Exotic Adventures Inc.
Case Synopsis
Exotic Adventures Inc. is an organization that has provided cruises up and down the Amazon River since March of 1997. The company has been advised that the water levels in the river are reportedly abnormally low and are required to make a decision about their already booked voyages (Sharw, 1999).
State the Assignment Question
Should Exotic Adventures Inc. continue with the voyage or inform their passengers about the cancellation and refund them their money?
Case Analysis
Exotic Adventures Inc. needs to make an important decision in regards to continuing with their cruises or suspend them and refund their passengers their voyage fares. The voyages have continued to be a success for the company since the first voyage in 1997. It was observed that during flooding and high levels of water in the river, the wildlife would move inland; whereas when the water levels were lower, the river’s edge were full of wildlife. Through completed research, the company found that during the best sailing time, that is low water season, the levels never reached lower than 18 feet which was a good depth for the vessel to safely sail (Shaw, 1999).
Exotic Adventures Inc. charges $4,000 per person for the tour. This package includes flights and lodging. In August of 1998, the vessel was almost completely booked with 99 passengers to later sail in October 52 up the river and 47 down the river. However, this is when the company began to receive news that the water levels were unusually low and may be dangerous to sail the river. Brazilian pilots reported not being able to navigate passed their part of the river, whereas the Peruvian pilots reported to have no problem with water levels. There was no information being received from a neutral source (Shaw, 1999).
One of the three options for the company would be to completely cancel the voyage in October and reimburse their passengers for the payments made. However, due to the cancellation, the company would have to pay $30,000 in penalties. These penalties include the domestic airfares that customers were required to purchase. In addition, the amount for the vessel charter, and the staff contract were already paid and are unrecoverable. Although they may need to pay the penalties, they will be able to save in fuel expenses, food, pilots, port fees, and international airfares. If the company decides to take option of cancelling on October 8th, it would cost them a total of $185,000, $426,000 in additional costs less $241,000 in savings (Shaw, 1999).
The company also has the option of continuing with the planned voyage while continuing to carefully observe the water levels. If the water levels continue to decrease, the voyage up the river would have to be cut short at the halfway point in Manaus and the second voyage down the river would need to be cancelled. This option exhibits a 20% probability of being successfully while 80% of not successfully making it. Additionally, this option would require chartering an aircraft in order for the passengers to connect with their already scheduled air arrangements. Instead of having to refund the full $4,000 to the passengers, Exotic Adventures Inc. would have to return $2,500 to 52 of those who were on the vessel during the first half, and the full $4,000 to 47 passengers of who’s voyage had to be cancelled. Including the air diverges and chartered flight, the total additional costs would total $368,000. Aside from the costs, Exotic Adventures Inc. would save in port fees, pilots, and fuel totaling in $86,000. This denotes that the total additional cost for the company would be $368,000 less $86,000 to equal $282,000 (Shaw, 1999).
Lastly, Exotic Adventures Inc. has the third option of trusting that the information provided is vague in regards to the true water levels. If they decide with this option, the voyage would continue from the halfway point in Manaus with a 50% probability of making it all the way to Iquitos. If this trip is successful, no additional costs would be incurred. However, if the vessel is not able to make the trip, they would have to return back to Manaus and the expenses incurred would equal to those in option 2. Yet, because the voyage does reach the upper river, the reimbursement made to passengers, would be $500 less to those on the first voyage, and full reimbursement to those on the second voyage which would have to be cancelled. In addition, Exotic Adventures Inc. would not save in pilot fees or port fees. It can be concluded then that the calculated refunds would be 52 people at $2,000 and 47 at $4,000, a chartered flight, and air deviations totaling $342,000. Savings would total $52,000. Therefore, the total additional costs would equal to $290,000 (Shaw, 1999).
Exotic Adventures Inc. has the necessary information to analyze their options and be able to make the best decision. It is crucial that all options are carefully analyzed in order to make the best decision for the company (Shaw, 1999).

Data Analysis to Support Decision The graph above is a graphical analysis developed using the Decision Tree tool with all the data provided by Exotic Adventure Inc. The tree that was developed by the program was made in order to assist Exotic Adventure Inc. in making the decision to continue or stop the planned voyage. The graph demonstrates the order of events in addition to the probabilities and estimated monetary values (Albright, Winston, & Zappe, 2010).
Based on the decision tree, Exotic Adventures Inc. should continue with their voyage based on the false response to cancel the voyage. There is a 20% chance that the company will have to pay $282,000 if they continue their voyage from Manaus, and therefore should make that decision. The tree concludes by showing a 50 % change of making the trip all the way to Iquitos. Overall, Exotic Adventures Inc. has an 80% chance of making profit and a 20% chance of losing money if they do decide to make the trip.

What Happened Based on the probability percentages and the costs that would be incurred by Exotic
Adventures Inc. it is in their best interest to continue with the voyage. If they do decide to cancel the trip, not only would is cause the company to lose money but also future passengers from the frustrations caused by the cancellation. The option of cancelling the trip causes the company of cost of $184,000. If Exotic Adventure Inc. decides to go with option 2 of taking the voyage midway to Manaus, it would incur them $282,000. However, if the company decides to go with option 3 to proceed with the journey to Iquitos, the company has an 80% change to make a profit and a 20% chance of losing money. The best decision for Exotic Adventure Inc. would be to make the trip to Iquitos.