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Microsoft Word - 9B13A037.doc W13502 LE CERF DE TREMBLANT Tom Funk and Wendy Lange-Faria wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e)
[email protected]; www.iveycases.com. Copyright © 2013, Richard Ivey School of Business Foundation Version: 2014-01-09 Wendy Lange-Faria was concerned about the future of her Mont Tremblant tourist home. She had bought the condo in 2006 as an investment property and for occasional use by her family. However, the number of rentals was disappointing. In 2006, there were only two nights rented, eight in 2007, 27 in 2008 and 41 in 2009. This meant the unit was operating well below expectations, so something had to be done to increase occupancy or she would have to sell the property. Lange-Faria did not want to take this step, so she started to think about how she could increase the number of rentals in 2010. TREMBLANT REGION Le Cerf was located in the Mont Tremblant region of the Laurentians in Quebec. Mont Tremblant literally means “trembling mountain,” the name given to it by the Algonquin First Nation in the seventeenth century. According to Algonquin folklore, the mountain was home to Manitou, the god of nature. When people made too many changes to nature, Manitou made the mountain tremble. Tradition had it that the rumbling sounds heard from the base of the mountain gave the impression it was quaking, hence the name “trembling mountain” or “Tremblant.” In fact, prior to Mont Tremblant becoming a tourist destination, the primary economy was driven by forestry and agriculture. In the early twentieth century, people from Montreal first began coming to the Laurentians for the summer and later on in the winter as well. They stayed in large boarding houses, usually run by farmwomen with outstanding culinary and managerial skills. In addition, many families started renting homes though actual summer cottages at this time were rare. The appeal of the many beautiful, clean lakes in the Laurentians enticed people to visit. Early promotional literature about Morin Heights, for example, boasts of “an elevation of more than 1,200 feet” and “hay fever free air.” The healthful effects of the natural landscape plus opportunities for sports such as swimming and boating encouraged more and more city residents to come to the area. The largest development phase in the Laurentians began around 1960. Until this time, most of the region, especially the more rural areas, had not changed much since the early 1900s. In winter, For the exclusive use of D. KRAT, 2021. This document is authorized for use only by DARIA KRAT in HOS6133 W2021 taught by ZAINUB IBRAHIM, Algonquin College from Jan 2021 to Jun 2021. Page 2 9B13A037 sleighs were still the usual mode of transport in the backcountry because most roads were not open at this time of year. Many farms had no access to electricity until the 1950s and some cottagers were still using kerosene lamps and “the little house out back.” The country experience was quite different from urban life in Montreal.1 Recently, Mont Tremblant became a major tourist destination for golf in summer and skiing in winter. The tourist area was divided into five sectors: Pedestrian Village, the old village, the downtown, the national park and the surrounding area. Each sector featured its own unique attractions from outdoor activities to various cultural events. Mont Tremblant was the highest peak in the Laurentians with 95 trails and three snow parks. At the base of the mountain was a pedestrian-only village complete with boutiques and a vast array of restaurants and cafes. Mont Blanc, the other mountain in the region, was the second highest peak in the Laurentians. It had 41 snow trails and two snow parks. At the base of the mountain there was a huge indoor playground for children. There were also numerous golf courses in the region, with La Belle and La Bête being two superb mountain courses in a majestic setting. Le Cerf was located on the La Bête golf course. The region had numerous and varied year-round activities, which are listed in Exhibit 1. In addition to these seasonal activities there was a casino, restaurants, spas and shopping that could be accessed at any time. LE CERF DE TREMBLANT The condo, named Le Cerf de Tremblant (translated as “deer of the trembling mountain”), was the centre unit in a semi-detached building consisting of three units. It contained 2,300 square feet on four floors. On the main floor there was a sitting room with a wood-burning fireplace, a dining area and a fully equipped kitchen, all open-concept. The sitting room opened onto a balcony complete with wrought iron patio furniture and a large gas barbeque. The lower level contained an entertainment room with a cinema style screen and projector. The bathroom on the lower level also had a stacked washer/dryer. The lower level balcony doors opened onto a terraced porch area. The unit was equipped with an outside personal ski locker directly adjacent to the front door. The upper two floors contained five bedrooms and an additional 2½ bathrooms. The building was situated on the sixth hole of the beautiful Le Bête golf course. Because it was built on the side of a hill, there was a panoramic view of three mountains from the balcony: Mont Tremblant, Mont Blanc and Gray Rocks. Exhibit 2 shows the exterior of Le Cerf, while Exhibits 3 and 4 show interior views of the condo. Lange-Faria purchased La Cerf as a new unit in 2006 for $500,000 including the necessary upgrades and furnishings so it could be rented out. Of this, $300,000 was financed through a mortgage with a fixed interest rate of 5 per cent. Annual costs were approximately $26,400 (see Exhibit 5). In addition to these costs, when the condo was rented, there were cleaning costs of approximately $75 per night and hospitality costs (linens and toiletries) of $10 per night. 1 http://laurentian.quebecheritageweb.com/article/laurentians-very-concise-history-part-2, accessed October 8, 2013. For the exclusive use of D. KRAT, 2021. This document is authorized for use only by DARIA KRAT in HOS6133 W2021 taught by ZAINUB IBRAHIM, Algonquin College from Jan 2021 to Jun 2021. Page 3 9B13A037 ACCOMMODATIONS IN TREMBLANT Since the early 1990s when Interwest invested heavily in the Tremblant area, the number of quality accommodations increased at a rapid rate. There were three very close competitors to Le Cerf. Residences Mont Tremblant Condotel was a 25-year-old company that managed a number of condos on Gray Rocks and La Bête golf courses just six kilometres from the main mountain resort. The development consisted of one- to five-bedroom privately owned condos loaded with amenities. Rates per night started at $200 for a one-bedroom condo and went up to $550 for a five-bedroom condo during ski and golf seasons. This organization had its own website and did a lot of advertising in travel magazines and newspapers. It was a competitor to Le Cerf but also a potential partner since it provided full management services to condo owners such as Lange-Faria. This included housekeeping, maintenance and rental services. This was quite attractive to some condo owners because it provided hassle-free management of the condo. It was, however, expensive as the commission was 40 per cent of the rental fee. Lange-Faria was not sure of the occupancy rate Residences Mont Tremblant Condotel was able to achieve. She was also a little concerned about handing rentals over to a management company because it meant she had no control over the type of renters who frequented the property. She wondered if this might devalue the property. Wyndham Cap Tremblant Mountain Resort was another condo development in the area. Unlike other condos, its units were in large, multi-storey buildings. They had a range of sizes from one to five bedrooms and were fully loaded with features such as a year-round swimming pool, a wellness centre, a water slide for kids, an indoor golf simulator, a tennis facility and an on-premise bistro. Although not on a golf course, the resort operated a complimentary shuttle service to the ski mountain and area golf courses. The condos themselves were very luxurious. Rates were $430 per night in the off-season to more than $600 in the ski and golf seasons. Privately owned condos were a third close competitor in the region. By looking at online booking sites such as EasyRez, Lange-Faria was able to see there were 20 or 30 of these listed at any one point in time. They varied considerably in size, decor and features but were generally priced in the same vicinity as Le Cerf. Lange-Faria noticed there was very little to differentiate one from another and wondered how a potential renter would make a selection. She also noticed that many did not have their own website. In addition to condos, there were several traditional hotels in the region. These offered superb accommodations on a nightly basis and usually at a higher price. Most were located closer to the ski facilities, shopping