Grand Garden is a luxury hotel with 155 suites Its regular suite rate is $210 pe
ID: 2459765 • Letter: G
Question
Grand Garden is a luxury hotel with 155 suites Its regular suite rate is $210 per night per suite The hotel's cost per night is $135 per suite and consists of the following. The hotel manager received an offer to hold the local Bikers' Club annual meeting at the hotel in March, which is the hotel's low season with an occupancy rate of under 55%. The Bikers' Club would reserve 45 suites for three nights if the hotel could offer a 55% discount, or a rate of $94 per night. The hotel manager is inclined to reject the offer because the cost per suite per night is $135. Prepare an analysis of this offer for the hotel manager.Explanation / Answer
The Total no of suites are 155
Total no of Occupancy in low season= 55 % of 155 = 85
Total no, of rooms that can be offered for meeting = 70
Total no of nights for which rooms are needed are 3
Revenue generated from suites given for Meeting for 3 days @ $94 per suite per night = 19,740
Less: Variable cost for 70 rooms for 3 nights @ $ 29 per suite per night = 6,090
Contribution margin= 13,650
The Hote manager should accpet to reserve the suits for 3 nights as it it beneficial for hotel in terms of Profit
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