Chuck Stout is the RM for the Holiday Inn Express. His 220-room property normally sells 85%...

 

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Chuck Stout is the RM for the Holiday Inn Express. His 220-room property normally sells 85% of its rooms on Tuesday nights at an ADR of $141.50. All variable costs related to selling his rooms are $55.00 per room. The DOSM at his Holiday Inn Express is proposing to place a bid to sell 125 rooms for a Tuesday night next month at a discounted rate. Chuck believes that if the hotel wins this group rooms bid, the transient room sales for that day will ensure a sell-out at the rate of $141.50. Help Chuck to find the minimum discounted rate for the group contract at which he can achieve an equal GOPPAR as the case without a group contract. Holiday Inn Express In order to achieve a GOPPAR equal to the normal sale for the case that includes group sale, we need to calculate the GOPPAR in the case without group contract. Table below shows the GOPPAR for this case: Without Group Sale Occupancy ADR 0.85 $141.5 Total Revenue $26460.5 Variable Costs $10285 $16175.5 GOP GOPPAR $73.52 Now we need to set the group contract case's GOPPAR equal to the one we calculated above. So: GOPPAR = $73.52 => GOP = $73.52 * 220(number of available rooms) = $1617.5 The variable costs for the case that a group contract is made are as follows: Variable costs = 220 (as the hotel sold out with group contract) *55= $12100 Having the GOP and the Variable costs, we can find the total revenue: Total Revenue = GOP + Variable Costs = $1617.5 + $12100= $28275.5 Please note that: Total Revenue = Revenue from Transient + Revenue from Group Sale We know that 125 rooms are sold through the groups sale, so 95 rooms are sold to the transients. At the rate of 141.50. So: Revenue from Transient = 95*141.50 = $13442.5 Revenue from Group sale = $28275.5 -$13442.5 = $14833 Knowing the revenue from group sale and the number of rooms sold to the group (125), we can find the rate at which rooms should be sold: Group sale rate = Group sale revenue/number of rooms sold = $14833 / 125 = $118.66 Chuck Stout is the RM for the Holiday Inn Express. His 220-room property normally sells 85% of its rooms on Tuesday nights at an ADR of $141.50. All variable costs related to selling his rooms are $55.00 per room. The DOSM at his Holiday Inn Express is proposing to place a bid to sell 125 rooms for a Tuesday night next month at a discounted rate. Chuck believes that if the hotel wins this group rooms bid, the transient room sales for that day will ensure a sell-out at the rate of $141.50. Help Chuck to find the minimum discounted rate for the group contract at which he can achieve an equal GOPPAR as the case without a group contract. Holiday Inn Express In order to achieve a GOPPAR equal to the normal sale for the case that includes group sale, we need to calculate the GOPPAR in the case without group contract. Table below shows the GOPPAR for this case: Without Group Sale Occupancy ADR 0.85 $141.5 Total Revenue $26460.5 Variable Costs $10285 $16175.5 GOP GOPPAR $73.52 Now we need to set the group contract case's GOPPAR equal to the one we calculated above. So: GOPPAR = $73.52 => GOP = $73.52 * 220(number of available rooms) = $1617.5 The variable costs for the case that a group contract is made are as follows: Variable costs = 220 (as the hotel sold out with group contract) *55= $12100 Having the GOP and the Variable costs, we can find the total revenue: Total Revenue = GOP + Variable Costs = $1617.5 + $12100= $28275.5 Please note that: Total Revenue = Revenue from Transient + Revenue from Group Sale We know that 125 rooms are sold through the groups sale, so 95 rooms are sold to the transients. At the rate of 141.50. So: Revenue from Transient = 95*141.50 = $13442.5 Revenue from Group sale = $28275.5 -$13442.5 = $14833 Knowing the revenue from group sale and the number of rooms sold to the group (125), we can find the rate at which rooms should be sold: Group sale rate = Group sale revenue/number of rooms sold = $14833 / 125 = $118.66