The MountainLodge, a mid-price, good quality “destination” resort hotel, is open only during the skiing season. The operating performance of this hotel in the skiing season is very well, but that in off-season is poor. Mrs. Krachit, CEO of this hotel, think about various methods to improve the situation. Among many things, operating and repair, maintenance of west wing are important issues.
We assume that X rooms must be rented each night in season for the hotel to breakeven. If 50 rooms in the east wing are fully rented. So, [50*0.2*15+50*0.8*20+(X-50)*0.2*20+(X-50)*0.8*25]*120= 138,410
X=58
If 30 rooms in the west wing are fully rented.Then, [30*0.2*20+30*0.8*25+(X-30)*0.2*15+(X-30)*0.8*20]*120=138,410
X=53
In conclusion, when 50 rooms in the east wing are fully rented, 58 rooms must be rented each night in season for the hotel to breakeven. When 30 rooms in the west wing are fully rented. 53 rooms must be rented each night in season for the hotel to breakeven.
If all room rates were raised $5 on weekend nights, but occupancy fell to 72 rooms instead of 80, If 50 rooms in the east wing are fully rented.
[50*0.2*20+50*0.8*25+22*0.2*25+22*0.8*30]*120=220560
220560-138,410=82150
If 30 rooms in the west wing are fully rented.
[30*0.2*20+30*0.8*25+42*0.2*15+42*0.8*20]*120=182160
182160-138,410=43750
So, the revised profit before taxes for the year is 82150 or 43750.
For off-season, the hotel management should make west wing of the hotel operating year-round, which could add its revenue and hence net income, and hence improve its financial condition. In addition, clerk, maids, insurance could be effectively and efficiently used. Third, when business in off-season is improved, advertising expenses may be cut down, as many tourists know the operating of this hotel in off-season.