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?$14,967.50$13,442.50$16,175.50$18,747.50What would be the after-variable room’s income if the hotel does not win the contract?$16,175.50$14,967.50$18,747.50$14,547.00

Answer 1

winning the group romm contract: $14,967.50

normal tuesday revenue $16,175.50

Step-by-step explanation:

group contract:

125 rooms x $ 109 = 13,625

normal rooms:

(220-125) x $ 141.50 = 13,442.5

total revenue: 27,067.5

variable cost: 220x55= (12,100)

contribution: 14,967.5

If it doesn't win the contract

will sale 220 x 85% = 187 rooms at 141.5 each

187 rooms x (141.5 - 55) = 16.175,5‬