Chuck Stout is the RM for the Holiday Inn Express. His 220-room property normall
ID: 2810848 • Letter: C
Question
Chuck Stout is the RM for the Holiday Inn Express. His 220-room property normally sells 85 percent 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 rate of $109.00 per room. 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.
What would be the total amount of after-variable costs rooms’ revenue the hotel will achieve if it wins the group rooms contract?
What would be the after-variable room’s income if the hotel does not win the contract?
$14,967.50Explanation / Answer
If contract is awarded No of rooms Room Price Room Variable cost Contribution per room: Room Price less Room cost Total Income: Contribution * No of rooms Group Award 125.00 109.00 55.00 54.00 6,750.00 Individual 95.00 141.50 55.00 86.50 8,217.50 Total 220.00 Total 14,967.50 So option A is correct If contract is not awarded No of rooms Room Price Room Variable cost Contribution per room: Room Price less Room cost Total Income: Contribution * No of rooms Group Award - 109.00 55.00 54.00 - Individual 187.00 141.50 55.00 86.50 16,175.50 Total 187.00 Total 16,175.50 So option A is correct
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