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As a result of Covid-19 an international resort hotel in Cairns, Australia has lost a lot of patronage and has been closed for refurbishment during

As a result of Covid-19 an international resort hotel in Cairns, Australia has lost a lot of patronage and has been closed for refurbishment during the pandemic and resulting lockdowns. It is planned to re-open and re-launch the hotel for the upcoming Australian summer on November 1st, 2021. The property will continue to trade on its reputation as a top of the range 5-star hotel. Following the renovation, the hotel has been valued at $700 million.

After re-opening the resort will be open 365 days of the year. In terms of cost accounting the resort has a number of cost centres including Repairs and Maintenance and the Front Office which are relatively fixed. The hotel also has variable costs relating to cleaning and servicing rooms. You have been provided with the following data regarding the refurbished hotel:

Available Rooms

600

Average Room Tariff (per night)

$495

Fixed Financing Costs

$15 million

Fixed Operating Costs

$100 million

Variable Operating Costs (per room per night when occupied)

$50

  1. Briefly discuss whether management should take up the last minute deals options. Include in your considerations any other business issues that the management should consider before making up their mind whether to proceed with the last-minute deals agreement.

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