Fairmont Chateau Lake Louise Background: Fairmont Chateau Lake Louise is a luxury resort, situated in the world’s most mesmerizing natural settings, within the Banff National Park in the Canadian Rocky Mountains, overlooking one of the most photographed panoramic sceneries in the world. The resort hotel is owned and operated by Fairmont Hotels and Resorts of Toronto, Canada. Fairmont Hotels and resorts is a leading North American operator of luxury hotels, with properties in Canada, USA, Mexico, Bermuda, Barbados and UAE. The Group has many landmark hotels in its portfolio, in New York, Boston, Toronto and Quebec City.
The group also operates several mid market Canadian business hotels and resorts. Chateau Lake Louise was constructed by Canadian Pacific Railways in early 20th century to service wealthy passengers on the company’s transcontinental rail services. Initially Chateau was summer-only resort; however during 1980’s the operations had been expanded to capitalize on the promising ski market. While summer remained the main business season of the resort, the snow conditions in the nearby Lake Louise and Sunshine Village made it a very attractive destination for skiers.
Chateau Lake Louise has a total of 497 rooms in different sizes and configurations. Rooms vary from Fairmont to Fairmont Deluxe, to Junior Suite to One Bedroom suite and Belvedere Suite. Rooms are also differentiated by the side of the hotel on which they are located. The size of rooms ranges from 165 square feet for a Fairmont to 675 square feet for a Belvedere suite. Chateau Lake Louise also has a health club which contains an indoor pool, whirlpool, steam room and fitness equipment. The resort also has a small spa, with massage, skin treatment and hair care services.
In addition to these facilities the resort also has a privately operated boutique for guests to shop. The resort also boasted of three full service restaurant, two lounges, a deli and a saloon. It also houses two restaurants, which can be used for meetings or converted into ballrooms. Chateau Lake Louise has a total meeting space of 17,500 feet, an area good enough to host over a thousand people. The resort employs around 725 people, with an additional 70 staff supporting the concessions. Since the hotel is situated in the park, the residential accommodation is extremely limited.
This poses some challenges for the hotel in managing employee accommodation in the area. Current Situation: Fairmont Chateau Lake Louise (CLL) is unable to translate its world’s most spectacular natural surrounding into profits. Approximately four million people visited BNP in 1997, which was expected to grow by 2% annually for the next ten years. Roughly 50% of the visitors originated from the nearby areas and 10% from other Canadian provinces, a total of 19% visitors came from the US and overseas market accounted for around 18% visitors.
The 1997 Asian economic crisis has caused a steep drop in the number of visitors from Asian locations such as Hong Kong, Japan and South Korea. The most common tourist activity in the Banff National Park regions is general sightseeing. However hiking, skiing, snowboarding, cycling, whitewater rafting, rock climbing, snowshoeing, horse riding, and ice climbing are most famous active sports. The region is also known for arts and leadership that plays host to the various cultural festivals and conferences throughout the year. The majority of resorts guests come from outside Canada, particularly the USA, Japan, UK and Germany.
The business at the resort is highly seasonal, with half of the revenue earned between late July and September. Also, the secondary peak season happens during the ski season, from January to March. The business cycle is another reason for volatility in the market, with average occupancy rate going as low as 10% in some months. Broadly, the visitors at Chateau Lake Louise can be classified into three categories; Tour Group, Independent travelers and Group and Meeting Markets. Tour Group consists of 50 guests on a preplanned tour that includes accommodation, transportation and food.
Chateau Lake Louise worked with over 100 tour companies, out of which only 12 firms’ accounts for most of the volume. Fully independent tours are similar to conventional tour groups, in that they are pre planned packages created by a wholesaler. In 1997, tour groups and FIT contributed around 57% of the Chateau Lake Louise’s business by volume. Independent travelers contribute approximately 24% to 28% of the Chateau Lake Louise’s business. Independent travelers generally book their vacation through travel agents or directly through internet or through phone.
Independent traveler market is much more sophisticated than tour groups in terms of expectations and tastes. The resort is facing problems for some time now, despite trying to get a better footing in terms of occupancy, the occupancy is dipping down sharply. The many issues facing CLL today include the declining Asian tour group market, due to the 1997 Asian economic crisis, the concentrated, summer and winter, seasonal demand, and the emergence of Internet, which empowers customers to make short-term decisions. Recommendations:
While the resort has a lot of options and alternatives to choose from, we suggest a combination of alternatives for a long term strategic benefit. By implementing these combinations of alternatives options, Chateau Lake Louise will be able to translate world’s most spectacular natural surrounding into profits. Furthermore, CLL’s long- term profitability and seasonal demand should be addressed by working on the proposed advertising and promotion options. Chateau Lake Louise position itself in the luxury segment, for doing so it needs a website to promote its location and increase its penetration rate.
Also CLL should look at retrofitting, renovating and building leisure facilities and all actions that will further promote the luxury brand of CLL; thus, this alternative would be responsible for achieving the highest level of corporate image. Besides very satisfied customers due to improved and larger rooms and new leisure facilities, this alternative would create customer loyalty and enhanced image of the resort. Since, there is a growing concern among residents of the area and regulators about the environmental issues, any ambitious plans of expansions are likely to be rejected.
Keeping that in mind expansion of the property is not very advisable, considering the time and bottlenecks in the process. We suggest that, CLL should start the conversion of 200 small size rooms to 100 luxury rooms, since it will take longer time. While the internal construction is underway CLL should also proceed to retrofit all of its rooms. These selections will take approximately one year to complete. Final action will require a lengthy process, of approximately seven years, which would include the building of new leisure facilities.
By implementing the above mentioned opportunities, CLL will be able to strengthen its luxury brand and increase its profitability and non-seasonal demand. The cost of renovation would be around $20mn-$24mn, which will add an additional $7mn-$8mn in revenues thus enabling the hotel to break even in next 3 years. CLL’s product features should include a mixture of luxury rooms and new leisure facilities, with prices set according to the new luxury image associated with the brand. The lace where CLL’s products and services should be offered include its new and old facilities, which will be promoted through various channels managed by the new marketing department through advertising means such as the new website, tour operators, magazines and other publications. Perhaps the most important tool of the marketing mix in CLL’s industry is its personnel. CLL’s employees will have to be trained in order to strengthen their understanding-expertise of serving all of CLL’s market segments. It will be important to improve CLL’s employee accommodations in order to gain their full commitment for CLL’s new growth strategy.