Expert answer:Blue Mountain Resorts Limited Case Analysis
Answer & Explanation:BlueMountainResortsLimited (1).pdf Case Analysis PaperRead the Harvard Business Review Case Study: Blue Mountain Resorts Limited: The Night Skiing Decision.In this case study, a large Ontario ski resort faces a decision about whether to invest in facilities for night skiing. Demand is very uncertain, so the management undertakes a market research study. Day skiers at the facility are surveyed about their potential interest during the months of February and March. The resort’s management is suspicious about the validity of the results of the research, but has no time to collect further data.Compose a 3–4 page paper (plus Title page and References page) and analyze the case using the following outline:Identification of the IssuesIdentify the major opportunity/problem faced in this case.Identify the major decisions that need to be made.External AnalysisEvaluate factors outside the organization that should be taken into consideration when making a decision.Internal AnalysisEvaluate factors inside of the organization that should be taken into consideration when making a decision.AlternativesSelect possible alternatives to take advantage of the opportunities or solve the problems identified.Evaluate the strengths and weaknesses of each alternative.Decisions and ImplementationPropose a solution to the problem.Defend your proposed solution by citing information from the case and our textbook or from other knowledge that you have gained from your experience or research; be as specific as possible.Measuring ResultsChoose methods to measure results.Predict what you will do if your plan fails and describe your contingency plan.
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BLUE MOUNTAIN RESORTS LIMITED:
THE NIGHT SKIING DECISION
Susan Burke prepared this case under the supervision of Professor Terry Deutscher solely to provide material
for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a
managerial situation. The authors may have disguised certain names and other identifying information to
protect confidentiality.
Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written
permission. This material is not covered under authorization from CanCopy or any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey
Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London,
Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca.
Copyright © 1981, Ivey Management Services
Version: (A) 2002-07-19
In mid-June 1979, Mr. Gordon Canning, president and chief executive officer of
Blue Mountain Resorts, was facing a major decision. He had to determine whether
or not facilities for night skiing in the upcoming 1979–1980 winter skiing season
should be installed on the Blue Mountain slopes. If he chose to do so, he would
have to determine an appropriate pricing strategy for lift tickets and season passes.
Since any promotions on night skiing would have to be included in the fall
brochures, the decision had to be made by July 1st.
Blue Mountain, located 136 kilometres (85 miles) north of Toronto near Georgian
Bay, is Ontario’s most prosperous ski resort. It is located a few miles from
Collingwood, a city of 11,500 people with 40,000 living in a 20 mile radius. It was
started by Jozo Weider in 1941, and he continued to run the resort until his death in
1971. Since that time, his family has operated the business, making Blue Mountain
the largest family-operated ski resort in Canada.
During the 1978–1979 season, Blue Mountain had 250 acres of ski trails in
service. There were 27 different trails serviced by eight chair-lifts and 10 other
tows. Three quarters of the trails were covered with snow.
Blue Mountain’s skier market is primarily from South and Southwestern Ontario,
with a small proportion coming from the U.S. Midwest. There are basically three
types of skiers at the resort. The largest group is the day skier, who represents 38.4
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per cent of the skiers who visit Blue Mountain once or more during a year. Major
markets for this skier are Toronto/Mississauga, the Collingwood area itself, and
Hamilton/Burlington. The multi-day skier, who stays two to three days, accounts
for 35.5 per cent of Blue Mountain’s skiers. Most of these people also come from
South and Southwestern Ontario. The final category, vacationers (who stay four
days or longer), represents the remaining 26.1 per cent of Blue Mountain’s skiers.
In a typical week, 65 per cent of skiers at the resort ski on the weekend (Friday,
Saturday, and Sunday). On average, Blue Mountain’s skiers visit the resort about
10 times a season.
Mr. Gordon Canning, Jozo’s son-in-law, joined blue Mountain Resorts in 1971
after completing his MBA studies at York University. Canning became marketing
manager in 1972 and General Manager in 1975. In 1978, at the age of 35, Gordon
Canning advanced to president and chief executive officer of Blue Mountain
Resorts Limited. He was also serving as vice president of the Ontario Ski Resorts
Association, vice president of the Ontario Ski Council, and Chairman of the
Tourism Development and Promotion Committee of Tourism Ontario. For an
organizational chart of Blue Mountain Resorts, introducing the key people
involved in the night skiing decision, see Exhibit 1.
PREVIOUS INVESTMENTS (1970s)
Gord Canning and the rest of the management were determined to maintain Blue
Mountain’s reputation for being innovative and successful. The organization’s
corporate strategy statement dictates that any proposed project must fit at least one
of the following conditions before it can be undertaken:
1. A project which protects current earning power and minimizes any risks
inherent to the business (e.g., weather conditions).
2. A project which expands primary earning power.
3. A project which helps to attain off-season use of facilities.
4. A project which offers new opportunities in:
a) other ski areas,
b) other recreational areas.
In addition, it was very important to the business to maintain a “comfortable
capacity” at the ski resort. Capacity at a ski resort roughly translates into the
number of skiers per acre who can ski the hill in reasonable comfort; it depends on
hill size, hill development and lift facilities. As this skier per acre population rises,
skiers become disgruntled over increasing line-ups and waiting times. Blue
Mountain had managed to keep this capacity at a comfortable level by increasing
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the number of lifts in 1974, 1977 and 1978 at a total cost of over $1 million. At the
same time, they developed additional areas on the mountain to offer an increasing
variety of ski runs.
In 1973, a $500,000 snowmaking system was installed; since then, a further $1.75
million had been invested to upgrade snowmaking and grooming facilities. This
investment reduced the risk to Blue Mountain of insufficient natural snowfall
forcing closure of the facilities. As long as the temperature was low enough, the
hill could be covered in artificial snow. Early in 1979, Blue Mountain installed the
world’s first computerized snowmaking system to boost the efficiency and output
of its snowmaking plant. This computerized system was expected to increase the
efficiency of the system for 1979–1980 by up to 30 per cent over that of the
previous season. With this snowmaking facility, Blue Mountain’s management felt
that they could usually count on a skiing season from Christmas to mid-March.
In 1975, Blue Mountain installed “Get Moving Boards” — electronic boards to
indicate which lifts were operating, the current waiting times and which of the
major restaurants were open. The next year, a ski shop complex was constructed at
the central base lodge to house the ski repair and rental shops.
The first major diversification away from skiing occurred in 1977 when Blue
Mountain introduced “The Great Slide Ride” at a cost of $500,000. A chairlift ride
to the top of the mountain in combination with a 3,000 foot descent on a plastic
sled opened the way to the development of summer tourism for Ontario ski resorts.
THE NIGHT SKIING OPPORTUNITY
In the fall of 1978, Gord Canning began to inquire into ways to increase utilization
of the facilities in the off-hours of the winter skiing season. Night skiing, which
involves lighting up the hill with artificial lighting, allows skiers to remain on the
hill until late into the evening. However, the majority of night skiing facilities were
located in private resorts near large urban centers. Since the nearest large city was
85 miles away, Canning and Bev Philp (who was in charge of the Marketing
Division of Blue Mountain Resorts), were uncertain about whether skiers would be
interest in night skiing at Blue Mountain.
Blue Mountain’s management felt a responsibility and a commitment to offering
skiers the highest quality and best value for their money. Canning felt, therefore,
that if Blue Mountain were to introduce night skiing, their facilities would have to
be better than any of their competitors’. By lighting an entire slope, Blue Mountain
could offer the longest run, the highest vertical1 and the best snow conditions for
night skiing in Southern Ontario.
1
A “vertical” is defined as the difference in elevation between the top of the ski trails and the base of the
mountain.
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Gord Canning’s first move was to approach Harold Abbotts, Blue Mountain’s
controller, to determine the incremental investment costs of this proposal. Abbotts
and Bill Skelton, who was responsible for running the operations of the resort,
agreed that $135,500 would be needed to install the necessary equipment (mostly
lighting) on one area at Blue Mountain. If the decision were made to go ahead with
the proposal, one of four separate areas would likely be chosen. Each of the areas
was roughly similar in size; skier capacity would be easily adequate even if
demand for night-skiing was much higher than expected. Two of the possible
choices were ski slopes at the intermediate level of difficulty, one (the North area)
was advanced, and one (Big Baby/O-Hill) was beginner and intermediate. Canning
was comfortable that the $135,000 estimate was an accurate one because all
construction would be done by the Blue Mountain staff themselves.
In addition, there would be operating costs involved in maintaining the facilities
for the evening hours. The costs would involve payroll for cashiers and ski patrol,
repair and maintenance costs for equipment and trails, printing costs for tickets and
an additional cost for utilities (lights and lifts). The total additional operating costs
would be approximately $1,000 per night plus a seasonal allocation of $20,000 for
fixed costs which would be shared with day skiing. These figures did not include
the costs of additional liability insurance, which would depend on the number of
skiers, or the cost of promoting night skiing. Current rates for liability insurance
were $7.75 per thousand skiers. Incremental promotional costs for supporting night
skiing were estimated at no more than $5,000.
With this information, Gord Canning approached Bev Philp and Bob Boggs (who
designed and executed Blue Mountain’s marketing research) and asked them to
determine the market potential for night skiing. Blue Mountain already had an
extensive marketing research program which enables the management to keep up
to date with the changing characteristics and needs of the approximately 30,000
different skiers who visited Blue Mountain annually.2 Hill Hosts and Hostesses
had been hired each winter since 1975 to aid in the distribution of surveys. After
working approximately two hours per day, the employee was permitted to ski the
rest of the day for free.
During each winter season, 4,000 profile questionnaires are distributed. On
designated sampling days (balanced according to skier frequency), the Hill Host or
Hostess approaches every third person in the ticket lineup and asks how many are
in the skier’s party, and the age, sex and residence of each member. There are four
ticket wickets at Blue Mountain and the profiles are divided in proportion to the
number of tickets bought at each wicket.
2
Exhibit 7, which is discussed subsequently in the case, shows a distribution of average number of days
skied during the 1977–1978 season. It had been obtained from a survey of skiers during the following
season.
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Also, during each winter season, a detailed seven-page “overall” skier survey is
distributed to approximately 700 skiers. These questionnaires are distributed
throughout the season in proportion to the number of skiers using the facilities
during any one time period. In practice, this sampling plan means that more
questionnaires are given out on weekends than during the week, and more are
distributed in January and February than November and December. The
questionnaires are given out by the Hill Hostesses in the various cafeterias. The
number distributed in each cafeteria is determined by the proportion of dollar sales
across the food outlets. Hostesses are given specified quotas by age and sex to use
in requesting skiers to participate in the survey. Their quotas are developed from
the results of the profiles. This plan ensures that the survey results are as
demographically representative as possible.
The overall skier survey which had been conducted during the 1978-1979 skiing
season already contained two questions on night skiing (see Exhibit 2 for the
results), but Blue Mountain management had felt that these data were not
sufficient for an accurate determination of market potential for night skiing.
Therefore, Bob Boggs subsequently developed a three-page questionnaire which
focused exclusively on night skiing and distributed it to just under 200 people (see
Exhibit 3). This survey was conducted in an identical manner to the overall survey,
except the interviews were all done near the end of the season, in February and
March. Consequently, it was expected that skier profiles would be somewhat
different in the night skiing survey than the overall one. Exhibit 4 contains data on
several demographics for the overall survey. Data from the entire night skiing
survey was also available for analysis (see Exhibits 3, 3A and Appendix 1).
Refusal rates for the night skiing questionnaire were less than five per cent, since,
as in the past, most skiers were very cooperative and supportive of the
questionnaires.
Gord Canning felt that from this questionnaire he could get a good idea of the
price sensitivity of the different consumers (planned prices for daytime skiing are
shown in Exhibit 5). If he went ahead with night skiing, he knew he would have to
make pricing decisions on both single-night lift tickets and on season passes. He
wondered whether he should offer a special night skiing season pass or combine it
with the season pass for the 1979–1980 winter season at the planned $250 cost. He
knew he had the alternative of increasing the pass price and making it a day and
night pass. On the other hand, he could offer three different passes — a night
season pass, a combined night and day season pass, and the traditional day season
pass. He would, of course, have to set appropriate prices for all passes.
Besides the pricing decision, Canning wanted to get a good idea of the profile of
the potential frequent night skiers — age, marital status, place of residence, etc. If
he decided to go ahead with the project, he felt that he needed this information for
planning a successful introduction — both from a promotional standpoint (e.g.,
what sort of message should he try to communicate to what people living where?)
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and from a product line standpoint (e.g., how important was it to have après-ski
activities?).
In making his decision, Gord Canning also thought that it might be worthwhile to
review some information he had about day skiers, because this data could
potentially offer him some insights about patterns of behavior which would
emerge for night skiers. First, he was interested in skiers’ spending patterns.
Exhibit 6 presents a summary of the expenditures of the typical skier for a day on
the slopes during the 1978–1979 season. It also contains rough estimates of the
estimated gross margins for evening operations of service (food and beverage, ski
rentals, etc.). Also, Canning wanted to review the data on frequency of skier visits
during a year. His marketing staff told him that the last accurate data which were
available had been obtained from the recent overall survey, only it was data for the
1977–1978 season (Exhibit 7).
Blue Mountain’s management had observed a marked divergence between data
obtained when skiers were asked to recall how much they skied last year and
information given when they were asked to forecast how much they were going to
ski in the future. On average, people seemed to think that they would ski
considerably more in the future than they had in the past. What Gord Canning had
to decide was to what extent any forecasts for the future reflected plans that would
actually be realized rather than inaccurate optimism. With these reservations in
mind, he sat down to begin his analysis of the night skiing decision.
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9A83A025
Exhibit 1
ABBREVIATED ORGANIZATION CHART1
President
Gordon Canning
Controller
Harold Abbotts
Marketing
Manager
Bev Philp
Food Beverage
And
Accommodations
Manager
Dale McNichol
Accounting
Staff
Marketing
Research Analyst
Bob Boggs
Food and
Beverage
Staff
Area Manager
(Operations)
Bill Skelton
Area
Management
Staff
Other Marketing
Staff
1
This chart contains only the people who would be involved to some extent in the Night Skiing Decision.
Page 8
9A83A025
Exhibit 2
NIGHT SKIING QUESTIONS ON THE OVERALL SURVEY
How likely would you be to use night skiing facilities on a regular basis?
Definitely would use
Probably would use
Might/might not use
Probably would not use
Definitely would not use
14.1%
15.9
20.1
30.9
19.0
How often over the season would you use night skiing facilities?
(Asked of those respondents who at least might use the night skiing facilities at Blue Mountain.)
One time
Two times
Three times
Four times
Five times
6–10 times
11–15 times
16–20 times
Once every weekend
Occasionally
Weekends and holidays
17.0%
18.5
11.8
5.8
8.8
15.5
3.5
2.8
5.5
7.3
3.0
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9A83A025
Exhibit 3
NIGHT SKIING SURVEY
Survey of Blue Mountain Skiers
Date: _____________
Dear Skier:
We would appreciate a few minutes of your time to give us your opinion of night skiing at Blue
Mountain. This survey is designed to help us provide you with the facilities and services which
will best meet your needs and help us plan for future development.
Thank You For Your Assistance
How to Fill in The Questionnaire
In the box at the right of the paper, please write in the number which is beside the answer you best
wish to select.
Example:
What is your age?
(1)
(2)
(3)
(4)
(5)
(6)
Under 15
16–17
18–24
25–34
35–49
50 or over
In some questions, we ask you to write in your answer in the space provided.
1.
Have you ever been night skiing before?
1)
2)
yes
no
70.7%
29.3%
2.
Where, if yes?
3.
Would you be interested in night skiing at Blue Mountain?
1)
yes
44.4%
2)
no
55.6%
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9A83A025
Exhibit 3 (continued)
4.
5.
6.
7.
How many times a year would you ski at night?
1.
2.
3.
4.
5.
6.
What night of the week would you prefer to ski?
1.
Monday
4.9%
5.
2.
Tuesday
7.3%
6.
3.
Wednesday
9.8%
7.
4.
Thursday
11.0%
How far would you drive to go night skiing?
1.
less than five miles
2.
6-10 miles
3.
10-25 miles
4.
25-35 miles
5.
35-75 miles
6.
more than 75 miles
1-5
6-10
11-15
16-20
20-30
30 or more
33.7%*
33.7%
15.7%
7.2%
4.8%
4.8%
Friday
Saturday
Sunday
28.0%
25.6%
13.4%
7.3%
11.0%
17.1%
13.4%
29.3%
22.0%
Would your trips be mainly:
1.
Skiing at Blue Mountain for the night and returning home
the same night
2.
Skiing at Blue Mountain for one day and one night
3.
Skiing at Blue Mountain for two or more days combined
with a night or more of skiing
4.
Other, please specify
(16.0%)
(14.8%)
(55.6%)
(13.6%)
8.
At what hour would you usually begin night skiing at Blue Mountain?
1.
3 p.m.
4.8%
5.
7 p.m.
38.6%
2.
4 p.m.
3.6%
6.
8 p.m.
7.2%
3.
5 p.m.
15.7%
7.
9 p.m.
4.8%
4.
6 p.m.
25.3%
8.
other ____________
*Tabulation for Questions 4-22 are all based on the 83 respondents (44.4 per cent) who replied “yes” to Question 3.
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9A83A025
Exhibit 3 (continued)
9.
At what hour would you usually finish night skiing at Blue Mountain?
1.
5 p.m.
—
5.
9 p.m.
4.9%
2.
6 p.m.
—
6.
10 p.m.
40.7%
3.
7 p.m.
—
7.
11 p.m.
54.3%
4.
8 p.m.
—
10. a) Midweek skiing for the day costs $9.00. What do you think is a fair ticket price for
midweek night skiing?
(See Exhibit 3A for tabulation)
b) Weekend skiing for the day costs $12.00. What do you feel is a fair ticket price for
weekend night skiing?
(See Exhibit 3A for tabulation)
11.
Would après-ski entertainment be a factor in your decision to go night skiing?
1.
yes
67.5%
2.
no
31.3%
12.
At which area would you like to see night skiing at Blue Mountain?
1.
North
11.4%
2.
Happy Valley/Apple Bowl 38.0%
3.
Tranquility/Smart Alec
38.0%
4.
Big Baby/O-Hill
12.7%
13.
Would you be interested in ski lessons at night?
1.
yes
24.1%
2.
no
75.9%
Would you require rentals at night?
1.
yes
10.8%
no
89.2%
14.
15.
2 …
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