Le Grand Hotel de Leysin (GHL) was one of the oldest hotels in Leysin, a small Swiss village in the canton of Vaud, 30 kilometers from Montreux and very close to Lake Geneva. At 1,260 meters above sea level, Leysin was one of the hot spots for alpine skiing enthusiasts and an oasis of tranquility for companies looking to get away from the large urban centers to hold work sessions, conferences or workshops. GHL, a four-star hotel, was founded in 1970 by Luca Frey, the grandfather of Soe Keller, the current general manager. The property remained in the hands of the family, which also owned the building. In 2020, GHL had 250 rooms spread over five floors. In the late 1990s, a major renovation of the facilities had been carried out. The first floor had been converted into spaces for events and conferences and meeting rooms. Since then, no other significant investment had been made. The hotel also had two restaurants, a heated swimming pool, a gym and a wellness center that offered a wide range of treatments. Throughout its 50-year history, GHL had experienced periods of strong growth as well as more challenging times. While most of its revenue came from holiday guests, they had also managed to attract business clients, mainly thanks to the facilities available for holding conferences and corporate events of all kinds. Keller, 34, was the youngest of three siblings and had been a professional competitive skier for years. Though she no longer competed, she still spent almost all of her time off practicing the sport, including summers, when she would try to travel to Argentina to enjoy the winter season there. Her two older brothers, aged 39 and 41, were married (both with young children} and worked in banking. The older brother was also a member of GHL's board of directors. The other board members were Keller's cousin, two independent professionals, and Keller's mother, Sarah Frey, who served as chairperson. Following her retirement from competitive skiing, Keller had studied at the Ecole Hoteliere de Lausanne. After graduating, she worked in the hotel industry in other parts of the country, mainly for the Movenpick and Accor chains, though never as a manager. In early 2019, the boa rd of directors had approved the decision to hire Keller as general manager of the hotel following the retirement of her mother, who had held the position for the last 20 years. In the words of the younger brother, "The gamble that mom's taken by putting Soe at the helm of GHL isn't a bad one. I imagine she must have learned a thing or two over the yea rs, but with that temper...\". Indeed, the decision to hire Keller had caused some unease among GHL employees. However, she had the support of her mother, who was often involved in some decisions, both formally (through the board of directors) and informally. In fact, some employees still went to her when they felt that she needed to be informed about something specific that was going on in the hotel. In January 2020, on the occasion of the rst board meeting of the year, the accountant had sent Keller a preview of the 2019 results, together with those for the previous two yea rs (see Exhibit 1}. 2019 had been a record year in Switzerland, with almost 40 million overnight stays, up 2% on the previous year.1 Eighteen million of those stays were attributable to local demand, which was up 3% on the previous year. The average occupancy in 2019 was 55% in Switzerland as a whole, which was similar to the average for the canton of Vaud. For GHL, in contrast, 2019 had been one of the worst years in the last decade. In addition to being an attractive location for a wide range of mountain sports, in the past Leysin had managed to attract a good number of corporate events, conferences and congresses, offering an alternative to nearby cities such as Montreux, Lausanne and Geneva. However, the small hotel market in and around Leysin was saturated with supply. The seven hotels that made up GHL's CompSet (competitive set},2 all four-star establishments, offered similar services and, given the transparency that characterizes the sector, almost identical rates. The largest competitor in terms of turnover was a hotel that belonged to the French chain Accor, which was located just 500 meters from GHL. Keller analyzed the rates of her CompSet almost daily, especially those offered by the Accor hotel, which were generally the benchmark for the rest of the competitors. With 73 hotels in Switzerland and more than 9,200 rooms,3 Accor was the largest hotel chain in Switzerland in 2020. At the board meeting held in January 2020, the need to achieve efficiencies in GHL's business had been put on the table. In this regard, Keller had suggested that they stop offering the conference service. To perform the analysis, she had asked the accountant to provide her with a more detailed breakdown of the 2019 results by business line (see Exhibit 2), a brief explanation of each revenue and cost item included in the analysis, and other details ofthe hotel's operations (see Exhibit 3). In Keller's view, the loss incurred by the conference business was definitive proof that it wasn't viable, and she had communicated this to the board. However, the board had denied her request to close that line of business. Six months later, Keller was preparing for another board meeting. During the intervening months, the unimaginable had happened: in March 2020, the Covid-19 pandemic had broken out. One of the sectors hardest hit by the health situation had been tourism. The authorities had forced the closure of hotels, restaurants and other businesses, and millions of workers around the world had been furloughed. Despite having weathered the crisis somewhat better than most neighboring countries, Switzerland had been no exception. However, unlike authorities elsewhere, the Swiss government hadn't mandated a strict lockdown of the population. Even so, lockdown orders in many other countries and travel restrictions caused hotel occupancy to fall to record lows in March and April of 2020. Keller's mother had advised her to keep the hotel open despite low occupancy. \"GHLcan't close. We have local customers who've been coming here all their lives and will keep coming. Life goes on despite Covid.\" Keller kept the hotel open and followed the instructions issued by health authorities, but she was forced to cut some costs and furlough some of her staff, who were eligible for compensation payments under a program introduced by the Swiss government. She had also had to implement health measures to ensure that GHL was safe for the few guests staying at the hotel. The July board meeting was to be held the next day. To prepare, Keller had requested a preview of the results for the first half of 2020 (see Exhibit 4), which she found worrying even though there were no surprises. GHL had never had occupancy below 40% or such low revenue per available room (RevPAR'), not even during the 2008 financial crisis. The big challenge for Keller now was to get back to positive figures in the second half of the year. A large majority of neighboring countries were starting to lift lockdowns and ease restrictions. Still, foreign tourism would take time to recover as many countries, including Switzerland, were imposing quarantines and other restrictions on travelers wishing to cross their borders. Despite the high level of uncertainty, Keller was confident that occupancy would increase slightly in the summer thanks to local tourism, and even more in the last quarter of the year when the ski season got underway. Some pharmaceutical laboratories were also predicting that a vaccine against Covid might be available by the fall of 2020. With this in mind, and taking into account the usual seasonal demand for GHL's services, Keller had produced a brief report for the boa rd with the estimated average occupancy for the second half of 2020 and expected average net rates (see Exhibit 5). As for costs, she did not anticipate any substantial changes from the rst half of 2020, with the exception of cleaning, where costs were likely to increase by 5% due to Covid-related measures. Likewise, she did not foresee any changes in the rates of the other services. The day before the meeting, Keller found out that the Accor hotel, her main competitor, had launched a campaign on its website with significant discounts for all overnight stays, with no exceptions. The discounts would apply until December 2020. According to her estimates, this meant an average net rate of around 120 Swiss francs per room per night, well below the standard official rates. Under the circumstances, Keller had expected some kind of reaction from her competitors, but the period during which the discounts would apply was longer than in cases when the Accor hotel had offered reduced rates in the past. With the occupancy rate expected, such a low net rate would cause RevPAR to fall significantly. Keller believed that could lead to serious problems for some hotels in the area, given their weak financial health, which had been exacerbated by Covid. The alternative, Keller thought, was to maintain the planned rates. In that case, Keller estimated that GHL could lose up to 30% of potential guests to the Accor hotel and any others that decided to apply similar rates. To relax, Keller decided to go for a swim in the heated pool in the semibasement of the building. Despite some deterioration of the facilities, the wellness center's results in 2019 had been satisfactory. (Due to the impact of the pandemic, the results for the first half of 2020 weren't representative.) "I remember that we were the pioneers in these services in Leysin," thought Keller. Indeed, both the two restaurants and the wellness center were famous in the area and attracted clients, even if they weren't staying at the hotel'. But going for a swim did nothing to relax Keller, who was going through one of the most difficult periods in her life. Although she was a strong person, the enormous pressure she'd been under over the past few months had even given her a health scare. Also on her mind was a recently published study on climate change, which claimed that the ski season in Switzerland had been reduced by more than a month since 1970 due to a shortage of snow, especially at lower altitudes, where the ski resorts closest to Leysin were located. Some experts estimated that climate change could eventually lead to the closure of ski resorts at altitudes below 2,000 meters. "Of course-what a bunch of doomsayers! But that's not what I need to think about now, though I wouldn't mind moving to run a hotel in Bariloche."Exhibit 1 GHL's Income Statement and Main Business Indicators as of December 31, 2019 (in Thousands of Swiss Francs) 2017 2018 2019 Gross sales 15,465 14,776 13,385 Commissions and discounts 1,375 1,338 758 Net sales 14,090 13,439 12,627 Materials 3,565 3,399 3,177 Personnel expenses 2,062 1,956 1,832 Maintenance 496 186 452 Cleaning 719 686 644 Supplies 899 369 838 Management salaries 246 238 215 Security 461 467 467 Insurance 196 290 270 Sales and administration expenses 562 592 549 Depreciation 3,760 3,834 3,680 Operating profit 1,025 522 503 Financial expenses 196 175 166 Profit before tax 829 447 337 Occupied rooms 54,464 51,417 48,341 Occupancy rate? 59.7% 56.3% 53.0% Net daily room rate 161.36 158.54 152.96 RevPAR 96.31 89.33 81.03 Number of meals served 110,017 107,571 108,713 Number of wellness services 6,181 6,323 5,912 Number of conferences 236 221 201 Source: Prepared by the authors.Exhibit 2 Results by Business Line and Main Indicators as of December 31, 2019 (in Thousands of Swiss Francs) Accom. F&B8 Wellness Conf. Total Gross sales 8,153 2,935 739 1,558 13,385 Commissions and discounts 758 0 0 0 758 Net sales 7,394 2,935 739 1,558 12,627 Materials 951 1,412 48 766 3,177 Personnel expenses 526 654 307 346 1,832 Maintenance $80 17 26 30 452 Cleaning 483 81 40 40 644 Supplies 492 213 50 82 838 Management salaries 129 54 11 21 215 Security 374 47 23 23 467 Insurance 229 13 13 13 270 Sales and administration expenses 357 110 27 55 549 Depreciation 3,173 169 97 241 3,680 Operating profit 301 166 97 -61 503 Financial expenses 97 39 10 20 166 Profit before tax 203 128 87 -81 337 Occupied rooms 48,341 Number of meals served 108,713 Number of wellness services 5,912 Number of conferences 201 Source: Prepared by the authors.Exhibit 3 Details of the Main Items in GHL's Income Statement 0 Commissions and discounts. Commissions paid to intermediaries such as agencies, Booking.com, etc., calculated as a percentage of the gross rate. 0 Materials. Costs for each line of business that vary in line with the volume of activity (occupied rooms, number of meals, wellness and conference services). 0 Personnel expenses. Expenses for full-time and hourly employees. Full-time staff received a fixed annual salary and performed tasks in all four lines of business. Hourly employees performed tasks in a single line of business, and their cost varied in line with the volume of activity. Accommodation and F&B activities didn't require hourly workers. In 2019, the costs for permanent employees working in wellness and conference services were 41,000 Swiss francs and 186,000 Swiss francs, respectively. 0 Maintenance. This service was outsourced to an external company. The cost remained practically unchanged. 0 Cleaning. This service was outsourced to an external company. The cost varied according to the volume of activity. 0 Supplies. Thirty percent of these expenses were considered fixed. The remaining 70% varied depending on the volume of activity in each line of business. 0 Though the remaining expenses could vary slightly at Keller's discretion, they didn't change according to the volume of activity at the hotel. Source: Prepared by the authors