Reference no: EM13991744 , Length: 4

I need only the payoff table and decision tree.

EXOTIC ADVENTURES INC.: THE AMAZON RIVER VOYAGE

Patrick Shaw prepared this case under the supervision of John S. Hulland solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.

Exotic Adventures Inc. (EAI) operated expedition-style voyages primarily to the Polar Regions. These voyages were concentrated in the Arctic in the summer and in Antarctica in the austral summer. As well, EAI operated voyages between seasons to the islands of the South Pacific and the Atlantic and in the Amazon River basin to help defray its fixed business costs.

The company operated a fleet of converted research vessels that were ideally suited for expedition travel. Although not luxurious, the vessels were comfortable, versatile and highly manoeuvrable. The level of comfort was categorized as three- star, with emphasis on adventure and education as opposed to the casinos and shows of traditional cruising. The company combined air transportation from North America, hotels and the voyage aboard ship as one complete package marketed to clients.

THE AMAZON RIVER VOYAGES

EAI first operated in the Amazon during the high water season in March 1997, offering one voyage upriver and a return voyage downstream. The voyages operated on the full navigable length of the river, from Belem, Brazil on the Atlantic coast to Iquitos, Peru, some 2,600 miles inland to the west (see Exhibit 1). Although the voyages were a success, a number of prominent naturalists suggested that voyages during the low water season in October would be more interesting.

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.

EAI's operations department began researching the low water season by consulting various pilot books and reviewing plans with local agents. It was learned that the minimum depth of the river, even during low water, was never less than 18 feet. This depth offered a comfortable safety margin for the 14-foot draft of the vessel to be used and the new voyages were included in the company's 1998/99 brochure. By early August of 1998, 52 passengers had booked passage on the upriver voyage and 47 on the downstream voyage, both to occur in October of that year. The average price for the tour package was US$4,000, including flights and lodging. These numbers were just above the break-even point required for the 80-passenger Inland Explorer and preparations continued as planned.

Early in September, the company began receiving messages from their agents in Brazil advising that water levels were unusually low. The phenomenon was attributed to El Niño, considered to be the reason behind both the flooding on the West Coast of South America and the unusual drought in the interior. By late September, the Brazilian agents were stating that their pilots - compulsory for foreign flagged ships (such as the Inland Explorer) on the river - would not take the vessel past the midway point of the voyage at Manaus. They explained that water levels between Manaus and Iquitos were fluctuating between 12 and 14 feet, not enough depth for the vessel to safely navigate.

At the same time, however, EAI's agents in Peru were advising that all was fine. Their own Peruvian pilots were operating vessels with drafts of 14 feet on the river and they could not see any problems with the planned voyages.

Unfortunately, there were no unbiased sources of information. It was in the interests of the Brazilian authorities for the voyages to remain entirely on the lower part of the river and within Brazilian waters. Pilotage was compulsory, and there was a lot of money to be made from the various stops that the passengers would make in ports and communities along the way. The Peruvians, for much the same reasons, also wanted to be sure that the visits to Peru were not cancelled. EAI had to decide whether or not to proceed with the voyages as planned, with only biased information at hand.

By the time all information sources had been reached and consulted it was October 8, five days before passengers would depart for Belem and the last chance to call them with enough notice to cancel their voyage.