MOUNTAIN GAP RESORT

It was early in December 1993 when Beth Earle-Lambert, Managing Director of the Mountain Gap Resort (MGR), received the announcement. It was official! The Nova Scotia government was going to sell Upper Clements Park (UCP) to a foreign operator. In 1985, MGR undertook a major expansion in anticipation of the potential business to be generated by UCP. In 1989, the year UCP opened, MGR was full of dignitaries attending the opening festivities and tourists flocking to see the new park. Room rentals for the 1989 season reached the highest level in MGR’s history at 11,046 roomnights. Now, four years later, the number of roomnights was the lowest in 17 years and MGR was just breaking even. See Exhibit 1. Even though Beth Earle-Lambert was appointed Managing Director only a few weeks earlier, it was clear to her that MGR finally needed a strategic marketing plan.

Mountain Gap Resort's Background

MGR was located in the Evangeline Trail tourism area which covers the western shore of Nova Scotia, from Yarmouth to the Annapolis Valley. See Exhibit 2 for a map of Nova Scotia. The Thornton family had acquired the land in 1915 with the aim of accommodating those who came to the Digby area to fish in the summer. The main building, where the dining room was now located, was built to house the guests. Later, around 1920, a row of cottages was built. These cottages had recently been renovated and modernised, but maintaining a rustic motif.

The property changed ownership several times over the next 40 years. In 1969, Gordon Price, a recreation director from Halifax, convinced Peter and Ann Goddard to jointly buy MGR as an investment. The property consisted of approximately 20 acres with the main building, 12 cottages, a swimming pool, a tennis court, and a shuffle board.


This case was prepared by Dr. Alex Wright and Dr. Scott Follows of Acadia University for the Acadia Institute Of Case Studies as a basis for classroom discussion, and is not meant to illustrate either effective or ineffective management.

Copyright © 1995, the School of Business Administration, Acadia University. Reproduction of this case is allowed without permission for education purposes, but all such reproductions must acknowledge the copyright. This permission does not include publication.


Peter had recently graduated from medical school and Ann was the mother of a young family. No one in the partnership had any experience in the hospitality industry. The most experience that any of them had was Gordon Price’s involvement with managing recreation programs, so he was appointed Managing Director. The resort’s main customers had been touring families and vacationers, and the business had grown during the first few years. In 1973, the partners decided to pursue the very attractive and lucrative motorcoach market. Land was purchased to build more and larger units to satisfy the needs of this market. The concept was to build large lodge-style buildings with 20 units in each for 40 people. MGR expanded from 48 units to 114 units within 47 acres.

In 1975, Gordon Price became ill, and the Goddards had to become more involved with the business. Interim managers were hired to take care of the day-to-day operations but this did not work very well. In 1977, Jim Call, manager of the Grand Hotel in Yarmouth, joined the Goddards to manage MGR. At this time, the new Provincial 101 highway was built and bypassed many of the small towns and businesses including MGR. No longer could tourists see MGR from the road or have easy access to its front door. This had a grave effect on passing trade. Struggling to survive, MGR was re-financed in 1977. The Government of Nova Scotia became its prime lender. It was not until 1985 that MGR was able to begin paying back loans to the investors. Peter and Ann Goddard were proud that MGR was considered one of the gems of Nova Scotia tourism. Jim Call stayed until 1985, when Ann took over as Managing Director. At this time Doug Cochrane, a Wolfville pharmacist, became a partner with the Goddards.

In 1985, it was apparent that a major tourism attraction, Upper Clements Park was to be built in the area. UCP was designed to celebrate Nova Scotia’s heritage presenting displays, handcrafts and amusement rides. See Exhibit 3 for advertisements from UCP. In anticipation and because the proposed site for UCP was less than 15 km. from MGR, Ann hired a landscape architect to develop a plan that would attract tourists to MGR. The decision was made to concentrate any new development on upgrading the facilities and grounds, rather than the recreation facilities. The primary focus was on short stays for families and the motorcoach business, rather than prolonged stays which would require extensive recreation opportunities. The upgrade started in 1988 at a cost of $300,000. An agreement with ACOA, a federal development agency, to split the costs 30/70, meant that MGR had to raise $90,000. "We may have done it without the Park being built. But the potential business from the Park was a powerful impetus," said Ann Goddard.

In 1993, Ann become CEO and Director of Marketing after deciding to move out of the day-to-day operations so she could devote time to market development. Beth Earle-Lambert who had worked as MGR’s financial manager for five years was named Managing Director. All major decisions were made by the Board of MGR which consisted of Peter Goddard as President, Ann as Secretary, Linda, the Goddard’s daughter, as Treasurer, Beth Earle-Lambert, and a representative from the Cochrane family.

Operations

Beth described MGR as "a friendly place with a relaxing atmosphere, ideal for a family vacation." The property had a rocky ocean beach, and its location was quite isolated and required a car to get to nearby shopping and restaurants. Guests usually commented on the friendliness of staff, the relaxing atmosphere and the view. Negative comments expressed by some guests implied feelings that the property was in a poor state of repair and that the room decor should be updated. The Goddards were particularly proud of the MGR’s four star dining room. The menu included items such as 'Chicken Elizabeth.’ The recreation facilities included: a tennis court, a swimming pool, an outdoor chess, and a children's playground. See Exhibit 4 for the layout of MGR. An indoor play area and games room for children were planned. In 1986, one hundred and twenty-five people were employed as either seasonal full-time or part-time workers. However, in 1991, staff downsizing began and by 1993, MGR only employed sixty people.

The actual length of MGR's season was from mid-May to mid-October. With 114 units and a 120 day season, MGR had a room supply of 13,680 roomnights per season. Sometimes MGR opened in early May if it had a special large group booking or a conference. The peak months for occupancy were typically July and August. This did not give MGR much time to make any corrective decisions if business floundered.

MGR’s advertising attempted to exploit its seaside setting. Advertisements were placed in Nova Scotia’s provincial newspaper, The Chronicle-Herald, the Nova Scotia government’s travel guide, "The Do’ers and Dreamers Complete Guide," and the New England magazine, The Yankee. The resort developed a number of co-operative packages with local tourist attractions. For a single price, MGR would arrange golfing, fishing, whale watching or visiting Upper Clements Park. Brochures describing the packages were also distributed to tourist bureaus, ferries, and mailed to past guests. Exhibit 5 shows an example of an advertisement and information on two of the packages.

Business Environment

MGR’s business followed the pattern of economic cycles over the years. However, there had been several factors that significantly affected MGR's business operations.

The tourism industry was a vital component of Nova Scotia’s economy. The provincial government acknowledged that the Atlantic Canadian market was very important but marketing efforts had shifted to the European and U.S. markets. Visitor origins are shown in Exhibit 6. The total expenditures by tourists in Nova Scotia had increased by 5.9% from 1988 to 1992 despite a 12.1% decrease in the total visitor volume. See Exhibits 7 and 8. Approximately 25% of tourism expenditures were for accommodations and 14% of expenditures were made in the Annapolis Valley. See Exhibits 9 and 10.

There were many reasons for the downswing in business since 1989. Two interacting factors that had a major impact were the recession and the Goods and Services Sales Tax (GST). The recession made people feel unsure about their ability to remain employed. Consequently, many people cut back on discretionary expenditures, such as vacations. In 1991, the GST was imposed on all facets of the hospitality industry and the market responded by reducing spending. The GST tax increased the cost of accommodations by 7%.

The Upper Clements Park did not reach its potential in drawing people to the Digby area. Each year since its opening, UCP had lost money and the government had to dip into the Province’s coffers to bail the park out. This move was not popular with the rest of Nova Scotia, since it was largely believed that the decision to build UCP was a political manoeuvre in the first place, rather than a sound business decision. Yet, an economic study showed that the multiplier effect of UCP was quite high for the surrounding area and had stimulated business. Support for the continuation of the UCP operation was strong throughout the region. It was categorically stated that it was good for business and many businesses depended on the people who were attracted to visit UCP. MGR developed packages and had a co-operative arrangement with UCP which included advertising and promotion at trade shows, joint brochures, and selling UCP "bracelets" to tourists. "Bracelets" allowed for entrance, and admission to all the park’s amusement rides as well as other activities.

The sale of UCP to a foreign company was to help ensure that UCP would stay open in the short term because the Provincial Government promised to cover any operating losses for the first five years. However, it was not known whether the new owners would be interested in co-operative promotions, or even if UCP would continue to celebrate Nova Scotia history and heritage.

The motorcoach market largely operated outside the peak summer season and the number of visitors entering Nova Scotia by motorcoach decreased by 20% from 1988 to 1992. See Exhibit 11. Motorcoach passengers were older and content to spend much of their time on the bus. However, the age of the typical passenger was becoming younger. Many of these passengers wanted to explore an area by walking rather than on the bus. Much of the visitor traffic in the Digby area resulted from the ferry boats leaving and arriving at Yarmouth and Digby. See Exhibit 12. These ferries brought both motorcoaches and automobile trade from the U.S. and New Brunswick. The ferries arrived early in the day, encouraging people to drive for a few hours before looking for accommodation. The departure times were in the early afternoon, allowing people to drive and catch the ferry without spending a night in the Digby area. See Exhibit 13.

Markets

Beth stated that MGR's markets had been clearly identified in the past. During a good season, from mid-May to October, MGR accommodated a mixed market of approximately 18,804 guests. Their major focus and the largest market was the vacationing family. Over the past years, Nova Scotian families travelling around the area dominated this market, staying for an average of 2 nights through peak months of July and August. The over-all average stay for guests throughout the year was 1.8 nights.

Families were also the target for UCP, and without a doubt, the success of MGR was co-relational with the success of UCP. In 1990, it was estimated that $100,000 of MGR’s revenue was attributed to UCP-related traffic. Beth noted that some of the family and touring business was attracted by the package deal of UCP and MGR. Upon further study, it was found that UCP had not been the prime motivator, but was merely part of the package. MGR did not have a plan that addressed the scenario of "what if UCP closed." However, Ann became involved with UCP’s management as a member of the Board of Directors in an attempt to check UCP's floundering situation. Simply, if UCP was to cease, the effect on MGR would be significant.

Prior to 1992, MGR which geared its development for increased motorcoach business, had reservations for 200 motorcoaches during its season. Gradually this had dropped to less than 100 bookings and with only 50 to 60 coaches actually showing up. This was because some of the coach tours which had booked at MGR did not have enough passengers to make it worthwhile, so did not turn up. Obviously, the coach tours lost their deposits. This market was profitable when the prices, as quoted in the previous year, remained stable.

In the shoulder seasons, Mountain Gap Resort accommodated Elderhostel programs with themes on the history and nature of the local area. These included whale watching, visits to Annapolis Royal, and Kejimkujik National Park. There was also a small corporate business segment that MGR was trying to nurture for the shoulder seasons. Because it was difficult for MGR to handle large conferences, small conferences were targeted.

It was the feeling of the management that the ferries to and from Digby and Yarmouth were crucial to MGR’s business. It was estimated that traffic on the Digby ferry, the Prince of Fundy, represented between 8% to 15% of MGR’s business. However, minimal marketing effort was specifically targeted in this direction. See Exhibits 14 and 15 for a market segment summaries.

Competition

Beth recognised that MGR’s main competitor was The Pines Resort, owned by the provincial government. Located in Digby, The Pines Resort overlooked the Annapolis Basin and was only about eight kilometres from MGR. Purchased by the province in 1965, The Pines was one of three resorts operated and maintained by the Nova Scotia Provincial Government. The main building had been in operation since 1929 and consisted of dining facilities and 83 hotel rooms. There were also 30 cottages on the grounds of the resort. Three and one-half stars were awarded to The Pines by the Canada Select Accommodations Rating Program, indicating that it was very comfortable and had various facilities and services to support several different recreation activities, such as an 18-hole golf course. Currently, The Pines catered to families, motorcoach tours and could accommodate business conferences in 5 meeting rooms which had an overall capacity to seat 300.

Both resorts had similar facilities and services: licensed dinning rooms, outdoor heated pools, tennis courts, lawn games, and bike rentals. Both were members of Check Inns, the Nova Scotia reservations system. The Pines differed by having a fitness centre and an 18-hole golf course which was home to the Annual Canadian Airlines International Invitation Golf Classic, a charity fund-raiser.

Price is a major consideration when choosing a vacation spot. At The Pines, the main hotel rates ranged from $115 for a single to $280 for a triple bedroom suite. Cottages ranged form $125 to $270, and children under 17 years were free. At MGR, prices ranged from $69 for economy rooms to $160 for family suites, and cottages were from $100 to $140 with children under 18 staying free.

According to the 1993 Doers and Dreamers Complete Guide, an official government tourism publication, only the Digby Pines and the Mountain Gap Resort were classified as resorts. However, there were two full service hotels in the Annapolis Valley, the Old Orchard Inn, near Wolfville, and the Grand Hotel in Yarmouth. There were over 164 properties with a total room capacity of 2,276 in the Annapolis Valley and the average room occupancy during the summer season was approximately 65%. See Exhibit 16.

The Plan

Beth knew that MGR needed a plan that would increase business in the short term and guarantee long term growth. She had to determine the strategic direction for MGR and develop some recommendations to be presented to the Board. After reading the announcement, Beth poured herself a cup of coffee and began to think about what she should do next.


Exhibit 1

Mountain Gap Resort - Roomnights Sold

1987

1988

1989

1990

1991

1992

1993

May

445

241

159

421

445

360

121

June

1017

1154

1613

1250

1103

1217

1045

July

2644

2962

3184

2653

2571

1920

2133

August

2902

3027

3250

2962

2683

2672

2492

September

1890

2538

2347

1682

1847

1839

1706

October

488

497

493

416

555

515

587

Total

9386

10419

11046

9384

9204

8523

8084

Source: Mountain Gap Resort

Exhibit 2

Map of Nova Scotia

mgr01.jpg (29566 bytes)

Exhibit 3

Upper Clements Park - Advertisements

mgr02.jpg (41464 bytes) mgr03.jpg (39117 bytes)

Exhibit 4

Layout of Mountain Gap Resort

mgr04.jpg (66726 bytes)

Exhibit 5

Mountain Gap Resort - Advertisement and Packages

mgr05.jpg (34273 bytes) mgr06.jpg (16591 bytes)
mgr07.jpg (14591 bytes)

Exhibit 6

Tourist Volume to Nova Scotia

Region of Origin

1991

1992

Atlantic Canada

477,500

44.5%

436,400

42.3%

Quebec

58,900

5.5

56,900

5.5

Ontario

234,700

21.9

240,100

23.3

Rest of Canada

45,000

4.2

51,800

5.0

Total of Canada

816,100

76.0%

785,200

76.2%

New England States

99,100

9.2%

89,400

8.7%

Mid Atlantic

58,500

5.4

49,900

4.8

South Atlantic

37,100

3.5

34,100

3.3

Other States

52,000

4.9

52,400

5.1

Total U.S.

246,700

23.0%

225,400

21.9%

U.K.

3,500

0.3%

9,000

0.9%

Europe

4,400

0.4

7,700

0.7

Other Overseas

3,300

0.3

3,600

0.4

Total Overseas

11,200

1.0%

20,300

2.0%

Sources: Nova Scotia Department of Tourism, Culture and Recreation Mountain Gap Resort

Exhibit 7

Total Tourism Receipts

mgr08.jpg (12931 bytes)

Source: Nova Scotia Department of Tourism, Culture and Recreation

Exhibit 8

Visitor Volume Overview

mgr09.jpg (13882 bytes)

Source: Nova Scotia Department of Tourism, Culture and Recreation

Exhibit 9

Tourism Receipts by Expenditure Category - 1992

Type of Expenditure

Amount ($ million)

Total (%)

Restaurant

204

25

Fixed-roof Accommodations

201

25

Shopping

134

17

Automobile and Fuel

100

12

Groceries and Liquor

58

7

Recreation and Entertainment

49

6

Local Transportation

37

5

Campgrounds

12

2

Other

10

1

Total

805

100

Source: Nova Scotia Department of Tourism, Culture and Recreation

Exhibit 10

Tourism Receipts by Region - 1991-92

Tourism Region

1991

1992

Amount

Total

Amount

Total

($million)

(%)

($million)

(%)

Halifax-Dartmouth

346

44

351

44

Cape Breton

149

19

160

20

Annapolis Valley

109

14

109

14

Fundy Shore

64

8

68

8

South Shore

55

7

54

7

Northumberland Shore

57

7

54

7

Eastern Shore

9

1

9

1

Total

790

100

805

100

Source: Nova Scotia Department of Tourism, Culture and Recreation

Exhibit 11

Visitor Volume by Mode of Travel (000)

1988

1989

1990

1991

1992

Automobile

820.4

842.0

812.2

800.1

733.5

Recreational Vehicles

112.1

94.7

79.1

71.7

65.5

Motorcoach

50.0

52.3

44.8

44.2

39.8

Total Road

982.5

989.7

936.1

916.0

838.8

Air

190.0

196.0

215.0

158.0

192.0

Total

1,172.5

1,185.7

1,151.1

1,074.0

1,030.8

Source: Nova Scotia Department of Tourism, Culture and Recreation

Notes: Recreational Vehicles, e.g. travel trailer, tent trailer, motorhome

Motorcoach - bus tours where each bus has an average of 39 tourists. Approximately 1,021 buses in 1992 compared to 1,340 in 1988.

Exhibit 12

Volume of Travellers for Points of Entry in Nova Scotia

mgr10.jpg (21487 bytes)

Source: Nova Scotia Department of Tourism, Culture and Recreation

Exhibit 13

Visitor Traffic Flows - Digby Area - 1992

Origin

Part Pass

Party

Party

Overnight

Total

Throughs

Stops

Visits

Party

Party

Trips Trips

Atlantic Canada

11,000

600

3,200

3,100

17,900

Other Canada

14,800

2,000

3,600

5,900

26,300

International

15,000

1,200

5,100

8,000

29,300

Total

40,800

3,800

11,900

17,000

73,400

Source: Nova Scotia Department of Tourism, Culture and Recreation

Notes: The statistics show visitor activity by those who arrived in Nova Scotia by automobile and RV but not motorcoach in 1992. The average number of people per party is 2.16.

Definitions

Party pass throughs:

Number of party trips passing through without stopping.

Party stops:

Stopping of less than 30 minutes in a community.

Party visits:

Stopping of more than 30 minutes in a community.

Overnight party trips:

Number of parties stopping for one ore more nights in community.

Visitor nights:

Party nights in a community.

Exhibit 14

Mountain Gap Resort - Market Segments (%)

1989

1990

1991

1992

1993

Motorcoach

23

16

15

20

19

Groups and Conventions

6

9

8

5

4

Prince of Fundy

15

15

12

6

8

Elderhostel

0

0

11

14

14

Vacationers

56

60

54

56

54

Source: Mountain Gap Resort

Exhibit 15

Tourist Volumes at Mountain Gap Resort

Region of Origin

1993

Atlantic Canada

9,148

48.6%

Quebec

220

1.2

Ontario

740

3.9

Rest of Canada

315

1.7

Total of Canada

10,423

55.4%

New England States

2,750

14.6%

Mid Atlantic

722

3.8

South Atlantic

216

1.2

Other States

485

2.6

Total U.S.

4,173

22.2%

Motorcoach and Others

4,208

22.4%

Total Guests

18,804

100.0%

Source: Mountain Gap Resort

Exhibit 16

Accommodation - Evangeline Trail Region

Accommodation Type

Properties

Rooms

Hotel

4

262

Motel

47

1,206

Small Inn

14

126

Bed & Breakfast

72

268

Cottages

20

165

Resorts

2*

227

Hunting/Fishing Lodge

5

22

Total

164

2,276

Source: Nova Scotia Department of Tourism, Culture and Recreation

Note: * The resorts are Mountain Gap Resort and The Pines.