MountainView Retreat (MVR)
MountainView Retreat (MVR) is a scenic lodge owned by John and Maria Torres. The lodge's primary target market consists of families looking for nature-focused getaways. MVR is known for its high-quality service, and guests pay for their stay upon departure rather than in advance. The lodge is situated near a major national park.
With no hospitality training institutes in the vicinity, John provides on-the-job training to all new hires. A recent customer survey conducted by MVR to gauge brand loyalty revealed that returning guests are loyal because:
- They appreciate the flexibility of paying at the end of their stay, unlike at other local lodges.
- Staff members are courteous, accommodating, and particularly attentive to families with children.
- The services offered are considered to be excellent value for money.
However, many guests have noted that the lodge's facilities could benefit from modernization.
During the off-season in winter, MVR experiences low occupancy rates and negative monthly cash flow. To manage these months, the lodge relies on bank overdrafts while continuing to pay its suppliers in cash to secure generous discounts. John is worried that this cash flow strategy is unsustainable, especially with the need for facility upgrades. He suggests raising additional funds and finding ways to cut cash outflows during the off-season (Proposal 1).
Maria believes that the main issue lies in low occupancy during the winter months. She proposes diversifying MVR's customer base by attracting a new segment: business travelers. However, this would require substantial investment, including upgrading and adding new facilities to cater to corporate clients (Proposal 2).
Define the term brand loyalty.
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Brand loyalty is consumers' faithfulness/commitment to a particular brand
1 mark -
This results in:
- Repeat purchasing behavior by consumers
- Ability to raise prices with less consumer resistance over time
1 mark
Explain two advantages for MVR of using on the job training.
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On the job training is cheaper than external training - no travel/accommodation costs which helps with cash flow problems
1 mark -
Allows new recruits to learn the specific culture and service standards of the lodge- evidence shows current staff are polite and helpful due to effective training
1 mark -
Trainees can serve customers while training, helping reduce labor costs and improve cash flow
1 mark -
Direct supervision allows close monitoring of recruits' progress, identification of strengths/weaknesses, and transmission of company culture
1 mark
Explain the importance to MVR of two elements of the extended marketing mix.
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Physical evidence: Environment where services are delivered
1 mark - Application to MVR: Lodge customers judge based on facilities and appearance, location is important for decision making
1 mark
- Application to MVR: Lodge customers judge based on facilities and appearance, location is important for decision making
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People: How employees interact with customers
1 mark - Application to MVR: Employees are polite, helpful with children, contributing to brand loyalty and value perception
1 mark
- Application to MVR: Employees are polite, helpful with children, contributing to brand loyalty and value perception
- Process: Methods of payment and service delivery
- Application: Unique payment system allowing payment on departure
Discuss whether MVR should implement proposal 1 or proposal 2.
Answers include but are not limited to:
Analysis of Proposal 1 (John's proposal):
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Reducing cash outflows through delayed supplier payments
- Potential loss of discounts and supplier relationships
- May increase direct costs
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Delaying maintenance and cutting overheads
- Risk of deteriorating facilities affecting customer perception
- Reduced promotion may impact future demand
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Staff reductions and seasonal closure
- Risk of losing skilled staff
- May affect service quality in peak season
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Additional financing options
- Short-term loans could replace expensive overdraft
- New business partner could bring fresh perspectives
- Limited options for asset sales or debt factoring
Analysis of Proposal 2 (Maria's proposal):
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Targeting business customers to increase winter utilization
- Requires significant investment in new facilities
- Need for extensive market research
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Financing challenges for Proposal 2
- Limited access to long-term loans
- Equity financing expensive for family business
- Venture capital unlikely due to profit potential
Evaluation and Judgment
- John's proposal is lower risk and more immediately implementable
- Maria's proposal has higher risk and significant upfront costs
- Balanced solution could include elements of cost control with targeted market expansion
Marking Guidance
Maximum
- Discusses only one proposal with little depth.
- Limited analysis of advantages and disadvantages.
- Covers one proposal in depth with a clear discussion of pros and cons.
- Minimal evaluation of the alternative proposal.
- Covers both proposals with detailed advantages and disadvantages.
- No clear final recommendation or justification.
- Balanced discussion of both proposals, clearly weighing short-term stability vs. long-term growth.
- Strategic evaluation of financial feasibility and risks.
- Justified recommendation with a potential hybrid solution, ensuring sustainability.
- Well-structured evaluation of both proposals.
- Justified recommendation, clearly linked to the business’s financial and strategic position.
