The Drowling Ski Resort - Case Study Example

The Drowling Ski resort is in serious financial crisis and in the last two year this trend has greatly curtailed its profitability, at the time of this study, it is threatening to cripple operations even possibly collapse the entire venture. Located 45 minutes from Syracuse, New York, Drowling Mountain used to be one of the most popular skiing resorts in the surrounding owing to its relative proximity to the city and its high skiing hills (Huang & Leong 2). Its financial trouble started in back in 2000 when it went into receivership and there seemed to be no buyer willing or able to finance the resort, after it remained closed for a year, it was reopened by Ian Mac-Arthur through an arrangement with the Syracuse development cooperation. The city was willing to fund the project since they believed that the resort represented and important economic entity and if it was left to collapse, it would harm the community especially owing unemployment of the hundreds of locals who worked there. After 5 years, MacArthur decided to discontinue his ownership of the resort because the capital investment required to repair and retransform the resort to its former glory was too much. Consequently, it was bought by a Peter Bass who assumed the debt and arranged with MacArthur to pay buy him off the debt in installments. The resort however continued to lose money and the visitors patronizing it went down considerably resulting in reduced revenue and dependence on government bailouts to remain in business (Huang & Leong 2). The management of the resort tried channeling back profits and even took on long term debt but the huge losses the firm had incurred in the course of the last two years had eaten too deeply into the cash reserves. Drowling Mountain is dependent primarily on the population of Syracuse since the customer base is predominantly local, for financial and practical reasons the firm did not market beyond the Syracuse area. The pricing is marginally higher than the neighboring resorts and this is justified by the variety of exclusive packages offered in the resort although admittedly clients sometimes found them too complex and therefore ignored them. Carter also says that the operations were far from smooth owing to the fact that they had cut down on the labor cost as much as they could and as result there was a perennial shortage of employees and the few ones were often overworked. After an incisive analysis of the situation, one the ground I came up with the following recommendations which if implemented successfully could reasonably be expected to curb the downward trend of the resort and gradually help it recover its prestige and profitability. For one, it is apparent that the resort justifies its higher prices by virtue of its exclusive package offering that are not available in other resorts, however, it has also emerged that these services are often viewed as too complex and the clients often ignore them. This leads to wastage since they require staff and maintenance they clearly do not justify the cost and complexity. Therefore instead of cutting down on costs by laying off staff, the management should carry out a thorough assessment on the redundant services, eliminate them or make drastic changes to simplify or make them more adaptable to customers. A strategic evaluation into the profitability of individual services and a comparison with their uptake in other resorts would give the managers a better understanding of what needs to be retained and what needs to be cut off. As a result, the services will be streamlined the staff will be more flexible and the costs or running the resort will marginally reduce, the surplus funds can then be used to service other facilities that can help resume profitability. The manager’s approach is based creating a culture of skiing and therefore he does not view the fact that other resorts are encouraging customers to engage in the sport as a threat since he felt they were promoting the uptake of skiing culture. Notwithstanding, this strategy may be in part responsible for the gradual loss of customers from Drowling to other resorts, this is because it ignores the threat of competition therefore does not take any deliberate steps to counter it. The resort’s approach needs to be diversified and this can be achieved through a SWOT analysis in which the management could examine the extent to which the weakness of the firm can be exploited by competition and how to capitalize on their strength to exploit opportunities (Yuksel 167). One of the reasons they are currently loosing clients because many of them want an all-inclusive package as in a resort that can service their needs throughout the year. This is because in such a situation, they can get special bonuses regular clients which Drowling Mountains can ill afford to give since they only operate a few months a year. The fact that the resort is normally closed when between March and December while some of the competing resorts are open is a major weakness and threat for sustainability. This is because when customers visit a resort for non-snow activities such as hiking and biking they will develop loyalty and during winter they will most likely go back to the same resort they visited in summer. Therefore, Drowling Mountains needs to diversify its services and remain open all year round, in addition to making extra money; they will be developing customer loyalty. Non-skiing customers who just accompany their friends are very price conscious and on average they spend about $30 per day, however this can be seen as an opportunity and in the diversification of services, the resort can offer more non ski related services. This way they can encourage more visitors to come and spend money even if they do not ski since in at present the firm is essentially limited to skiers who are the only big spenders. Moreover, the management could also introduce training facilities, that way they could “create” a customer base since when non-skiers learn how to ski they will ultimately join the big spender’s league. With more skiers the resort will undoubtedly be in a better position to get back on its feet, furthermore those who learn to ski on the resort will become loyal customers and it will be harder for them to defect to other resorts. According to the Carter, the resort has cut its staff to the bare minimum and they are literally running on bones, this is no doubt a product of the original problem since the cuts were made remedy to the financial situation. Nevertheless, I believe that drastic cutting of employees and consequent overworking their motivation away is only going to have negative impacts and will be counter-productive to any efforts made to resuscitate the resort. The fact that the person who operates the ski lift may be the same one serving coffee at the club means that the workers are extremely overworked and they hardly have any free time. While this might seem like a good financial saving strategy in the short run, in the long run it will make matters worse since demotivated employees will be unlikely to offer good quality service to customers (Wilson 48). One of the managers suggests that the labor situation is as good as it will be and therefore the resort should focus on encouraging customers to come skiing. However, with poor customer service, this request bespeaks poor strategic thinking since customers will not come back if they do not enjoy the services. In order to remedy this situation, the resort should invest more in increasing the number of employees so that they may work on a flexible schedule as well as motivated them so they may provide quality service and make the customers want to return. In the same way the resort takes money for expansion and repair or its infrastructure, they should invest in their staff since no matter how much they spend of services and facilities; they will only be as good as the people running them. Furthermore, in regard to marketing it is apparent that the resort has set a glass ceiling for its latitude by only marketing in the local area where the most clientele come from, however from the money saved by cutting down on the redundant services they could increase their marketing expenditure. In addition, if the resort’s managers were to embrace innovation they could expand the scope of their advertising without necessarily spending too much. For example through social network such as Facebook they could create an online presence through which they could interact with their clients, get feedback woo prospective customers. Conclusion At the end of the day, owing to the stiff competition from the resorts in the locality, the customer base keeps shrinking in the locality. Therefore, it is imperative that the resort takes cognizance of the fact that it has to attract customers form outside the tradition area since there are simply not enough skiers in the Syracuse area to patronize all the resorts the area. By implementing the strategies suggested herein, the resort will stand a good chance of dealing with both its external and internal problems and resume profitability in the long run. Works Cited Yuksel, Ihsan. "An Integrated Approach with Group Decision-Making for Strategy Selection in SWOT Analysis." International Journal of Academic Research in Business and Social Sciences 2.11 (2012): 134-61.  Huang, David & Leong, Lorian. Drowling Mountains. Ivey School of Business Foundation. 2011. Wilson, Michael. "The Psychology of Motivation and Employee Retention." Maintenance Supplies 07 2005: 48-9.  Read More