In the first part of 2005, Tina Reynolds, VP of sales at Cabo San Viejo Health Resort, was considering adopting a loyalty rewards program, to meet the competition and increase sales. Several guests left comments highlighting the absence of a loyalty program for repeat guests. Tina Reynolds also noticed the importance of attracting younger customers who grew up in a culture "accustomed to rewards programs". The basis for a rewards program was even if the program did not directly lead to new customers, existing customers would feel more appreciated, and in turn be more likely to recommend Cabo San Viejo to others. Reynolds also knew that there could be several implications with implementing a rewards program.
Cabo San Viejo guests always expected the best, and if a rewards program was not implemented to perfection, the idea could certainly backfire. Since Cabo San Viejo's computer system was outdated and not fit to save customer data, there would be costs associated with the update. In addition, Cabo employees have already been trained to offer the highest level of customer service. The addition of a rewards program would increase the strain on the staff and possibly increase turnover. The low turnover of the staff was part of what made the experience great for customers. The staff was well trained and Cabo relied on employee dedication to achieve high levels of customer satisfaction. 50-60% of Cabo's business was based on repeat customers. If new guests felt shorted because of advantages given to repeat customers, reservations could possibly decline.
In order to achieve the best possible sales, Cabo San Viejo should not implement a rewards program. The optimal capacity for Cabo San Viejo is 270 guests per night. Since the average guest stays 1 week, the optimal capacity would be approximately 14,040 guests per year. Per exhibit 8, Cabo San Viejo only