PROBLEM5

RoyalResortsandHotels(RRH)operatesachainof30resortsacrossthecountry.Itpridesitselfonthecomfortoftheroomsinitshotelsandthequalityofserviceitofferstoguests.

ThemajorityofRRHhotelsarelocatedalongthecostlineandhavepreviouslybeensuccessfulinattractingupscalecustomers.Inrecentyears,however,thenumberofcustomershasstartedtodeclineasaresultoftougheconomicconditionsinthecountry.

RRH'spolicyistosetstandardpricesfortheroomsineachofitshotels,withthatpricereflectingthehotel'slocationandtakingaccountofcompetitors'prices.However,hotelmanagershavetheauthoritytoofferdiscountstoregularcustomers,andtoreducepriceswhenoccupancyratesintheirhotelareexpectedtobelow.Theaveragestandardpricepernight,acrossallthehotels,was140EUROin2020,comparedto135EUROin2019.

Inadditiontoroombookings,thehotelsalsogeneraterevenuefromtheadditionalservicesavailabletocustomers,suchasrestaurantsandbars.

Note1:Capitalemployediscalculatedusingthedepreciatedcostofnon-currentassetsatallRRH'shotels.

Note2:Occupancyratesfortheyearended30June2020werebudgetedtobe72%.

Note3:Employeesatisfactionscoresaregradedonascaleof1-5where'5'represents'Excellent'.

TwothemesarebecomingincreasinglyfrequentinthecommentsRRHcustomersmakealongsidethescores:

(1)Repeatcustomershavesaidthatthestandardofserviceinrecentvisitshasnotbeenasgoodasinpreviousvisits.

(2)Theroomsneedredecorating,andthefixturesandfittingsneedreplacing.Forexample,thecustomerscomplainedaboutthebathroomscomfort.

RRHhadplannedatwo-yearrefurbishmentprogrammebeginningin2020ofalltheroomsineachhotel.However,thisprogrammehasbeenputonhold,duetothecurrenteconomicconditions,andinordertoreduceexpenditure.

Requirement:

1.Usingtheinformationprovided,evaluateofRRH'sperformancefortheyear2020.Commentontheresults.

2.Financialmeasuresareknownfortheirshort-termismandencouragementto"mindprofitcentermanagerownbusiness".Whattypeofaccountingoradministrativetoolsacompanymayuseinordertopromotecooperationbetweendivisionsaimingatmaximalizationofcompany'svalue?Provideatleast4differentsolutionsandcriticallyevaluateyourproposals.