The Saga of SuperClubs®
and
The History of Hedonism II®

Countless e-mails are received daily asking questions about the Caribbean, the various island countries there and many about resorts and places I've visited.  But the largest number of questions center on the resorts that make up SuperClubs – the innovative resort management company located in Kingston, Jamaica – and one of its most successful properties – Hedonism II in Negril, Jamaica.. 

SuperClubs' founder and its current Chairman of the Board, the Honourable John Issa, was the person who, more that anyone else, conceived and created the "Caribbean all inclusive resort."  I have the pleasure and honor to have met John and the members of his family – wife Aida, son Joe and twin daughters Zein and Muna.  I have long been interested in John, his company and the resorts that he has created. 

It was because of this interest that a friend, A. J. Hutchinson (founder of Go Classy Tours, a full service travel agency in Palm Harbor, Florida) sent me a copy of a case study that I am now making available here – with the full approval of it's author. 

Couples appears here in its entirety, with the original footnotes included at the end of the section containing the reference.  The original exhibits were omitted in the interest of overall length.  Where situations have changed since the original study was published, I have included some notes of my own. 

It is my hope that people with an interest in the answers to such questions as "What is SuperClubs?" and "Whatever happened to Hedonism I ?" will find them here.

Much love -- and maximum respect!

 Jamaica Jim Jordan

January 13, 2001 

 
COUPLES

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.

Copyright © 1980 by Rudolph Winston, Jr.



(Note: Dr. Winston is no longer affiliated with Babson College.  He lives in a small town west of Boston.)



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 area.

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 3-4 weeks.
  • More than one trip outside the country per year.
  • Longer stay in one country.
  • More culturally minded
  • More budget minded.
TOURISM IN JAMAICA

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.
  • High unemployment.
  • Breakdown of confidence in the private sector.
  • Immigration of skilled and managerial personnel.
These problems were caused and/or exacerbated by the following:
  • 1970 oil prices were five times those of 1973.
  • Undiversified export economy (70% Alumina / Bauxite).
  • Exports' prices did not rise as fast as imports' prices.
  • Recessions abroad.
  • 40% decline in net tourism receipts since 1974.
  • Net outflow of private capital.
Besides promoting tourism, the Jamaican government has taken a number of steps designed to strengthen the national economy.  These included the following:
  • 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,
  • Devalued currency.
  • Limited bank credit expansion to public and private sectors.
  • Increased taxes.
  • Set up wage guidelines.
  • Tightened import restrictions.
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.


* 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 $1.66 Jamaican.

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 site.

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 natural resource.

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 management services.



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 I

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 service."

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
Couples
Age group 22-32 
Doctors
General Business Executives
Teachers, Engineers
53 
65 
25 
42 
15

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
Travel Agent 
Advertising (which was to trade only)
Personal friend
56 
20 
19

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 couple.

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:

  • Single guys making passes at wives
  • Activities oriented more to single individuals
  • The presence of children
  • Hassling over payments for activities, services
  • Check-in, check-out procedures
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.

TURNING THE OLD LADY INTO SOMETHING NEW

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 – transportation, 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 offered.

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 traveling together.

NEW PERSONNEL

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

 
Area
# Staffers
Stables
   7
Water Sports 
   6
Kitchen (butcher, cooks, pot washers)
 35
Maintenance 
 11
Housekeeping
 23
Grounds
   7
Bar
 13
Sanitation
   8
Bellhop
   2
Store Room
   2
 
-------
Total of Hourly Workers
114

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 offered:

  • Payment while training.
  • 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.
  • 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.
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:
"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 others rendered.

PROMOTING COUPLES

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 commented:

"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 Couples.



* 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.

OPERATIONS

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:

  • Faulty expectations
  • High need for structure/ formality
  • Poor equipment maintenance
  • Management problems
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).

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.

PRICING

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 a profit.



* 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 FUTURE

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.


 
The above text was scanned from a copy of the original case study Couples in the section "Cases: Growth, Strategy, Succession and Nurturing Entrepreneurial Activities" from the book Entreprenureship - Text, Cases and Notes by Robert Ronstadt, copyright © 1985.  Couples is included here with the prior express written permission and approval of the author, Dr. Rudolpf Winston, Jr., copyright © 1980.
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