What potential new markets might Nottoway pursue? How can it attract those segments?
What will be an ideal response?
Even without the data given as desirable in the answer to the previous question, some new sources of visitors can be identified. These can be grouped into three market segments: leisure, group tour, and business.
Tour groups are perhaps the most natural segment to target since tours are already stopping at Nottoway, although not staying overnight. The necessity of adding additional rooms should be questioned. Critical information for Nottoway to obtain is the needs and wants of the tour operators and the likelihood that tours would stay at Nottoway given the availability of rooms. But if there is a need for more rooms, then careful consideration should be given to the design of the rooms and their ambience.
The business segment is potentially more risky to target because Nottoway has little experience with that market. New relationships would have to be established and perhaps new promotional strategies developed. Still, this segment could help support the additional rooms and is worthy of investigation. Research to determine the needs and wants of meeting planners and forecast usage is as critical for the business as for the tour group segment.
Pricing is another critical factor. If the average room rate is considered to be $150 and current operating expenses are one-third of revenues (from the budget in Exhibit 2), then the price per room must be maintained above $50, even for tour group operators. Economies of scale are unlikely given the labor-intensive cost structure.
Another consideration is that Nottoway’s business is highly seasonal. The high labor intensity is probably in Nottoway’s favor as staff can be adjusted to meet demand more easily than can capital equipment (rooms). On the other hand, hiring, training, and layoff costs can be substantial. These costs are important because hiring high-quality service staff is critical to maintaining Nottoway’s image for elegance and personal service. Accommodations are limited (13 rooms), but during the seasonal low periods and on weekdays, special rates might be offered.
Even at $8, the tour price might be a bit steep for a large subsegment of the leisure and tour markets—senior citizens. Nottoway should look into the feasibility of matching the discount to seniors offered by the other plantations, especially given the expected growth in this population segment.
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