Lauren Had Been a Manager of a Major Hotel Chain

Essay

Lauren had been a manager of a major hotel chain for 15 years. Due to a hotel owner's illness, Lauren was offered the opportunity to purchase a hotel near a vacation area she had often visited. It was a great place surrounded by mountains and known for its scenic beauty. After obtaining a lawyer and an accountant to assist her, Lauren did an analysis of the business and evaluated several contingencies relating to various scenarios. Since the expected monetary value of the various scenarios was much higher than the price of the hotel, she decided to purchase the hotel. She resigned her position, obtained a loan, and purchased the hotel. The following year, there was a severe economic downturn and also a very bad weather season that reduced the number of guests and also caused a resulting mold situation in the hotel building that required expensive repair work. Lauren ran short of cash, became emotionally distraught, and eventually had to sell the hotel at a significant loss. Was it a bad decision for her to purchase the hotel instead of keeping her other managerial position? Explain.