good 95% 37.5%

Belzor 8000 75% 33.3% $2500/night Excellent 100% 50%

Note: Peak season runs from June – August 182

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12 | CASE: WHALE HOTEL - APPENDIX

EXHIBIT 2

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