Motel 9 is a chain with 10 hotels, which operates 365 days a year. The chain inv

Question

Motel 9 is a chain with 10 hotels, which operates 365 days a year. The chain invested $200 million to purchase land for these 10 hotels and $100 million to build and furnish them. Each hotel has 150 rooms and charges on average price of $80 per night. Each hotel is staffed with 20 employees; each paid $200 a day on average. On average the hotel is 90% occupied at any given time. The Overhead cost is $1500 per day.

M9-1. What is the labor productivity of each hotel? Express the answer as dollars per dollar?

M9y 2. What is the multi factor productivity of each hotel? Express the answer as dollars per dollar? Do not worry about the invested capital.

M9-3. The hotel can increase the average occupancy to 95% if it hires one marketing employee. (Average pay $200/day). Should the hotel hire this person or not. Justify your answer.

Explanation / Answer

1) Productivity = Output / Input

Hotel occupancy = 90 % of 150 rooms

Hotel occupancy = 135 rooms

Labor productivity = ( 135 X $ 80 ) / (20 X $ 200)

Labor productivity = 2.70 dollars per dollar

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Multifactor inputs for the hotel per day = 20 X $ 200 (labor costs) + $ 1500 (Overhead cost )

Multifactor inputs for the hotel per day = $ 5,500

Multifactor productivity = Output / Input

Multifactor productivity = ( 135 X $ 80 ) / $ 5,500

Multifactor productivity = 1.96 dollars per dollar

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3) If the hotel can hire one marketing personnel .

Occupancy = 0.95 X 150

Occupancy = 142.50

Input factors increase by 20 X $ 200 + $ 200 = $ 4,200

Productivity = ( 142.50 X $ 80) / ( $ 4,200)

Productivity = 2.71 dollars per dollar .

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The hotel should hire the marketing person because the labor productivity of each hotel has increased to 2.71 dollar per dollar invested which earlier was 2.70 dollar per dollar when the hotel had not hired the marketing employee.

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