Kristin Helmud is the general manager of Highland Inn, a local mid-priced hotel with 100 rooms. Her job objectives include providing resourceful and friendly service to the hotel's guests, maintaining an 75% occupancy rate. Improving the average rate received per room to $98 from the current $95, achieving a savings of 5% on all hotel costs, and reducing energy use by 10% by carefully managing the use of heating and air conditioning in unused rooms and by carefully managing the onsite laundry facility, among other means. The hotel's owner, a partnership of seven people who own several hotels in the region, wants to structure Kristin's future compensation to objectively reward her for achieving these goals. In the past, she has been paid an annual salary of $82,000 with no incentive pay. The incentive plan the partners developed has each of the goals weighted as follows: Measure Occupancy rate (also reflects guest service quality) Operating within 95% of expense budget Average room rate Energy use Percent of Total Responsibility zex 30 30 2e 100% If Kristin achieves all of these goals, the partners determined that her performance should merit abonus of $40,000 The partners also agree that her salary will need to be reduced to $70,000 because of the addition of the bonus. The goal measures used to compensate Kristin are as follows: Occupancy goal: Compensation: Expense goal: Compensation: Room rate goal: Compensation: Energy use goal: Compensation: 27,375 room-nights - 75% occupancy rate * 1ee rooms 365 days 20% weight * $40,000 target bonus = $8,000 $8,000/27,375 - $9.2922 per room-night 5% savings 30% weight * $40,eee target bonus = $12,000 $12,000/5 $2,40e for each percentage point saved $3 rate increase 30% weight 540,000 target bonus - $12,600 $12,000/300 $40.ee for each cent increase 10% savings 20% weight $40,eve target bonus - $8,000 $8,eee/ie - $888 for each percentage point saved Kristin's new compensation plan will thus pay her a $70,000 salary plus 29.22 cents per room-night sold plus $2.400 for each percentage point saved in the expense budget plus $40 for each cent increase in the average room rate plus $800 for each percentage point saved in energy use. The minimum potential compensation would be $70,000 and the maximum potential compensation for Kristin would be $70,000+ $40,000 = $110,000 Required: 1. Based on this plan, what will Kristin's total compensation be if her performance results are (Round y whole dollar amount.) a. 30,000 room-nights, 5% saved, $3.00 rate increase, and 7% reduction in energy use? b. 25,000 room-nights, 3% saved, $1.15 rate increase, and 4% reduction in energy use? c. 28,000 room-nights, 0% saved, $1.00 rate increase, and 1% reduction in energy use? a. Total compensation b. Total compensation c. Total compensation
