Drowling Mountain is a community resort, situated 45minutes away from Syracuse, New York, one of the larger cities in New York, with a population of 145,170 people in 2010. Drowling Mountain was also located near some surrounding communities in Onondaga County, which has a population of 321,830 people. Drowling Mountain offers snow related activities such as snowboarding and skiing, along with operating a full service chalet, which has equipment rentals, food and beverage for sale, ski instructions and lodging rentals available for overnight guests.
Drowling Mountain has a close connection with the city of Syracuse and its local businesses, however, over the past couple of years, Drowling has been struggling to cover its fixed assets and operational costs, which is a reflection of their lower top-line revenue sources. Being a community resort, they find themselves competing against the other 34 resorts inside the state of New York and they need to establish some points of differentiation, “only here” type of activities and services that would make them unique and sustainable against the other rivaling resorts in the state.
Drowling Mountain needs to develop a new marketing plan, which is focused on top ling growth for the company. Increasing sales and having new pricing schemes would be very beneficial for the company, as they attempt to lower their financial debt and increase their cash flow on hand. Analysis
Porter’s five forces industry analysis:
• Threat of New Entrants:
o Minimal to No threat of new entrants – with the right type of conditions needed to be available for a new resort to establish themselves, no real
location available o Large Capital Requirements – needing a large sum of money to start a resort posses a problem for new firms entering the market
• Bargaining Power of Suppliers:
o Drowling has a close relationship with its suppliers and together they work towards a common goal of creating a positive economic benefit for the city of Syracuse. o The suppliers are very lenient on the accounts payable terms with Drowling, as they operate under the assumption that “someday” they will be reimbursed. This relationship stems back to the basis of the positive economic benefit that Drowling provides to their city. o There is not much threat of the suppliers raising costs or lowering quality to meet the resort expectations as they both enjoy the benefits of providing business to each other • Bargaining Power of Buyers:
o The suppliers of food and beverage enjoy the benefit that Drowling provides to the city through their local suppliers of food and beverage o Not much power with the suppliers as there is a mutual understanding between them for the repayment of accounts payable, this creates a relationship for both the buyer and supplier to be lenient on the terms of their relationship due to the dual benefits for being in business with each other
• Threat of Substitute Products:
o The threat of substitute products is very low
o Syracuse being very close to Drowling Mountain provides positive benefits to both parties as delivery times, quality of service, economic benefits and being a positive influence in the community is the basis to their relationship that demonstrates a long term commitment
• Rivalry among Existing Competitors:
o There are 34 competing resorts in the state of New York
o In 08-09, 4 million people visited the state of New York for the purpose of skiing and snowboarding. o Competitors offered lowered prices for their services and they indicated that this was due to the difference in the size of the hills and the difficulty of the runs. o Quite a few other resorts offered year round services at their resorts.
These services includeddogsledding, horseback riding, hiking, and biking and wildlife observation. o Each resort competes for visits to the resort in order to cover costs, and the entire industry would be better served if the region experienced a higher participation rate. o Resorts differentiate themselves by the type of secondary services they provide to their customers. These include things like chalet service, nightlife, equipment rentals and recreational activities available o The degree of rivalry among the competing resorts is fairly high, as they compete mainly on price, customer’s satisfaction and quality of ski experience each resort provides.
After a carefully analyzing Porter’s five forces, the ski resort industry is a tough industry to capitalize growth in, unless you have a positive experience product and service differentiation than what other resorts are offering. There are minimal barriers to entry, which eases pressure on the resorts to be able to forecast industry expectations a little simpler.
The participation rate in snowsports was 7.5% of the US population in 2010, with a male to female ratio of 64:36, in which 46% of male skiers were aged between 13 and 34. This demographic demonstrates that an older population is mostly interested in snowsports as a whole and that having attractive services for this age group is paramount. Skiing is popular enough that profit is attainable and would be sustainable given a good suggestion moving forward in this highly competitive industry, especially between the local ski hills.
Martin Cartier, chair of the board of directors, and Patrick Stanley, a long-time employee of Drowling Mountain, are two key members of the organization who will be responsible for turning the resort into a profit center. Having Peter Bass, a local investor, on board as a new investor in the resort is important because he is saving the resort from going back into receivership and ensuring that operations will move forward effectively and efficiently. Drowling Mountain was also operating as an 8-member board of directors, which was designed and intended for 11 members to serve. All of
the members had vested interest in the future of the resort and all shared a common goal of making Drowling Mountain into a profitable company. A main area of concern for all resource members was that the company had a real lack of cash available on hand for the disposable of company operations that needed funding to ensure sustainability.
The company valued the relationship they had with the city of Syracuse, which included the local businesses and its residents, as Drowling Mountain was the resort of choice for the locals to travel to when they were planning their ski adventures. Being able to provide quality amenities for all patrons visiting the mountain has always been at the focal point in the boards decision making, but a lack of cash, is making it difficult for them to sustain their capital improvements.
Alternative #1 – Change the Price Structure for lift passes
The first alternative Martin can choose is to change the pricing structure of the lift passes for Drowling Mountain.
The current prices for pass holders and daily tickets find themselves significantly more expensive than those prices of competing resort Devil’s Hill. The argument presented for charging higher prices for their pass holders and daily passes was due to the difficulty levels of Drowlings ski runs. There are not many benefits for having higher prices in my opinion as these resorts are competing on a community resort basis, which is defined as “smaller players that primarily targeted the surrounding population and relied on frequent visits from their customer base”.
This definition is where Drowling fits into, however, from my viewpoint, the resort is trying to operate as a popular destination place or in other words are trying to attract more experienced or frequent skiers. I believe Drowling needs to focus on the casual skiers and non-skiers primarily, as their geographic
location does not consist of high quality, competing skiers and snowboarders.
Exhibit 2 shows the break-even costs for the pass holders break-even visits required to get their monies worth on buying a season pass. All passes, except for the Junior’s Pass find themselves significantly higher than those of Devil’s Hill. The biggest benefit Drowling would incur from lowering pass holders and ticket prices would be they would see an increase in the number of passes sold. From an accounting standpoint, having more or fewer patrons on the hill would not increase or decrease costs significantly, however, increasing the amount of patrons occupying the hill would have significant effects on top line revenue numbers. This is where the focus of Alternative #1 needs to focus on.
Alternative #2 – Open the resort up for year round activities
The second alternative that Martin can choose is to open the resort up year round, to have seasonal activities available to provide to those interested. These services would provide year round revenue opportunity for Drowling Mountain Resort and would provide positive customer satisfaction to be able to enjoy all the amenities that the resort has to offer on year round basis.
This alternative would also assist in covering a lot of the fixed assets expenses that are incurred regardless of whether operations are functioning or not. It would also help to retain customers for all seasons activities, as they would feel a sense of commitment and appreciation towards the resort, which would in turn show through their memberships rates increasing.
Alternative #3 – Open up marketing scope
The third alternative for Martin would be to open up his marketing campaign and expand the scope of their target market to make Drowling a more recognized ski destination for travelers. This option would create awareness for tourists traveling to the area to select Drowling as their vacation destination due to the amenities that they will outline in the marketing
There are benefits and disadvantages for any of the alternatives above for Martin to select; however, the most appealing option to me is to have the pricing strategy change for the lift passes. This is beneficial for all stakeholders inside the company, because Drowling needs to see an increase to their top line figures. Accomplishing this task should come across as a positive change, because any time a company lower prices, it is viewed as an attractable offer from a consumer’s standpoint. The lower prices should encourage more skiers to want to visit Drowling Mountain over some of the close competitive places inside their market zone.
The time line that Martin has to work with to implement a new plan is two months from now. He doesn’t have much capital to work with, so any strategy he chooses, needs to be rewarding from a customers standpoint to want to continue to support the resort operation functions.
When Martin meets with his staff in October, he is going to suggest the implementation of a new pricing scheme, aimed at retaining customers to cover the expenses of the ski hill. Exhibit 1 shows the breakdown of the allocation of revenue and expenses to the different operations at Drowling. As the exhibit demonstrates, the ski hill is the only operation that loses money and also accounts for a high percentage of the revenue earned. The decision to lower ticket prices is very beneficial because by theory, lower prices leads to more sales, and if all other services remain the same, then the more visitors to the hill will also increase the profit from the other areas of operations.
This theory also implies though that you would need to attract more customers with lower prices to get back to the profit levels earned while they were charging higher prices. This is where the implementation of alternative two comes into place.
The additional alternative to provide year round services would be an instrumental opportunity at retaining customers. Drowling would have the opportunity to enjoy year round revenue from its committed customer base. These year round services can also be included in seasonal or yearly passes that Martin and his staff can design for the purpose of increasing customer satisfaction with the resort.
The major objective of Martin’s Action plan is to get as many visitors to the resorts as possible, while maintaining a positive price and profit figures that are attractive for the customer and Drowling Mountain Resort.