In early September 1979, Frank Rance,
General Manager of Couples, a resort exclusively for couples, in St. Mary,
Jamaica, was considering what recommendations to make to John Issa, director
of the resort. The Issa family, which owned Couples and numerous
other enterprises in Jamaica was very concerned about maintaining the profitability
of this almost two year old venture. The family also was considering
expanding this unique resort concept into other areas of the Caribbean
and the world. Besides refining basic operational procedures, Rance
had several concerns to factor into his deliberations.
First, there was the long-term appeal
of the couples-only concept. Next, there was the impact of competition
from not only single unit resorts, but especially from experienced international
multi-unit operations like Club Mediterranean (referred to as Club Med).
Also, the impact on tourism of the economic trends of inflation and recession,
especially in the United States and Canada, had to be assessed. If
these factors on net were judged to be conducive to tourism, there remained
the question of where to acquire or to build new sites, and any changes
that should be made in merchandising and operating procedures of these
new units. Rance knew his recommendations would be major factors
in the Issa family's final decisions. Also, he had just one week
to prepare them.
This case was written by Professor
Rudolph Winston, Jr., of Babson College as a basis for class discussion
rather than to illustrate either effective or ineffective handling of an
entrepreneurial situation. The author acknowledges the financial
support of Northeastern University which made this case possible.
1980 by Rudolph Winston, Jr.
(Note: Dr. Winston is no longer
affiliated with Babson College. He lives in a small town west of
OVERVIEW OF TOURISM
Generally, tourism worldwide has
been increasing in recent years in terms of the total number of travelers
and expenditures. U.S. citizens departing for foreign countries reflected
this worldwide rise. In 1978, an estimated 23.5 million Americans
traveled abroad, spending about $10.7 billion dollars. Compared to the
previous year, this represented a 3% increase in travelers, and a 2.5%
increase in dollars spent. An annual growth in personal income of
9% and spending a larger proportion (6.7%) on travel accounted for these
increases. At the same time, the number of foreigners coming to the
U.S. had increased at an even faster rate as shown by the decreasing deficit.
In 1976, the number of Americans that traveled abroad exceeded the number
of foreigners that came to the United States by 5.4 million. This
deficit had been dropping steadily and was estimated at 3.4 million for
1978. Likewise, the travel dollar deficit for 1978 dropped to $2.6
billion, lowest recorded in the last eight years.
While in 1977, about one-half of
all U.S. travelers' destinations was Canada, only 18% of total U.S. travel
dollars were spent there due to shorter stays, use of automobile transportation,
and low per capita expenditure. The situation was just the reverse
in Mexico, which got only 12% of our total departures, but 25% of total
U.S. foreign travel expenditures. The appeal of the floating peso,
better air service, and more interest in tourism by the U.S. and Mexican
governments explained the appeal of Mexico for U.S. travelers. Western
Europe and the Mediterranean ranked after Mexico in popularity, followed
by the Caribbean area.
While the Caribbean has benefited
from the increased American travel, it lost share of market in terms of
number of travelers. Due to the political unrest of the 70s, the
Caribbean had lost not only share of market, but also experienced a decrease
in number of travelers as well as expenditures. However, recent trends
indicated more U.S., as well as foreign, travelers were discovering the
Data developed from various tour
services indicated that there was a change taking place in the American
tourist. While the new profile traits were noted of tourists with
destinations overseas, judgment indicated they probably applied to the
Caribbean tourists as well. These traits were in sharp contrast to
traits of just a few years ago:
Shorter stays of 2 weeks or less versus
More than one trip outside the country
TOURISM IN JAMAICA
Longer stay in one country.
The tropical climate and varied but
magnificent scenery have made Jamaica a popular tourist destination.
Since the late 1940s, the tour industry grew steadily and by 1978, tourism
was the second largest source of foreign exchange behind alumina / bauxite.
Over the past three decades, numerous resort areas were developed along
the north coast and in and around Kingston, the island's capital.
In these areas, luxury hotels, pension type inns, apartments, and fully-staffed
villas were built to cater to the growing number of foreign travelers.
The Jamaican Tourist Board, a government agency, spent in excess of $2
million (Jamaican *) annually to sustain the flow of foreigners and to
encourage the development of new resort sites. Some of these new
sites were government owned.
The Jamaican government was very
concerned about its tourist dollars in light of the current economic problems
confronting it at the start of 1979:
A $110 million deficit budget for 1977/78.
A foreign exchange shortage.
Breakdown of confidence in the private
These problems were caused and/or exacerbated
by the following:
Immigration of skilled and managerial
1970 oil prices were five times those
Undiversified export economy (70% Alumina
Exports' prices did not rise as fast
as imports' prices.
40% decline in net tourism receipts
Besides promoting tourism, the Jamaican
government has taken a number of steps designed to strengthen the national
economy. These included the following:
Net outflow of private capital.
Made an agreement with the International
Monetary Fund to receive $250 million over the next three years.
Secured credits from commercial banks,
international organizations, and other countries.
Unified the exchange rate,
Limited bank credit expansion to public
and private sectors.
The government hoped that these steps
would not only stabilize the economic situation but encourage foreign investment.
Joint ventures to diversify Jamaica's exports were emphasized to improve
foreign exchange earnings and alleviate domestic problems.
Tightened import restrictions.
* All dollar figures are Jamaican
dollars unless otherwise noted. Prior to 1976, one Jamaican dollar
equaled one U.S. dollar. After devaluation, one U.S. dollar equaled
BACKGROUND OF COUPLES
Although Couples opened for business
on January 20, 1978, the events leading up to the concept started in 1974.
At that time, the Jamaican Government was interested in expanding tourism.
Besides the extraction of bauxite, tourism was the major generator of foreign
exchange. A potential resort site had been identified at Negril on
the northwest coast. The seven miles of untouched beach had no industry
and the areas surrounding it were also undeveloped. The government
approached the Issa family and asked for a proposal of how they would develop
THE ISSA FAMILY
It was not surprising that the Issas
were sought out to develop the Negril site. The family's ventures
have touched every major aspect of business on the island.
Of Arab decent, the Issa family came
to Jamaica in 1893 from Bethlehem led by their great grandfather who was
a trader selling cloth. In 1946 the family bought a hotel in Kingston
with the United Fruit Company. The Issas promptly broke with British
colonial tradition by making the hotel the first to permit black Jamaicans
as guests. This hotel did very well, and, in 1949 they built Tower
Isle in an area so sparse that water had to be trucked in to mix cement.
Since 1949, the family proceeded to purchase other hotels, as well as to
establish foreign car dealerships, and the Hertz franchise. They
also supplied equipment for the extraction of bauxite, the Island's primary
John Issa's uncle was chairman of
the Jamaican Tourist Board during the years that tourism prospered.
Thus, as established business achievers, the Issas accepted the government's
challenge to design, supervise construction, and manage the new resort.
The Issas chose not to risk an equity investment, but received a fee for
Note: John Issa's uncle, referred
to above, was Abe Issa ... "the father of Jamaican tourism." Abe
had acquired the Myrtle Bank hotel in Kingston, which was successful ...
it had many celebrity guests such Joan Crawford, Errol Flynn, Winston Churchill
etc. Abe also was the person who built Tower Isle Hotel near Ocho
Rios. It has been said that Abe Issa's contemporaries told him that
a hotel on the north coast would never be profitable. However, he
proved all his critics wrong.
Tower Isle Hotel quickly became the place
where celebrities went ... guests such as Debbie Reynolds, Sarah Vaughn,
Vincent Price, and Eva Gabor stayed there. Mr. Jamaica brought
an awareness of a Jamaican paradise to travellers (or tourists) in the
international market. It was somewhat a predecessor to what would
today be called a "jet set" resort. Many well known personalities
who also frequented Tower Isle Hotel included stage actress Mary Martin,
movie stars Montgomery Cliff, Shelly Winters, Eva Gabor and Errol Flynn,
to name a few. Noted visitors included writer Ian Fleming (the author
of the James Bond books his vacation home "Goldeneye," about four miles
east of Oracabassea, was where he wrote all thirteen of the Bond novels)
and playwright and songwriter Noel Coward (who's vacation home in Jamaica
was "Firefly" located in Port Maria, not far from Tower Isle).
THE FORERUNNER OF COUPLES STAGE
John Issa first examined the resort
hotel market generally to see what was working and why. The Club
Med concept immediately impressed him. It was the fastest growing
international resort hotel chain in the world in terms of sales (1978
U.S. $358.5 million) and sites (87 in early 1979, plus 5 scheduled to open
by the end of the year). These "Village Hotels" were positioned mainly
for singles. Reservations were made in advance with guests paying
for transportation and room. At the resort they paid additionally
for drinks and for some activities. Recreational activities were
numerous with trained staffers available to conduct scheduled classes geared
to the guests' abilities.
John Issa studied the Club Med formula,
and noted that it had turned on a primary demand for foreign resort hotels.
However, Club Med could not completely satisfy this demand for a variety
of reasons. Among them there were high transportation costs to some
of its sites, full bookings at peak seasons, and some aspects of the way
Club Med resorts were run.
CLUB MED TRAITS AND THE ISSA RESPONSE
First there was the language problem.
English-speaking and other non-French speaking guests had difficulty with
the total French orientation in almost every aspect of the Club Med resorts,
from promotional literature to menus. Next, there were beads used
in place of money at the resort, with different colors representing different
amounts. Guests often found they had too many of one color and not
enough of another when purchasing an item or service. The decorum
of the rooms was judged to be rather bare, no pictures on the walls and
sparse furnishings. Activities were very structured at appointed
times for groups, and meal hours were judged by some to be too short.
However, John Issa believed the basic
Club Med format was a proven success. In spite of the weaknesses
mentioned, almost 300,000 Americans, Canadians, and other non-French speaking
tourists had signed up for the 1977-78 season. John Issa reasoned
that if an alternative was offered, capturing the positives of Club Med
and overcoming the negatives, there would be a profitable response.
The result was the creation of Negril Beach Village, the Jamaican resort
based on the theme of a "pressure-free holiday with simple but elegant
Negril differed from Club Med in
several critical aspects besides location (no Club Med resort in Jamaica;
the nearest ones were in Eleuthera in the Bahamas and in Acapulco, Mexico)
and English-speaking orientation. The money problem of colored beads
was solved by the use of shark teeth, each having the value of fifty cents
($0.50). Drinks and services were priced as multiples of this basic
value assigned to the shark teeth. In addition, meal hours were longer
and more flexible. Activities were informal, less structured, and
peer pressure was judged to be less. Activities like horseback riding
were offered free at Negril Village. The rooms were spruced up with
pictures on the walls, extra furniture, radios, carpets, and central air
conditioning, so that "people could stay in them, not just sleep in them."
The Issas believed that these changes would attract North Americans and
others, because guests would "be taken from the day-to-day cares of the
world." To launch this new venture, John Issa hired Frank Rance to
be the general manager in December of 1976.
BACKGROUND OF FRANK RANCE
Frank Rance was born 32 years ago,
in Kingston, Jamaica, the third of five children. His father worked
for a local tobacco company as a quality control supervisor. Rance,
an above average student, completed high school and went to work for one
year as a time keeper and cashier on a local sugar farm. In February,
1966 at age 19, he got a job as a checker and cashier at the Hilton International
Hotel. He progressed well during his eight years with Hilton.
In 1974 he became an auditor, a top position in financial control for the
Jamaican Hilton. His potential had been identified during these 8
years and Hilton sent him to Montreal to its worldwide Career Development
Institute to be trained in hotel management. The eight week program
was soon to be followed by five trips to the Hilton Caribbean training
center in Puerto Rico for additional training in hotel accounting, food
and beverage operations, and general management.
In early 1975 Rance joined the Issa
Hotels of Jamaica as Vice President of Administration and Sales for their
Runaway Bay Hotel* which was located 19 miles west of Ocho Rios on the
North Shore. While there Rance kept the hotel profitable, even though
other resort hotels were failing and or losing money. In late 1976
the Issas moved Rance to Negril Beach Village. This hotel was owned
by the Jamaica Government, who contracted with the Issas for management
services. Earlier the Issas had developed the idea for the hotel,
but chose not to risk an investment in an equity position. The 4%
of sales fee was judged by the Issas to be a better position to take given
their other ventures.
At Negril, Rance had introduced nude
bathing to Jamaica. Although the practice was outlawed, he was permitted
to do it because his hotel was successful. While Rance's first year
at Negril had been judged excellent, other factors caused him to rethink
his future. Even though the Issas had a contract for management services
with the Jamaican government, a separate agreement had been made between
Rance and the government to cover a bonus. Thus Rance was supposed
to get a salary from the Issas, plus a bonus of 5% of the hotel's profits
from the government. For the first year's operations this amounted
to approximately a $50,000 bonus. The government refused to pay the
bonus, with one official telling Rance, "...what would happen if the average
Jamaican heard that you made over $50,000?" Rance left the Issas
and Negril in late 1977 and became general manager of the Zemis Hotel in
Nassau, Bahamas. He stayed there through May of 1978. During
this period he formed Caribbean Hotel Consultants with an Englishman living
in Jamaica. Also he commuted to Jamaica every two weeks to consult
with the Issas on the development of the resort hotel that would come to
be known as "Couples."
* This hotel was sold by the Issas
in 1977 after a bad 1976-77 winter season due to national unrest when Parliamentary
elections were held.
Note: When the Jamaican government
originally contracted the management of Negril Beach Village, P. J. Patterson,
who was then the Minister of Tourism, was instrumental in the contract
being awarded to John Issa.
Runaway Bay Hotel subsequently did again
become a resort managed by the Issas, first as Jamaica Jamaica and later
renamed Breezes Golf and Beach Resort and managed by SuperClubs, the resort
management company headed up now 2001 by John Issa.
THE SUCCESS OF NEGRIL VILLAGE
- STAGE 2
The results for the first year (1976-77)
spelled success. Gross operating profit was $1.8 million Jamaican.
While gross revenues were $7.0 million, there was a net loss due to $1.0
million being written off because of the devaluation of the Jamaican dollar*.
More noteworthy was the fact that a profitable gross margin and net profit
was realized in July, a traditionally poor tourist month. For year
one, Rance had targeted a $1.6 million net profit on gross sales of $6.4
million. This would represent a 25% net profit on sales compared
to the Caribbean hotel average of 13% P.A.T. But management still
considered the first year's results very good.
Besides the gratifying income statement,
Rance and the Issas also noted the profile data on the guests. The
profile extracted from the following findings proved quite interesting.
Percent of all guests
Age group 22-32
General Business Executives
They also noted that 89% of all reservations
came from the United States. They interpreted this statistic as being
proof that their desire to create an English speaking alternative was working.
Other data indicated that word of mouth was a major factor in people's
decisions to pick Negril Beach Village.
|How Guests Heard of Resort
Percent of Guests
Advertising (which was to trade
As these interesting data were being
examined in late 1977, the Issas noted that two of their other hotels were
losing money due to the unfavorable impact of the political unrest on the
tourist trade. One of these hotels, The Runaway Bay, was acquired
by the government and leased to a favored operator. But the Issas
were determined to maintain the Tower Isle Hotel at St. Mary's as
their flagship hotel. The question was how to make it viable again,
while other hotels were failing.
* In late 1979, one U.S. dollar
was worth $1.66 Jamaican.
THE BIRTH OF COUPLES - STAGE 3
While contemplating the problem of
the Tower Isle Hotel, John Issa recalled the data generated by Negril Beach
Village's first year. One statistic caught his attention particularly
- more than half of Negril's guests were married or singles traveling as
A brainstorming session was held
subsequently with three Canadians (one advertising consultant, a marketing
VP, and a creative writer). They reviewed once more the Club Med
model, and how they modified it for Negril. They searched behind
the successful numbers and asked what could be done to improve upon Negril.
More and more they focused upon the annoyances that couples usually had
at resort hotels such as:
It was then that they came to the question,
"Why not a hotel especially set up for couples only?" They noted that four
out of five adults lived as a couple, so they felt they were essentially
catering to a mass market. Omitting children was judged not to be
detrimental, because they were "Couples". Rance noted "Tower Isle
was a beautiful lady in her time. It would have been rape to put
the Couples concept onto the name. It was a brave step to change
her name to Couples." The features of the resort were designed to
overcome the negatives learned from the examination of Club Med and Negril.
The tone of the resort was to be a place for people in love, who desired
a simple hassle-free, but elegant vacation.
Single guys making passes at wives
Activities oriented more to single individuals
The presence of children
Hassling over payments for activities,
Check-in, check-out procedures
TURNING THE OLD LADY INTO SOMETHING
Late in 1977, the transition of Tower
Isle into Couples started. Structurally, a $1.2 million investment
gave the old hotel a complete face lifting. The objective was to
remove all traces of the former traditional operation, and create a relaxed
tone and a relatively unstructured environment. Accordingly, the
formal dining area was renovated completely. A more open, colorful
style was created with tables for four, six, or ten people. This
table arrangement encouraged open seating, and made it easy for guests
to get to know each other. A piano bar was built next to the dining
room. It stayed open from 11:00 P.M. until the last guest left, providing
drinks, live music, and snacks. In addition, a large patio was built,
which served as a dining area for breakfast and lunch, and an entertainment
area with stage and dance floor for the evening. The entire patio area
was open to the ocean breezes, yet protected from the sun and rain by a
coconut thatch roof. Next to the patio area was a large swimming
pool, with tables around it, plus sheltered activity coves where crafts,
ping pong, and exercise equipment were available. The other structural
change you would notice as soon as you arrived. Gone was the traditional
black-tied doorman with long white socks and white hat. Also missing
were the check in and check out facilities so common to every hotel.
A desk with an attractive young lady behind it welcomed you. Finally,
to create the new tone the personnel were encouraged to fraternize with
the guests on a first name basis. Dress codes for guests as well
as staff were relaxed...No ties or jacket, just casual sportswear was necessary
for dinner. Bathing suits or shorts were the typical dress for breakfast
or lunch on the patio.
Couples went one step further.
The price guests paid for the trip would cover everything
room, board, all tips and activities. After their plane landed, a
couple did not have to spend any money. Even transportation from
the airport to Couples as well as the return trip were free. Guests
paid only if they went shopping in local towns, or selected certain activities
like scuba-diving, tours to nearby tourist attractions, or special boat
cruises. The only necessary expenditure was a tourist tax of five
dollars (U.S.) per person which was paid on departure at the airport.
But cigarettes, liquor, meals all you wanted of each, were covered by
the basic one-time cost. Also noteworthy was the fact that there
was a full day's complement of free activities like tennis, crafts, horseback
riding, sailing, cycling, and live evening entertainers plus dancing and
a piano bar, which was placed in each room to acquaint guests with services
Like Negril, the 131 rooms were large,
well furnished, and the walls were decorated with pictures. Each
had a set of sliding doors that opened onto a patio or terrace facing the
mountains or the ocean. There were also four villas on the grounds,
each of which could house two couples in separate bedrooms and bathrooms.
The shared kitchen and living room made these villas ideal for two couples
In addition to these structural changes,
John Issa released the entire staff of Tower Isle. This decision
cost $330,000 because government regulations set strict guidelines for
compensation of released workers. The released staffers were replaced
by 182 new ones, seven of which were managers, 61 were supervisory, clerical,
and activity coordinators, and the remaining 114 were hourly workers.
The list below shows the number of hourly personnel by functional areas.
Distribution of Couples' Staff
|Kitchen (butcher, cooks, pot washers)
|Total of Hourly Workers
With the exception of most of the
salaried staffers, all new hourly personnel had no hotel experience.
About 85% of these persons had not been employed before, having just completed
schooling and / or been unemployed - there being few jobs available on
the island for unskilled workers.
For additional insight into personnel
changeover, the casewriter interviewed Neville Hudson, Manager of Internal
Support Departments, and Cargill Brown, the Resident Manager. Hudson
pointed out that in the latter part of 1977, Couples went into the hills
of the St. Mary area and put up posters which read, "If you want a job,
come down to Couples." Over 700 people applied. Those judged
the brightest were selected. They were trained for two weeks with
some financial help from the Jamaican Tourism Development Company.
The new employees were paid from the time they were hired. The service
staffers averaged about $35-$55 per week. Most of the non-salaried
personnel were 18-21 years old, with several over 25. A few had some
high school, but most completed only primary school (9 years).
The salaried staffers often had to
be recruited from other areas of the land. In order to attract the
best ones, good salaries were offered, plus free housing across the street
from the resort in small villas consisting of about four rooms plus bath.
PERSONNEL POLICIES AND BENEFITS
For this new staff, Couples initiated
a number of innovative policies. While some resorts may have offered
one or more of these benefits, none had the entire package that Couples
Staffers got all meals free while working.
Free housing for staffers living far
away or working odd hours, judged to be worth about $3,000 per year.
10% of gross revenues was distributed
every 14 days to all staffers in equal shares with the exception of Rance,
who reserved a yearly bonus based on profits. This revenue sharing
averaged about $113 per person per week.
To compensate for the currency devaluation,
salaries were raised immediately to maintain buying power.
Staffers were guaranteed year round
employment, not just work during the peak season.
Special awards of $100 or more were
given for outstanding work. Most employees qualified for this bonus.
When Hudson and Brown were asked about
problems with the personnel, they felt there were none of a serious nature.
Absenteeism, which averaged about 1% per day, was considered the only difficulty
with the staffers. Turnover was not a problem. In fact, the
casewriter noted there were only a few new faces in June 1979 compared
to December 1978 when he first visited Couples. Some of these new
faces had come from Negril Beach Village where they had been activity coordinators.
Rance, when asked about these new additions, said he told them, "Come on
down. I know your work, I know you'll do good stuff." Commenting
further on his dealings with staffers:
All employees with potential were sent
to special training sessions on site. Management staffers were sent
outside the country for training. At this time, the Chief Engineer
and the Comptroller were attending a two-week seminar at Cornell University
School of Hotel Management. Hudson was scheduled to go to this same
seminar when they returned.
"I don't say that every
worker is perfect in every sense, but while they're under my jurisdiction,
they behave themselves and they don't want to let me down ... I take the
time to make certain that if I have to crack the whip, I crack it.
And they listen. They leave wherever they are to work with Frank.
At least (here) they know where they're going."
Rance also noted his preference for
experienced staffers. "If you've had any experience abroad or in
any other place, I'll hire you over someone without this background."
The casewriter observed Rance's interaction with staffers and asked about
it. "I don't believe in dominating. Guests should not see signs
of management outside, but things should be working. I prefer to
observe, then in my office give orders. I don't want guests to see
me managing or more dressed than they are."
To reflect the attitude of employees
and the atmosphere of the resort, Rance told the casewriter about one of
the women in housekeeping. The young lady had been cleaning up this
guest's room for several days, and knew his name was Ron. Ron was
one of the travel agents Rance had invited to Couples. The young
lady knocked several times, but got no response. Aware that the door
was locked from the inside, she went outside to the bathroom window and
called out several times, "Ron, are you all right?" Ron was awakened
from his deep sleep and replied that he was fine. Later that day,
Ron went to Rance's office and said how amazed he was that "...she was
genuinely concerned that I was O.K." Rance pointed out that he stressed
to employees the need to be concerned and friendly with the guests.*
* The casewriter personally benefited
from this, when his luggage was delayed for two days. The staffers
telephoned the airlines several times daily about it, as well as washed
and ironed the clothes the casewriter was wearing. In addition, they
got some personal effects and beachwear for the casewriter to wear.
They never expected nor would accept any tip for these services, or any
The promotional efforts for couples
were modeled on the experiences of Negril Beach Village, and several other
resorts. These resorts followed the theme of pleasure presented seductively
but not sexually in their promotional literature. For example, Negril's
posters featured the torso of a woman wearing a string of shark's teeth
which hung between her partially exposed breasts. The banner headline
of the advertising was "Hedonism." Following Negril, in the fall
of 1978, were Zemi in the Bahamas, Jamaica's Trelawny Beach, and the Dominican
Republic Club Dominicus. Each picked some aspect of the sensual to
stress. At Zemi, where apples were used for currency, the featured
theme was "Edenism the non-stop party in the Bahamas." Displays
showed a big apple which looked like a female derriere (the bum come-on).
Both Zemi's and Negril's marketing were executed by Toronto adman J. Alan
Murphy. Trelawny Beach followed suit with "Ectacism," and Club Dominicus
with "Sensualism". By the end of 1978, large tour operations were
into this seductive theme running advertising, one of which read, "Club
Med, Move Over! We've got Ectacism, Hedonism, and Edenism." The results
indicated that vacationers were responsive to this approach. Rance
"At Zemi's and Negril, we
used art to express the quality of the vacation being offered. There
were too many ordinary vacations. The days of showing couples splashing
in the water or lying on the beach are over."
THE LION'S ROAR
Murphy, Rance, and Issa agreed the
sensual theme should be used for Couples. Rather than a word, they
chose the symbol of two lions and the words, "Now the Couple Takes Its
Rightful Place in the Sun." A Canadian artist, Heather Cooper, was
commissioned to do the artwork. The finished product showed a male
lion mounted from the rear atop a lioness with her full breasts showing.
Like Negril's torso, no explicit sex or genitalia were shown. In
spite of efforts to play down the sexual image, tourist agencies, the Jamaican
Tour Board and others thought otherwise. Meanwhile, the fate of 10,000
posters costing $20,000, plus the plans for the lions to be Couples' logo
to be featured on the brochure cover, were hanging in the balance.
Rance pointed out in response that the lioness had a placid facial expression,
that her tail was underneath her and therefore "there could be no penetration."
He also mentioned the fact that the poster design "with breasts" had been
awarded the New York Art Directors' Club gold medal for illustration.*
While the poster and logo remained
intact, the brochure cover was changed. The lions were replaced with
general views of the resort, which had to be photographed with live models
while renovations were being done. However, the publicity about the
dispute in the press and among the trade, created a lot of notoriety for
* In spite of winning the award,
the Union Carbide people would not let the poster be hung in their exhibition
of award winning posters. They did say if asked they would get it
out of the closet for people.
OTHER PROMOTIONAL EFFORTS
While the logo issue was being resolved,
many travel agents were contacted personally. From his prior affiliations,
Rance was well known and respected. In fact, the Negril advertising
all carried these final lines:
"If you would like to see
before you send, give our 'Chief' a call. He's Frank Rance, at 957-4200
in Jamaica. He'll probably tell you 'Soon come, man.'"
He visited the large tour operators
in Canada and the United States with a slide presentation:
"I visited one agency with
63 offices. If each office would give me one booking a week, that
would cover over 45% of my capacity."
Rance also relied on his reputation,
and judged tour agents' responses would be positive:
"Wherever Frank goes, that's
where we'll send our people. We have confidence that all will go
well or Frank will fix it."
While Negril had been presented to tour
agents as an alternative to Club Med, Couples was presented to them as
an "alternative to the alternative."
With the season already started and
some negative images of Jamaica for tourism remaining, the January opening
of Couples produced only 38 guests in the first week and 18% occupancy
for the month. By the end of March, the occupancy rate had reached
30%. About this time, the decision was made to stress getting tour
agents to visit Couples with their mates.* If they liked the experience,
they would be more likely to recommend it to others. In June of 1978,
Rance shifted from his consulting role to that of full-tune general manager.
There were advertisements placed
in trade magazines to reach tour agents. Although Couples placed
no advertisements in consumer media, their tour operators did. Ultimately,
word of mouth recommendations of the tour agent and/or a friend who had
been to Couples, was the major promotional technique. The tour operators
received brochures to distribute to their agents who passed them out to
potential guests. During the first year of operations, the tour packagers
or representatives could sell as many rooms as they could, calling Couples
to confirm the availability. In 1979 Couples started making allocations
to tour operators, letting them do mailings to their agents and attending
trade shows, which Couples used to do on its own. John Issa believed:
"...Make the wholesaler
sell, rather than perform a clerical function only."
* Tour agents normally got a 75%
discount from the airlines, and a 20-50% off for accommodations.
These discounts usually did not cover mates or children.
After Rance joined Couples in June
1978, and as more travel agents "came on down" to the resort, occupancy
rates picked up. The flow of guests continued to increase until occupancy
surpassed 100% in July 1979.* Advanced bookings indicated a full
house for each of the off-season May-June and September-October periods.
While occupancy rates, revenues and profits climbed, a number of operational
problems surfaced during the first eighteen months that affected both management
and the guests.
* Permitting travel agents to sell
more than 100% was an acceptable practice due to cancellations and rescheduling
by guests. When extra guests did arrive, they were placed in extra
villas nearby and transported to the resort.
THE VIEWS OF THE GUESTS
The casewriter interviewed over thirty
guests in June 1979 and a similar number in December of 1978. The
following list was representative of the guests' positive and negative
reactions to their stay at Couples.
Overall, most guests of all age groups
liked the experience and intended to recommend it enthusiastically to relatives
and friends. The lack of formality and structure, no money needed
for purchases or tips, a wide range of free activities, friendly staffers,
plenty of good food and liquor, live entertainment nightly, and room accommodations
were judged by guests to be superior to the facilities offered by other
resorts, particularly Club Med. One couple from Frankfort, Germany,
liked Couples so much that they were just completing their second four-week
stay within five months. They even invited any Couples staffers who
came to Germany to stay in their home. Incidentally, this couple
already had booked their next four-week stay for six months hence.
However, a few guests felt differently
due to one or more of the following reasons:
High need for structure/ formality
Some guests generously interpreted the
brochures and/ or descriptive comments by travel agents and friends.
One couple expected breakfast to be served in their rooms on the terrace.
Another had a friend that got travel bags and other handy travel items
from their travel agent, yet they did not get these items when they booked
the trip. Also, some guests booked ocean view rooms but found these
had been oversold on arrival, and they had to take a mountain view room
or a villa until an ocean view was vacated. A few guests complained
about the lack of activities during rainy days. Others pointed out
how staffers often were not at their activity areas when guests needed
them, but could be found at the bar or beach areas chatting with guests.
A frequently voiced irritation was the lack of tennis pros to hit with
or instruct guests. When the pros were found they seemed to enjoy
playing with each other or with guests who were very good players.
Also, the tennis courts had been painted with a high gloss paint that made
footing difficult. There were not enough playing cards, tennis balls,
ping pong balls, and the paddles needed replacing. There were also
complaints about a significant amount of the activities equipment needing
repairs (e.g., paddle boats, bicycles).
Poor equipment maintenance
Everybody found fault with the transportation
to and from the airport. The trip took an hour and a half or longer.
The road was narrow, winding through small villages along the north shore.
This trip was very tiring. Often, several stops were made to pick
up or deposit guests at other resorts. Waiting for luggage to be
untied from atop the van or unpiled from the rear did not help. There
was also the waiting for planes in Miami (2 hours) and in Montego Bay,
where some guests with later flights had to take the van with those who
had earlier flights.
THE VIEWS OF MANAGEMENT
Interviews with John Issa, Rance
and top managers indicated they were aware of these difficulties.
While there was little that could be done about the transportation problems,
the casewriter noted on his second trip that most of the equipment problems
noted above had been solved. The reasons for the problems and the
methods used to solve them were quite interesting.
The equipment problems were due to
the management being unable to buy the spare parts or new items, even though
the money was available. The Jamaican government had placed very
strict limits on importation of any item by requiring all local buyers
to have an import license. This was done to reverse the negative
balance of payments and conserve foreign exchange. The procedures
to import items were very involved and lengthy. Foreign sellers were
discouraged by long waiting periods for payment after delivery. Sellers,
therefore, when they did choose to deal with Jamaicans added on a significant
factor in setting price to compensate for the administrative and cash flow
problems. But management realized that the guests paid for a "hassle-free
vacation," not problems with equipment. Hudson, the manager of internal
support departments pointed out how difficult it was to get raw materials
and supplies to maintain the resort. But he stated, "We don't believe
in passing the buck. Somehow we'll get these things." He also commented
that sometimes equipment was not available but some guests would hoard
items like snorkel equipment. Management judged that tolerating the
hoarding was a necessary trade-off to promote the friendly family atmosphere,
which strict policing type controls would offset.
One way to secure some of the needed
items was to have travel agents and other friends bring them when they
visited. Foreigners and returning Jamaicans could bring such items
duty free. The day of one interview, Rance had just returned from
the U.S. with new ping pong paddles and balls, volley balls, and other
sports equipment. When larger items were involved, such as replacing
a unrepairable air-conditioning condenser, then the lengthy import process
had to be started. The condenser took five months to get.
For some problems, Rance and the
other staffers had to figure out other types of solutions. For instance,
the tennis court had been painted originally with a durable enamel paint
purchased locally. Once Rance realized that the court surface was
slippery, he had a local painter make up the type paint that was needed.
Rance expressed his approach to these operational problems:
"...Don't throw up your
hands and say you can't be bothered with Jamaica. Recognize there
are problems and try to work around them... Keep them as low as possible...
If you're going to stay here, make a living, work and get ahead, you've
got to be creative... Stop griping, do something about it.
Make things work. Otherwise, get out!"
Overall, Issa and top management felt
they were doing a good job. Issa commented to the casewriter:
"...Guest satisfaction is
extremely high. Things are not perfect. You can walk into any
hotel and list two yellow pages of things that need doing... We are
very conscious about keeping the product up to what is said about it."
THE RESULTS OF OPERATIONS
The first twelve months were almost
break even, even though Couples ran at a loss for the first six months.
Rance felt that this was considered in the trade as exceptional for a 131-room
resort. He pointed out that operations figures alone showed a profit
for the year. But there were extraordinary start-up expenses such
as the reverence pay and the debt service costs that caused the loss.
However, the exceptionally high occupancy levels maintained during June
1978 through May 1979 and bookings beyond this exceeding 100%, indicated
a very profitable second year.
At the start of 1979, prices were
raised to cover inflationary trends. The rates paid by guests depended
on the time of year and location of room. The highest rates were
charged during late December through the first half of April. Medium rates
covered the last part of April, July, August, November, and the first part
of December. The lowest rates prevailed during the other early summer
and fall periods. Within these seasons the ocean view rooms cost
more than those with the mountain view. Overall, rates were based
on a price for two people for a week's stay. While many guests stayed
just one week, a significant number stayed for two weeks, and a few couples
stayed longer. In addition to these rate schedules which applied
to foreign and local guests, there were rates offered to locals for stays
of a day or a weekend.
Rance commented on how important
it was to read market conditions accurately by comparing pricing strategies
of Negril Beach and Couples for the Summer of 1979.*
"... Negril is priced now
more than Club Med and Couples, and that's with no drinks included.
Negril is caught in the marketplace. Demand is declining. People
have a strong alternative which is Couples. Negril has managed to
price themselves entirely out of the market. Negril felt too confident
based on last year, so they figured the market could take high prices ...
They used medium prices in May and June. Couples went down in price
during this low period. In terms of dollars Negril is not offering
as much. Last year Couples considered doing what Negril did last
summer. But we decided not to do this because Club Med did not.
If Club Med with all their experience doesn't change to medium season rates
in low season, why shouldn't we follow the people with 20 years experience
... No one has had 100% occupancy in the Caribbean before.
The bottom line comes out extremely healthy."
Issa commented on the approach used
in figuring prices
"...It's a matter of guesstimation
because we are not experienced with all-inclusive packaging. The
cost of serving free liquor is one of our trade secrets. We do not
think in terms of percentages and traditional methods of control.
We think in terms of dollar cost per person. It doesn't really matter
where you allocate the reserve."
Based on the current schedule of prices,
breakeven points could be reached with occupancy rates of 45% in high season,
65% in the medium season, and 75% during the low season. These breakeven
points were approximations and assumed that travel agents got a 20% commission
on rate charged.
Overall, Rance and Issa appeared
satisfied with the financial state of Couples. They judged that mistakes
and problems of other resorts had been avoided or solved by them.
Couples had controlled their costs so that salaries and revenue sharing
stayed about 48% of gross revenue. Many other resorts, even with
seasonal lay-offs, ran this figure even higher due to management inefficiencies
and low occupancy rates. During the spring and especially into the
summer, Couples was one of the only three resorts on the island to turn
* The Issa family no longer managed
Negril Beach Resort after 1978.
Note: Subsequent to the 1980 case
study, the Issas did resume management of what had been Negril Beach Village.
It was at this time that John Issa opted to change the name of the resort.
It was his thought that the resort had gotten a bad reputation between
his prior management and his resuming management of the property, again
at the request of the Hon. P. J. Patterson, who is Prime Minister of Jamaica
in 2001, when this page was included on the JamaicaJim.Com web site.
The original brochure for Negril Beach
Village had the word "Hedonism" on the front. John Issa decided the
word aptly described what the resort had to offer. He therefore chose
it as the new name, but since he didn't want there to be any thought that
it was the same property, he added the Roman numeral and the resort was
rechristened Hedonism II.
The casewriter asked John Issa and
the key staffers what they saw as the problems and opportunities for Couples
in the future. They were all confident about the viability of the
concept, their current strategy and eventual expansion. They saw
tourist dollars continuing to flow in and a gradual relaxation of import
regulations. Hudson expressed his optimism:
"The concept of Couples
is right, and that will make it a winner. Right now it's the most
unique concept in Jamaica ... The main contribution to our success
is the staff."
Issa stressed the concept in terms of
continuing to keep the product pure, not contracting tour groups or 3-4
day packages. When they tried this at Negril Beach as a favor to
a tour operator during the slow season, it was a disaster. These
people all stuck together and didn't meet others. Issa also pointed
out that Couples believed its success was, and will continue to be, due
to two factors that accounted for Negril Beach's failure in recent months.
Namely, suitable management and "plowing back into the plant some of what
you make to keep it fresh and crisp." In process were the building of more
stables, a handball court, and a practice wall for tennis. Also,
renovation of a fourth floor office and banquet room area will make room
for 14 new rooms. These guest rooms will be completed by October
1979 and will pay for themselves by the end of the year. This fast
payback was possible due to continued high occupancy rates. Demand
for rooms had been so strong recently that Rance had to turn away more
than half of those who wished to come. Interestingly, part of this
strong demand was couples returning for a second stay.
But Issa and Rance both stressed
the need to expand into other areas of the Caribbean. But this was
not easy, said Issa:
"...the Caribbean is doing
so well that even the poorly run properties are making money."
Rance pointed out how difficult it was
for start-up operations outside the Caribbean due to unions and competition.
Those who tried have failed in Puerto Rico.
When asked about the merits of building
a new Couples, Rance pointed out why it would cost too much:
"...It cost $10 million
to build Negril Village. At the time $1.00 U.S. equaled $1.00 Jamaican.
Normally, it takes 5-10 years for payback...By using low-rise building,
no million dollar chandeliers, avoiding the Hyatt syndrome, then you could
build from scratch and make it...But today, building costs are $50,000
(J) per room ($30,000 U.S.)...With cost of goods sold at 30% to 40%, and
payroll with revenue sharing at 48%, not much left over for debt service
and a profit."
Responding to a question about competition
in the picture, Issa noted that:
"...Many are trying to benefit
from the concept. A resort in Puerto Rico spent a fortune to advertise
to consumers and to the trade for two people in love. A tour director
I know stopped by and observed two children at the bar. Now you have
to make up your mind. Couples, on the other hand, made a total commitment..."
Finally, on the last day of his second
trip, the casewriter talked with Rance about Couples' future and his own:
"...We're looking actively.
I need that for my personal ambition. I would not like to know that
we hit on such a beautiful concept and let it die after only one property.
I want to see the concept developed in the Caribbean, for the Caribbean,
and the holiday of the Caribbean. I want to see it that way...The
holiday that people have been looking for all along."
Three months later, in September, Rance
had to reflect on how best to formulate his recommendations for strategy
to keep Couples viable and growing.