BLUE MOUNTAIN RESORT LIMITED: THE NIGHT SKIING DECISION

BackgroundBlue mountain-Ontarios most popular ski resort, situated at the 85 mile away from the Toronto near Georgian. The resort was started by Jozo Weider in 1941. Mr.Gordon Canning was appointed as a chief executive officer of the Blue mountain resort. At the time of winter season a large gathering of people come for skiing. Mr. Gordon wanted to start night-skiing so he have to take a decision whether he have to start this new facility or not. There were three kind of people visit over there, one day skier, multi-day skier, long day skier. The day skier contribute 38.4% , multi day skier 35.5% and long day skier 26.1% respectively. It is assume that one skier visit 10 times in a season. Whole organization divided into four category-controller, marketing, food beverages and accommodation and area management.

The main context of the case was to decide whether or not to invest $135500 in installing lighting at the resorts skiing centre for facilitating night skiing. then if they decide to invest the amount to build up the facility for night skiing, they had to make1.product and distribution decisions. 2. Pricing decisions. 3. Promotional decisions. In product and distribution decision they had to decide some facts like The area of hill to be used for night skiing. They had to decide whether the beginner or intermediate hill for skiing because choosing of an intermediate hill would be risky for the unskilled skier. Whether or not they should provide people to assist during night skiing to the skiers. In which days of week, night skiing facility would be available for skiers. They had to decide the time period for night skiing. From the exhibit we can observe that the preferable time for the night skiing is from 6-7 p.m. to 10-11p.m.

In pricing decisions they had to decide Price of ticket for pass-holders.

Price for individual tickets on week-nights and weekends. They had to decide whether they should offer a special night skiing season pass or combine it with general season pass.

In promotional decisions They have to find out the right customer segment.

Criteria for making the decision

Profitability from the investment Maintaining the current image of the company

Information needed
The cost structure Demand of night skiing in the market Expected revenue The implication of the night skiing business on the existing day skiing business.

Customer analysis and segmentation

From the exhibit we came to know the segment that most of the night skiers belong To age group 18-24 which account for 54.2 % of the total population of the night skiers. On the basis of martial status single male are the most which account for 80.5%. Reason for night skiing Social ability Enjoyment Craze for the sport Price sensitivity The customer who come to use the night skiing facilities are not price sensitive the mainly focused on the enjoyment part of the sport another reason for them to be not price sensitive is that there are no any other skiing facilities near by We can also segment the customer on the basis of pass-holder and non passholder. Since the customer are not price sensitive a price band of $7-$8 would be justified PRICES %Willing to pay that price or Expected revenue more 10 18 $1.80*N 9 24.6 $2.21*N 8 45.9 $3.67*N 7 59 $4.13*N 6 80.3 $4.81*N 5 98.3 $4.92*N

LEVEL OF DEMAND
Pass holder 60.7% of sample reported they were interested in night-skiing. Analyzing the exhibit we can calculate expected revenue from pass holders and that is 40%*2100*$40 which is $33600 For the non pass holder which is 28000(30000-2000) and out of this 41.4% is interested in the night skiing .as per the average of the weighted average of the frequency of the turnout in table 2(8.9) and exhibit 2(4.75) which is 7so the total visit in the year would be 28000*41.4*7=81000 But in BMR the total foot fall in the year 30000 so our result of 81000 visits per year has some error which are of three types Sample bias - Errors due to conduct of interview at the end of the season which has the chance of including more enthusiastic skiers in the sample. Double counting of the day skier. we can apply the correction factor of 25%-35% Response bias There is biasness in the response most of the people in the middle of an enjoyable activity would say that they would be doing this more often but they dont The correction factor to be applied is 35%-50% Analysis bias-It is possible that some interested people might not participate because of higher prices, wrong hill or wrong times. The correction factor to be applied is 10%-35% Now we would be calculating the level of demand for the non pass holders by applying the correction factors now if we see the result from the optimistic and pessimistic point of view then the aggregate correction factor is Optimistic-(1-.25)(1-.35)(1-.1)=0.44 Pessimistic-(1-.35(1-.5)(1-.35)=0.21 Net result from the non pass holder Optimistic =81000*0.44=35600 and Pessimistic 81000*0.21=17000 As we know that the customer are not price sensitive so we can set the price of $6-$8,in an average$7 for each ticket of non pass holder, then the net revenue generated by the non pass holder Optimistic=35600*7=$250000Approx Pessimistic=17000*7=$119000Approx Then the total expected revenue Optimistic=$250000+$33600 =$283600 Pessimistic=$119000+$33600

=$152600

Investment
1. 2. 3. 4. 5. 6 7. Promotion Operating costs(assuming 80 nights of operation) Depreciation on a 5 yr basis ($135000/5) Insurance Allocation from existing fixed cost Cost invested capital TOTAL $ 5,000 $ 80,000 $27000 Negligible Inappropriate $200000 $132000

So in both the case whether Optimistic or Pessimistic the revenue generated is greater than the investment. So , in our point of view Blue Mountain Resorts Limited should go for the night skiing project.