Background The Extraordinary Buttercup Hotel & Amusement Company, operate a hotel and an amusement park. The amusement park is located 5 km from the hotel grounds. When the amusement park is open a shuttle service operates throughout the day to transport residents between the hotel and the amusement park. Hotel The hotel is open 7 days a week throughout all 52 weeks of the year. It has 30 family rooms, 50 double rooms and 20 single rooms, all of which are let on a nightly basis. Family rooms accommodate two adults and two children. Management expect that the occupancy rates during the 24 week busy season will be 80% for family rooms, 70% for double rooms and 60% for single rooms. During the remainder of the year occupancy rates are expected to be 50% for family rooms, 30% for double rooms and 40% for single rooms. The variable costs associated with room occupation are estimated at 25 per family room per night, 20 per double room per night and 15 per single room per night. The contribution generated per night by a family room per night is 200% of the contribution generated by a single room while the contribution generated per night by a double room is 150% of that generated by a single room. The fixed costs to be incurred in respect of hotel accommodation are budgeted at 1,175,480 per annum. All hotel residents make use of the hotel's bar and restaurant facilities. In addition the bar and restaurant attract an average of 20 casual adult visitors per day throughout the year. Details of budgeted contribution and budgeted fixed costs in respect of the bar and restaurant are as follows: Bar Restaurant Budgeted contribution per child per day 2 4 Budgeted contribution per adult per day 5 8 Budgeted fixed costs 112,000 180,000 Amusement Park The amusement park is only open during the 24 week busy period. However it is open 7 days a week during that time. 60% of the families who occupy the family rooms during this period visit the amusement park, while only 20% of the other residents who stay in the hotel during the busy period visit it. In addition to hotel residents the park also attracts an average of 70 families and 200 individual visitors per day. An entrance fee of 50 applies to families and covers up to two adults and two children. A flat entrance fee of 15 per person applies to all other visitors, irrespective of their age. All costs incurred in respect of the amusement park are deemed to be fixed and amount to 1,245,000 per annum. Requirement Prepare a report for management in which you: (a) Present the nightly rates to be charged for family rooms, double rooms and for single rooms if management wish to earn a profit of 670,000 on hotel accommodation during the forthcoming year. (Note: This profit target relates to accommodation alone, therefore exclude figures pertaining to the bar and restaurant from your calculations). 9 marks (b) Discuss the assumptions which underpin your calculations in (a) above. 4 marks (C) Assuming that the rooms rates calculated in (a) above are charged, calculate the budgeted profit for the entire company for the forthcoming year. (You may assume that double rooms and single rooms are only occupied by adult guests). 9 marks (d) Identify THREE dimensions of performance on which hotel management should focus and suggest measures (or criteria) that could be used for each of these dimensions of performance. 9 marks (e) Suggest THREE courses of action that amusement park management could adopt to increase the competitiveness and improve the profitability of the amusement park. 9 marks Total: 40 marks Background The Extraordinary Buttercup Hotel & Amusement Company, operate a hotel and an amusement park. The amusement park is located 5 km from the hotel grounds. When the amusement park is open a shuttle service operates throughout the day to transport residents between the hotel and the amusement park. Hotel The hotel is open 7 days a week throughout all 52 weeks of the year. It has 30 family rooms, 50 double rooms and 20 single rooms, all of which are let on a nightly basis. Family rooms accommodate two adults and two children. Management expect that the occupancy rates during the 24 week busy season will be 80% for family rooms, 70% for double rooms and 60% for single rooms. During the remainder of the year occupancy rates are expected to be 50% for family rooms, 30% for double rooms and 40% for single rooms. The variable costs associated with room occupation are estimated at 25 per family room per night, 20 per double room per night and 15 per single room per night. The contribution generated per night by a family room per night is 200% of the contribution generated by a single room while the contribution generated per night by a double room is 150% of that generated by a single room. The fixed costs to be incurred in respect of hotel accommodation are budgeted at 1,175,480 per annum. All hotel residents make use of the hotel's bar and restaurant facilities. In addition the bar and restaurant attract an average of 20 casual adult visitors per day throughout the year. Details of budgeted contribution and budgeted fixed costs in respect of the bar and restaurant are as follows: Bar Restaurant Budgeted contribution per child per day 2 4 Budgeted contribution per adult per day 5 8 Budgeted fixed costs 112,000 180,000 Amusement Park The amusement park is only open during the 24 week busy period. However it is open 7 days a week during that time. 60% of the families who occupy the family rooms during this period visit the amusement park, while only 20% of the other residents who stay in the hotel during the busy period visit it. In addition to hotel residents the park also attracts an average of 70 families and 200 individual visitors per day. An entrance fee of 50 applies to families and covers up to two adults and two children. A flat entrance fee of 15 per person applies to all other visitors, irrespective of their age. All costs incurred in respect of the amusement park are deemed to be fixed and amount to 1,245,000 per annum. Requirement Prepare a report for management in which you: (a) Present the nightly rates to be charged for family rooms, double rooms and for single rooms if management wish to earn a profit of 670,000 on hotel accommodation during the forthcoming year. (Note: This profit target relates to accommodation alone, therefore exclude figures pertaining to the bar and restaurant from your calculations). 9 marks (b) Discuss the assumptions which underpin your calculations in (a) above. 4 marks (C) Assuming that the rooms rates calculated in (a) above are charged, calculate the budgeted profit for the entire company for the forthcoming year. (You may assume that double rooms and single rooms are only occupied by adult guests). 9 marks (d) Identify THREE dimensions of performance on which hotel management should focus and suggest measures (or criteria) that could be used for each of these dimensions of performance. 9 marks (e) Suggest THREE courses of action that amusement park management could adopt to increase the competitiveness and improve the profitability of the amusement park. 9 marks Total: 40 marks