Solved: Crabbe the owner of the Ocean Hotel is concerned

about
Crabbe the owner of the Ocean Hotel is concerned about

Crabbe, the owner of the Ocean Hotel, is concerned about the hotel's finances and has asked
your advice. He gives you the following information:

We have rooms for 80 guests. When the hotel is open, whatever the level of business, we have
to meet the following each month:

(£)

Staff wages and benefits.......................... 12500

General overheads (rates, electricity, etc)........ 8000

Depreciation .......................................... 2200

Interest on mortgage and bank loan................ 1800

Repayments on mortgage and bank loan......... 2500

Drawings for my own needs .........................1000

28 000

'For our normal business we charge an average of £20 per night for each guest. Each guest-
night involves variable costs of £4 for laundry and cleaning. Guests also spend money in the
restaurant, which on average brings us another £5 per guest-night after meeting

variable costs.

'I need advice on two problems; one concerns the month of September and the other relates to
the winter.

1 'Normal business in September will depend on weather conditions, and the probabilities of
occupancy from normal business are:

'Air travel Tours has enquired about a block booking at a discount in September. I intend to
quote a discount of 40 per cent on our normal guest-night charge. In the restaurant Air travels
package tourists will only bring us £3 per guest-night after variable costs. Air travel could take all

Reach out to freelance2040@yahoo.com for enquiry.

 our capacity, but I have to decide how many guest-nights to offer. The contract will mean that I
agree in advance to take the same number of Air travel tourists every night throughout

September. If they won't accept my price, I would be prepared to go as far as a 60 per cent
discount. 2 'When we come to the winter, trade is usually so bad that we close for three months.
We retain only a skeleton staff, costing £1500 per month, and general overheads are reduced
from £8000 to £2000. I am trying to find ways of keeping open this winter, but staying open will
incur the full monthly outgoings.

'If we remained open for all three months I estimate our basic winter trade at reduced prices,
together with income from conferences, would be as follows:

'If the courses are offered we shall have to run them for the full three months, irrespective of the
take-up. The charge per night would be £24, and the revenue from the restaurant net of variable
cost would only be £1 per guest-night.

We would have to spend about £5000 per month on tutors, and the courses would also have to
be advertised beforehand at a cost of £1500.'

Assume 30-day months throughout.

Requirements:

(a) Calculate the number of guest-nights Crabbe should contract to Air travel Tours at the
quoted 40 per cent discount.

(b) Determine the minimum price per guest-night at which it would be worthwhile for Crabbe to
do business with Air travel, and the maximum number of guest-nights it would be worthwhile to
contract at this price.

(c) Assess which of the winter options Crabbe should undertake and state any reservation you
may have about your assessment.

(d) Briefly explain the criteria on which you have identified costs to assess Crabbe's business
options in requirements (a) to (c).

Crabbe the owner of the Ocean Hotel is concerned about

ANSWER
https://solvedquest.com/crabbe-the-owner-of-the-ocean-hotel-is-concerned-about/

Reach out to freelance2040@yahoo.com for enquiry.

Powered by TCPDF (www.tcpdf.org)