The 450-room Hotel Fernando is a four-star full-service hotel in San Petresco. It is highly regarded...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The 450-room Hotel Fernando is a four-star full-service hotel in San Petresco. It is highly regarded among both locals and tourists. Its service standards and ameni- ties complement its exquisite rooms. In addition, the hotel boasts an impressive amount of meeting and conference function space to cater to events and groups. Due to a steady increase in group bookings, management is proposing to imple- ment new revenue management tactics to expedite its process of deciding which groups to accept. Certain techniques, such as displacement analysis, would prove very helpful, especially during the main season when the hotel operates at high- occupancy levels. By using a displacement analysis spreadsheet, management would be able to more effectively select the booking opportunities with the high- est net revenue potential. The hotel forecasts its occupancy levels for the upcoming Easter weekend, April 14-16, as follows: Apr 14 405 Apr 15 420 Apr 16 355 The average daily transient rate for those days has been posted at $175 per room. The variable cost for cleaning any occupied room, regardless of whether it has been assigned to a transient or group guest, averages $20. A franchise fee of 8 per- cent, which is composed of 4 percent for a marketing fees assessment and another 4 percent for royalty fees, must be allocated to the room cost; the fees are calculated based on the room rate. The following table explains these transient room costs: 104 Chapter 7 Total Transient Room Cost: Variable Cost: Franchise Fee: 8% (ADR: $175) Meal Breakfast Lunch Dinner or $141. After all room costs have been established, the net transient room revenue may be calculated by subtracting the total room costs from the room rate. There- fore, in this scenario, the net room revenue (also called contribution margin) is $175 Hotels make a significant portion of their net revenue from rooms, but, if they have the facilities to support other revenue opportunities, such as food and bever- age facilities and meeting and banquet halls, total revenue will increase. Based on historical data, the Hotel Fernando's capture rate of transient guests purchasing a meal in its food and beverage facilities is as follows: Average Check $12.00 $25.00 $45.00 Food Cost% 30% 35% 32% $34.00 $20.00 $14.00 Food Cost $3.60 $8.75 $16.25 $14.40 $30.60 Net Revenue $8.40 Average Beverage Price Average Beverage Cost Direct Variable Beverage Cost Transient Capture Rate The information in the preceding chart is based on the Hotel Fernando's purchase- ratio history. Since the hotel's capture rate is higher during breakfast, it receives more business from transient guests during that time period. It is important to point out that the average check at breakfast is $12, which is lower than the aver- age check at either lunch or dinner. The breakfast food cost percentage is the low- est of the three meals, but breakfast also brings in the lowest net revenue per meal. Dinner, on the other hand, has a slightly higher food cost percentage, but this meal period generates a substantially higher net revenue value due to the significantly higher average check. Transient Capture% 70% 25% 40% The Hotel Fernando's capture rate of transient guests purchasing a beverage in its food and beverage facilities is as follows: $5.00 20% $1.00 50% The 50 percent capture rate means that, on average, half of the transient guests staying in the hotel will purchase one beverage a day. The average beverage price is $5 and the direct variable cost associated with that one beverage is $1; therefore, the hotel would make $4 net revenue from each beverage sold. Furthermore, if 85 transient guests staying in the hotel have a capture rate of 50 percent, approxi- mately 43 people (calculation rounded up) would purchase drinks. Consequently, the hotel would generate $170 net revenue from selling beverages to these tran- sient guests. The Group Request. One of the most prestigious community groups in the state is the Rotary Club, whose members are known as Rotarians. The Rotary Club meets to d the p . . . Displacement Analysis 105 the Easter weekend. positioned itself as a leader in conference facilities, the Rotary Club has decided every month in one of the Hotel Fernando's conference halls. Since the hotel has to host its annual Easter event at the Hotel Fernando, Rotarians from around the state will stay in the hotel to attend the conference that is being held on-site over is Easter Monday. The coordinator also inquired about receiving special group on April 14, staying the night on Good Friday, and departure on April 17, which The event coordinator for the Rotary Club requested a three-night stay, arrival The group also wishes to rent a conference room and audiovisual equipment for room rates of $70, breakfast coupons for $10, lunch for $22, and dinner for $41. to displace a number of its transient guests. Therefore, management has proposed forecasted high-occupancy levels during that weekend, it would probably have Normally, this situation would not pose a problem, but since the hotel has understand whether it is advantageous to accept the group booking. that a displacement analysis spreadsheet be created so management can fully Occupancies. The occupancy forecasts for the transient guests and for the group- two days. block guests are as follows: que Forecasted Occupancy Group Rooms Request Apr 14 405 Apr 15 420 85 Apr 16 355 90 75 Other Revenue. The Hotel Fernando rents conference rooms for $250 per day and audiovisual equipment for $80 per day. Costs to the hotel for these items are $60 per day for conference room setup and $30 per day for the audiovisual equipment. Assignment Perform a displacement analysis for the Hotel Fernando. Include a brief discus- sion explaining how the different revenue management tactics are applied in your scenario. If you do so by creating a displacement analysis spreadsheet, the spreadsheet should consist of a workbook with four worksheets: Net room revenue differential calculation Net food and beverage revenue differential calculation Other net revenue calculation Summary, where all the subtotals are linked and tallied up for decision-making The 450-room Hotel Fernando is a four-star full-service hotel in San Petresco. It is highly regarded among both locals and tourists. Its service standards and ameni- ties complement its exquisite rooms. In addition, the hotel boasts an impressive amount of meeting and conference function space to cater to events and groups. Due to a steady increase in group bookings, management is proposing to imple- ment new revenue management tactics to expedite its process of deciding which groups to accept. Certain techniques, such as displacement analysis, would prove very helpful, especially during the main season when the hotel operates at high- occupancy levels. By using a displacement analysis spreadsheet, management would be able to more effectively select the booking opportunities with the high- est net revenue potential. The hotel forecasts its occupancy levels for the upcoming Easter weekend, April 14-16, as follows: Apr 14 405 Apr 15 420 Apr 16 355 The average daily transient rate for those days has been posted at $175 per room. The variable cost for cleaning any occupied room, regardless of whether it has been assigned to a transient or group guest, averages $20. A franchise fee of 8 per- cent, which is composed of 4 percent for a marketing fees assessment and another 4 percent for royalty fees, must be allocated to the room cost; the fees are calculated based on the room rate. The following table explains these transient room costs: 104 Chapter 7 Total Transient Room Cost: Variable Cost: Franchise Fee: 8% (ADR: $175) Meal Breakfast Lunch Dinner or $141. After all room costs have been established, the net transient room revenue may be calculated by subtracting the total room costs from the room rate. There- fore, in this scenario, the net room revenue (also called contribution margin) is $175 Hotels make a significant portion of their net revenue from rooms, but, if they have the facilities to support other revenue opportunities, such as food and bever- age facilities and meeting and banquet halls, total revenue will increase. Based on historical data, the Hotel Fernando's capture rate of transient guests purchasing a meal in its food and beverage facilities is as follows: Average Check $12.00 $25.00 $45.00 Food Cost% 30% 35% 32% $34.00 $20.00 $14.00 Food Cost $3.60 $8.75 $16.25 $14.40 $30.60 Net Revenue $8.40 Average Beverage Price Average Beverage Cost Direct Variable Beverage Cost Transient Capture Rate The information in the preceding chart is based on the Hotel Fernando's purchase- ratio history. Since the hotel's capture rate is higher during breakfast, it receives more business from transient guests during that time period. It is important to point out that the average check at breakfast is $12, which is lower than the aver- age check at either lunch or dinner. The breakfast food cost percentage is the low- est of the three meals, but breakfast also brings in the lowest net revenue per meal. Dinner, on the other hand, has a slightly higher food cost percentage, but this meal period generates a substantially higher net revenue value due to the significantly higher average check. Transient Capture% 70% 25% 40% The Hotel Fernando's capture rate of transient guests purchasing a beverage in its food and beverage facilities is as follows: $5.00 20% $1.00 50% The 50 percent capture rate means that, on average, half of the transient guests staying in the hotel will purchase one beverage a day. The average beverage price is $5 and the direct variable cost associated with that one beverage is $1; therefore, the hotel would make $4 net revenue from each beverage sold. Furthermore, if 85 transient guests staying in the hotel have a capture rate of 50 percent, approxi- mately 43 people (calculation rounded up) would purchase drinks. Consequently, the hotel would generate $170 net revenue from selling beverages to these tran- sient guests. The Group Request. One of the most prestigious community groups in the state is the Rotary Club, whose members are known as Rotarians. The Rotary Club meets to d the p . . . Displacement Analysis 105 the Easter weekend. positioned itself as a leader in conference facilities, the Rotary Club has decided every month in one of the Hotel Fernando's conference halls. Since the hotel has to host its annual Easter event at the Hotel Fernando, Rotarians from around the state will stay in the hotel to attend the conference that is being held on-site over is Easter Monday. The coordinator also inquired about receiving special group on April 14, staying the night on Good Friday, and departure on April 17, which The event coordinator for the Rotary Club requested a three-night stay, arrival The group also wishes to rent a conference room and audiovisual equipment for room rates of $70, breakfast coupons for $10, lunch for $22, and dinner for $41. to displace a number of its transient guests. Therefore, management has proposed forecasted high-occupancy levels during that weekend, it would probably have Normally, this situation would not pose a problem, but since the hotel has understand whether it is advantageous to accept the group booking. that a displacement analysis spreadsheet be created so management can fully Occupancies. The occupancy forecasts for the transient guests and for the group- two days. block guests are as follows: que Forecasted Occupancy Group Rooms Request Apr 14 405 Apr 15 420 85 Apr 16 355 90 75 Other Revenue. The Hotel Fernando rents conference rooms for $250 per day and audiovisual equipment for $80 per day. Costs to the hotel for these items are $60 per day for conference room setup and $30 per day for the audiovisual equipment. Assignment Perform a displacement analysis for the Hotel Fernando. Include a brief discus- sion explaining how the different revenue management tactics are applied in your scenario. If you do so by creating a displacement analysis spreadsheet, the spreadsheet should consist of a workbook with four worksheets: Net room revenue differential calculation Net food and beverage revenue differential calculation Other net revenue calculation Summary, where all the subtotals are linked and tallied up for decision-making
Expert Answer:
Answer rating: 100% (QA)
Dear student We can solve this problem step by step Playing out a removal investigation for the Inn Fernando includes computing the net room income di... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Posted Date:
Students also viewed these accounting questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Given a circularly linked list L containing an even number of nodes, describe how to split L into two circularly linked lists of half the size.
-
A portion of the current assets section of the December 31, 2011, balance sheet for Carr Co. is presented here: The company's accounting records revealed the following information for the year ended...
-
A time-series process of the form \(y_{t}=\alpha+y_{t-1}+v_{t}, v_{t} \sim N\left(0, \sigma^{2} ight)\) can be rearranged as \(y_{t}-y_{t-1}=\) \(\Delta y_{t}=\alpha+v_{t}\). This shows that...
-
Statistical distance between records can be measured in several ways. Consider Euclidean distance, measured as the square root of the sum of the squared differences. For the first two records in...
-
Youre a supervisor in the treasury department of Big Corp. Recently there has been increasing concern about the firms rising interest expense. Fred Eyeshade is an analyst in your group who...
-
You're a cashier at a local grocery store. You notice many customers buying kiwifruit, but you've never tried kiwifruit yourself. When the price of kiwifruit suddenly drops, you notice that your...
-
There is a New York Times articleit discusses how the rise of cell phone-only households has affected surveys. Read that article and respond to the following questions via a primary post of your own...
-
Write the common names for the amines shown below. HC-N-CH, CH3 H h-ethylmethylamine HC-CH,-NCH,CH3 H -ethylpropylamine Incorrect. First name the alkyl groups. Keep in mind that the term methyl...
-
Your best friend owes you money for 500php. However, your friend does not have the initiative to pay you back. Even though your friends keep on seeing him/her spending money for his/her own vanity....
-
701 5310 Think about groups in which you have participated. Write down one way a group leader began his or her group meetings. Discuss whether you think his or her way of beginning effectively set a...
-
FIN 3 1 4 4 Financial Planning Case Facts Sheldon and Amy Cooper Sheldon and Amy Cooper have come to you, a financial planner, for help in developing a plan to accomplish their financial goals. The...
-
https://www.youtube.com/watch?v=_FSHKircIoA Describe and Analyze Rebar Jaff's Ted Talk contrasting his experiences with Canadian multiculturalism with his experiences addressing attitudes towards...
-
How are biological phenomena such as transcription and translation, alongside evolutionary mechanisms like natural selection, leveraged to enhance the quality of life for individuals globally?
-
At the end of the current period, a company has an outstanding loan balance of $3,000,000. The terms of the note will require $300,000 of principal to be paid in each of the following 10 years. What...
-
Do the three planes x + 2x + x 3 = 4, X X 3 = 1, and x + 3x = 0 have at least one common point of intersection? Explain.
-
Why is the general journal referred to as the book of original entry? How are transactions presented in the journal?
-
On January 1, 2016, Faxico, Inc. issued $ 4,500,000 par value 8%, five- year bonds. Interest is payable semiannually on January 1 and July 1 with the first interest payment on July 1, 2016. The...
-
Does an entity have to legally dissolve treasury stock shortly after acquiring the shares? Explain.
-
Consider expansion of a function in terms of a series \(F_{n}(x)\) in the following form: \[f(x)=\sum_{n} A_{n} F_{n}(x)\] If the functions \(F_{n}\) are orthogonal then this property helps to unfold...
-
A concrete wall \(20 \mathrm{~cm}\) thick is initially at a temperature of \(20^{\circ} \mathrm{C}\), and is exposed to steam at pressure \(1 \mathrm{~atm}\) on both sides. Find the time for the...
-
Analyze the transient problem with the Dirichlet condition for a long cylinder and for a sphere. Derive expressions for the eigenfunctions, eigenconditions, and eigenvalues. Find the series...
Study smarter with the SolutionInn App