Assignment 4 - Displacement Analysis (14 points) The Winsor has 400 rooms. The average transient rate in March is $142. The variable room cost is $17 (per room). The Windsor is also paying a royalty fee of 4% and a marketing fee of 3% of room revenue. A local university's business student alumni association plans a reunion. The group requests single rooms for $65 per room night, meals, and other services for a 3-day event between March 6 - 8. The following is the group's request: Meeting room Date 03/06 03/07 03/08 Total Rooms 85 80 Breakfast 85 80 70 235 Lunch 0 0 40 40 Dinner 85 0 0 85 70 235 $300 $300 $600 The forecasted transient demand of the hotel for the days in question is as follows: 03/06 365 03/07 360 03/08 310 This means that the hotel will have to displace some of the forecasted transient demand in order to accommodate the group. The displaced transient room nights for the first night will be 50 rooms (400 85 365 = 50); and for the second night is 40 rooms (400 80 - 360 = 40). The hotel's capture rate (% of transient guests purchasing a meal) and other relevant data per meal period for transient guests in March are as follows: Meal Price Food cost Displaced transient guests 90 Transient meal capture % 70% Breakfast $12 $3.60 Lunch Dinner $28 $40 $9.52 $12.80 90 90 20% 40% The group meals have the same food costs per item as the transients but are sold at discounted price: Meal Price Food cost # of Group meals capture Breakfast $10 $3.60 235 Lunch $24 $9.52 40 Dinner $32 $12.80 85 Beverage costs and prices are the same for group guests and transients. The average beverage price is $6.00 and the average beverage cost is 29%. The organizer believes that 70% of the group members will purchase one beverage per day. The beverage capture rate of transient guests is 40%. Beverage Group Transient Price $6 S6 Cost % 29% 29% # of guests 235 90 Beverage capture % 70% 40% Please conduct a displacement analysis to determine whether confirming or rejecting the group request. Template for displacement analysis Displacement Analysis Group Displaced Transients Step 1: Calculate Room Profit Room Revenue Room Cost Room Profit = revenue - cost Step 2: Calculate Food Profit Food Revenue Food Cost Food Profit = revenue - cost Step 3: Calculate Beverage Profit Beverage Revenue Beverage Cost Beverage Profit = revenue - cost Step 4: Calculate Other Revenue Step 5: Calculate Total profit = room + food + beverage + other Step 6: Calculate Total profit difference between group vs. transient Step 7: Explanation what should the hotel do and why Assignment 4 - Displacement Analysis (14 points) The Winsor has 400 rooms. The average transient rate in March is $142. The variable room cost is $17 (per room). The Windsor is also paying a royalty fee of 4% and a marketing fee of 3% of room revenue. A local university's business student alumni association plans a reunion. The group requests single rooms for $65 per room night, meals, and other services for a 3-day event between March 6 - 8. The following is the group's request: Meeting room Date 03/06 03/07 03/08 Total Rooms 85 80 Breakfast 85 80 70 235 Lunch 0 0 40 40 Dinner 85 0 0 85 70 235 $300 $300 $600 The forecasted transient demand of the hotel for the days in question is as follows: 03/06 365 03/07 360 03/08 310 This means that the hotel will have to displace some of the forecasted transient demand in order to accommodate the group. The displaced transient room nights for the first night will be 50 rooms (400 85 365 = 50); and for the second night is 40 rooms (400 80 - 360 = 40). The hotel's capture rate (% of transient guests purchasing a meal) and other relevant data per meal period for transient guests in March are as follows: Meal Price Food cost Displaced transient guests 90 Transient meal capture % 70% Breakfast $12 $3.60 Lunch Dinner $28 $40 $9.52 $12.80 90 90 20% 40% The group meals have the same food costs per item as the transients but are sold at discounted price: Meal Price Food cost # of Group meals capture Breakfast $10 $3.60 235 Lunch $24 $9.52 40 Dinner $32 $12.80 85 Beverage costs and prices are the same for group guests and transients. The average beverage price is $6.00 and the average beverage cost is 29%. The organizer believes that 70% of the group members will purchase one beverage per day. The beverage capture rate of transient guests is 40%. Beverage Group Transient Price $6 S6 Cost % 29% 29% # of guests 235 90 Beverage capture % 70% 40% Please conduct a displacement analysis to determine whether confirming or rejecting the group request. Template for displacement analysis Displacement Analysis Group Displaced Transients Step 1: Calculate Room Profit Room Revenue Room Cost Room Profit = revenue - cost Step 2: Calculate Food Profit Food Revenue Food Cost Food Profit = revenue - cost Step 3: Calculate Beverage Profit Beverage Revenue Beverage Cost Beverage Profit = revenue - cost Step 4: Calculate Other Revenue Step 5: Calculate Total profit = room + food + beverage + other Step 6: Calculate Total profit difference between group vs. transient Step 7: Explanation what should the hotel do and why