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Required: 1. Based on this plan, what will Kristin's total compensation be if her performance results are {Round your answers to the nearest whole dollar amount.) a- 30,000 room-nights, 5% saved, $3.00 rate increase, and 8% reduction in energy use? b. 26,000 roomnights, 3% saved, $1.15 rate increase, and 5% reduction in energy use? c. 29,000 roomnights, 0% saved, $1.00 rate increase, and 2% reduction in energy use? Total compensation Total co rn pensatio n Total co m pensatio n Kristin Helmud is the general manager of Highland Inn, a local midpriced hotel with 100 rooms. Herjob objectives include providing resourceful and friendly service to the hotel's guests, maintaining an 70% occupancy rate, improving the average rate received per room to $100 from the current $97, 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 $84,000 with no incentive pay. The incentive plan the partners developed has each ofthe goals weighted as follows: Percent of Total Measure Responsibility Occupancy rate (also reflects guest service quality) 20% Operating within 95% of expense budget 30 Average room rate 30 Energyr use 20 100% If Kristin achieves all of these goals, the partners determined that her performance should merit a bonus of $42,000. The partners also agree that her salary will need to be reduced to $22,000 because ofthe addition ofthe bonus. The goal measures used to compensate Kristin are as follows: Occupancy goat: 25,550 roomnights = 20% occupancy rate at 100 rooms at 365 days Compensation: 20% weight X $42,000 target bonus = $8,400 $3,400u'25,550 = $03283 per roomnight Expense goal: 5% savings Compensation: 30% weight x $42,000 target bonus = $12,500 $12,600f5 = $2,520 for each percentage point saved Room rote goat: $3 rate increase Compensation: 30% weight I $42,000 target bonus = $12,600 $12,600f300 = $42.00 for each cent increase Energy use goo-L: 10% savings Compensation: 20% weight X $42,000 target bonus = $8,400 $3,400u'10 = $840 for each percentage point saved [ Kristin's new compensation plan will thus pay her a $72,000 salary plus 32.88 cents per room-night sold plus $2,520 for each percentage point saved in the expense budget plus $42 for each cent increase in the average room rate plus $840 for each percentage point saved in energy use. The minimum potential compensation would be $72,000 and the maximum potential compensation for Kristin would be $72,000 + $42,000 = $114,000
