The Case for Exotic Adventures Inc.
Case Synopsis This case study will analyze the case for Exotic Adventures Inc., which provides customers with expedition like travel that is adventurous from the Amazon. The dilemma causing the need for this analysis is the seasonal and water level dependency which puts their trip at risk due to wildlife issues during low level season. Naturalist suggest that October trips are most favorable, leaving EAI with three options to consider for this analysis, one to cancel the trip all together, two to continue with plans and cut trip short halfway, and third is to anticipate completing the entire trip. State the Assignment Question
Less than one week prior to the passengers’ departure, EAI is faced with the questions of should they cancel the trip and refund those 52 passengers who have already paid their money? Should they continue with the voyage and return midway should the water levels be too low while taking into account all of the cost aspects? Or should they risk it and plan on having the entire trip at all costs? Case Analysis
Before deciding on which option is more cost effective, we must first understand what Exotic Adventures offers their customers. Their primary service is to provide passengers with expedition type voyages. EAI also provides customers with trips to the Amazon during the low river seasons. This offer is primarily during the month of October. They offer complete packages including air, lodging, and cruise at an average of $4000 per traveler/passenger.
Since EAI originally operated during the high water season, their upcoming voyage during low water season (October) proves to be a challenge. The trips were from the east coast of Brazil to the west coast of Peru. “Flooding during high water caused more wildlife to move inland away from the river’s edge. In contrast, during low water the banks of the river were said to be prolific with wildlife” (Shaw, 1999). With all of this to be considered, many factors come into play. EAI immediately researched the low water level seasons. Through this research, they found that levels were never below 18 feet, giving them some comfort for safety to use their 14 feet draft vessel intended for these October voyages.
Each trip would consist of two voyages, up river voyage and a return downstream voyage. Already they had 52 passengers who booked the up-river voyage and 47 had already booked the downstream. Once booked the trip was planned for a go ahead until they received messages from Brazil a month later stating that water levels were very low. Later that month, Brazilian agents stated that they would not let their pilots take the vessel past the midway point which was in Manaus. The water levels between Manaus and Peru were lower than what would be considered safe. Meanwhile, EAI’s agents in Peru were saying that all was fine and they should continue with plans for a full trip.
Not knowing which group to listen to, EAI is faced with a dilemma of having to make a choice less than a week prior to their voyage. Three options were on the table. Option one would include canceling the entire voyage prior to passengers leaving their destination and reimbursing those who’ve already paid along with paying approximately $30,000 in cancellation and penalty fees. With this option, EAI would have cost savings from fuel, food and pilotage expenses. As for vessel charter hire, staff contracts, and such cost cannot be recovered and are considered a loss.
Option two calls for making the voyage, but returning midway from Manaus if water levels continued to drop. The second trip would then be cancelled. There is a 20 percent probability that option 2 would occur. A $2,500 refund would be given to the first group of passengers, and a full refund would be issued to the other 47. Similar savings for the fuel expense, Brazilian port fees and others. As described in the charts below. Option three involves planning and completing a full trip. This has a 50% chance of occurring. If not, the same circumstances would stand as for option 2 with the exception that if they needed to turn back, the refund would be a lot less since they reached the upper river. All three options present a risk. Even option one’s cancelation is a major risk at losing $184,000.
Data Analysis to Support Decision

After great analysis, it would be in EAI’s best interest to continue with the trip. Since there is a 50 percent chance of completing the trip, it in in this company’s best interest to move forward with this trip and gain something for their losses. Even if they are to return at the end of the Peru trip, they are not required to refund the monies in its entirety. Although they would lose money in the all three, there is a greater possibility that they would gain from finalizing the trip. This cumulative probability chart shows the possibility of an outcome being equal to or less than a specific value for each of the three different options. Option one shows that at 600,000 it is at 100% probability. The overall case study shows that EAI should choose option three as their best choice. Although all options lead to a loss, there is a greater probability that EAI will be able to recoup their money. | | | |
References

Shaw, P. (1999). Exotic Adventures Inc.: The Amazon River Voyage. Richard Ivey School of Business – The University of Western Ontario 9A99E027.