Question
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 |
Required
- What is the total number of room rentals needed for the year for the hotel to reach its breakeven point? Show the corresponding percentage of occupancy that this level of occupancy represents in order for the hotel to break even (show all calculations)
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