Hello. Adrian? Have you read the paper today? asked Damario, the revenue manager at the 480-room Barcena Resort as he spoke into his cell phone. It was 9:00 a.m., and Damario had just placed a call to Adrians office. Youve got to be kidding me! replied Adrian, the Barcena Resorts rooms manager. Whos got time to read the local paper? I can barely get through my e-mails! Well, theres an article in the Business section that I think we need to talk about, said Damario. I know Im pretty new here, but I think this will really affect us. What is it? asked Adrian. I have a hard time believing that anything happening locally will affect us. Our guests all fly in. As a resort located on a Caribbean island, most of the hotels guests were vacationing Americans, Canadians, South Americans, or Europeans, coming either in charter groups or as individual travelers. Thats just it. The article is about InterContinental Airlines. It says that due to higher fuel costs and slackening demand, it will be reducing the number of flights to our island by 20 percent, starting in the third quarter of this fiscal year. Damario paused and let Adrian consider what he had just said. That could be really bad, said Adrian, as he recognized the importance of the information. I bet InterContinental currently has 20 to 30 arrivals every weekend. Most of the InterContinental flights are scheduled to arrive Thursday and Friday, right? asked Damario. Right, replied Adrian. Their arrivals are mostly couples, mostly two to three night stays, mostly requests for King-bedded rooms. We already have tons of reservations for the third quarter. Some of those must be on InterContinental Airlines flights. What will happen to those? The article says flyers with previous reservations will be contacted to be rescheduled on different flights or to get a refund. How many rooms do you think will be affected? asked Damario. Well, we certainly do more with charter flights than transient-oriented flights like InterContinentals, but if their flights are reduced by 20 percent for half the year? A lot! said Adrian. Lets get together to talk about this, said Damario. Im on my way, said Adrian, as he hung up the phone. As he walked to Damarios office, Adrian tried to assess the impact of InterContinentals decision. It would affect the number of rooms sold to the type of clients arriving on InterContinental, that was for sure. And also the room types requested. And the start of the third quarter was only 30 days away. No doubt, this was big news!

1. What impact will the reduction of the number of flights to the Barcenas island likely have on the previous demand forecasts that have been created by the resorts revenue management team?

2. What specific historical data would be helpful to them as the RM team evaluates the potential impact of the airlines decision?

3. In this scenario, the number of potential guests delivered to this destination by this air carrier will likely be reduced. If that is so, what impact would reducing room prices in an effort to stimulate demand likely have on the resorts third- and fourth-quarter RevPAR performance? Explain your answer.