Discussion:
The Cost Controller had analyzed the existing costing and pricing practices for event management services. Subsequently, he was required to propose and justify to the Board of Directors, an effective pricing strategies for event manager: services offered by Sri Suria Hotel. The question that kept coming to his mind was, "What is the right price?" He needed to convincingly advise the Board on thus issue in the meeting scheduled next month. Discuss pricing methods (at least 3) and costing methods(at least 3) that can be used by Sri Suria Hotel to determine the cost of its event management activities.
Sri Suria Hotel offered hotel accommodation, dining outlets and on- site event management services to its clients. Recently, the Board of Directors raised concern over minimal profit margin gained through the event management activities. The Cost Controller of Sri Suria Hotel was assigned the task to propose effective pricing strategies to the Board. The Controller believed that the most important factor affecting pricing would be costs. However, the Controller was well aware that internal factors such as marketing strategies, cost structure and cost decision mechanisms; and external factors including demand structure, competition, and legal legislation must be taken into consideration in his proposal. If the price is right, Sri Suria Hotel has an edge over its competitors The cost controller chose costing for the following two recent events; (1) Manjong Community Anniversary Dinner, and (2) Ruby Care Sdn. Bhd. one-day seminar, to illustrate existing costing practices. Manjong Community celebrated its 50th anniversary with an Anniversary Dinner for 600 persons with reservation for 60 tables of 10 person each. The event total revenue was RM 47,280.00 based on the selling price of RM7S.so per person. The price is calculated based on a customized package prepared by the event team in accordance with the client's needs. The breakdown for event cost and price are as shown in Table 3 Item Cost Price Per Unit | % of Cost to! Total Per Unit Total (RM) price (RM) Note (RM (RM) Food 18.72 40% | 11,232.00 46.80 28,080.00 5.00 3,000.00 10.00 6,000.00 8.00 4,800.00 3.00 1,800.00 6.00 3,600.00 Beverage1.30 26% | 780.00 Hall Rental 5 AV & 50%13,000.00 | 5096 | 2,400.00 70% | 1,260.00 100% | 3,600.00 25% | 11.820.00 | 8% | 3,782.40 896 | 3,782.40 3 5.00 4.00 2.10 Carpark Decoration 6.00 Salaries Operation System 19.70 6.30 Utilities Total 69.42 41,656.80 78.80 47,280.00 Notes on Each Item in Table 3 Note 1 The food price as per package which include appetizer, soup, main course and desert. The food costing ingredients for preparing an item is 40 % from total selling price for food. Note 2 Beverage item which include Chinese tea, cordial punch and mineral water is estimated at a cost of RM5. The cost involved per person is 26 % from selling price of beverage. Note 3 The hall rental charge can sometimes be negotiated depending upon food and and audio-visual. For i and wedding dinner may be discounted or provided complimentary depending upon the amount of food and beverage contracted. This function is booked for an anniversary dinner event, and rental is fixed 50 % from selling price. Note 4 Specific AV needs for events such as wedding, reception and other gatherings presentations needing similar equipment may be booked concurrently by different guests, thus adding to cost by having to rent extra equipment from the market The AV and equipment rental fee from market is set at 50 % from selling price of equipment Note 5 Car park is safe under CCTV and floodlighting, while guests concentrate on the important business and enjoying the event. With this option the guest I to leave their car in the hotel's car park for the duration of time given. The carpark charges per parson's RM3.00 and 70% will be taken for cost involved. The carpark is under renovation to accommodate additional 40 percent parking space for the guests In addition, automation resulted in 10 percent increase of gross margin. Note 6 Decoration costs vary depending on the location, length of event, types of lighting fixtures, seasonal& planning, theme, etc. Many variables go into determining the exact pricing for an event. Moreover this decoration not borne by the hotel, and fully using outsourcing services. The charges will be imposed on clients according to the quotation given by supplier So 100 % of the total revenue from decoration services that hotel charged to guest will be used to pay contracted supplier Note 7 The salary range for this particular event is estimated at 25 % from total revenue. Cost of staff salaries that assist with the event, and indirect could be allocated on the basis of how much time organization staff spend on the event. Note 8 Operating supplies like linen, toweling, dishwasher, chinaware and etc. located 8 % from total revenue for the event specified by the hotel management. Note 9 Utilities include electricity, energy, and water expanse. Hotel management allocating this amount according to certain factors (ex. Surface, usage ad duration).For this event the allocation was 8% from total revenue of RM 47,280 per pax charged. The standard normal package for dinner event advertised by Sri Suria Hotel is priced from RM68 nett per person. 2. Ruby Care Sdn. Bhd. organized a one-day seminar for its selected sale agents. The seminar package chosen by client costs RM1,000.00 for 15-30 persons. The price is based on hotel standard packages which include all the charges or expenses involved on seminar date. The package requirements will be fulfilled by the event team according to the client's needs. The breakdown of cost and price are shown in Table 5 Item Cost Price %of Cost to Total Total (RM) price (RM) Note 10 10 Snack (am tea break) Snack (pm tea break) Beverge Meeting Amenities Hall Rental AV & Equipment Salaries and related expenses Operating supplier Utilities Total 20% | 128.00 20% 128.00 26% | 26.00 20% | 14.00 50% | 60.00 70% | 49.00 20% | 200.00 8% | 80.00 640.00 100.00 12 70.00 13 120.00 14 70.00 15 16 896180.00 | 17 765.00 1,000.00 Table 6 Notes on Each Itera in Table5 Note 10 Item provided during morning /afternoon tea break is smacks like cake, cookies, or muffin will be served according to client favour and packages requested where the allocation will be (RM640.40 96/ 2 ) . During break the guest can have real espresso and fresh-brew coffee/tea to make favourite drinks using specialty coffee/tea machine in the Foyer. Note 11 Mineral water during seminar costs RM100 where the cost will be 26 % from total selling price of beverage Note 12 Meeting amenities include lip chart, marker pen, and other stationeries such as pencil or pen and notepad which cost ( RM 70.20% ) Note 13 Hall rental to be charged for fully equipped meeting facilities and boardrooms which offer high class stylish business environments to cater for business needs with the cost or 50 % from selling price Note 14 AV and equipment lays emphasis on harmony between audio-visual technologies and interiors. Audio-visual equipment can be integrated in order to provide a perfect experience. It covers LCD projector screen, PA system, and CD/DVD Player upon requested. The margin on rental of AV and equipment is set high al the percentage of 70 % because it is expensive equipment and technical service is provided to ensure the success the event Note 15 Salaries and related expenses include staff salary and commission. The salary range for this particular event ranges 20 % from total revenue of the event Note 16 Operating supplies like linen, towelling, dishwasher, chinaware and etc is allocated at 8 % from total revenue. Note 17 Utilities include electricity, energy, and water expanse. Hotel management allocating this amount according to certain factors (ex. Surface, usage ad duration).For this event the allocation was 8% from total revenue. Discussion: The Cost Controller had analyzed the existing costing and pricing practices for event management services. Subsequently, he was required to propose and justify to the Board of Directors, an effective pricing strategies for event manager: services offered by Sri Suria Hotel. The question that kept coming to his mind was, "What is the right price?" He needed to convincingly advise the Board on thus issue in the meeting scheduled next month. Discuss pricing methods (at least 3) and costing methods(at least 3) that can be used by Sri Suria Hotel to determine the cost of its event management activities
