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Question 2 (8 marks) Glitz hotel, a 520-room hotel, rents hotel rooms for $120/night. At the current sales level of 440 rooms per night, Glitz
Question 2 (8 marks)
Glitz hotel, a 520-room hotel, rents hotel rooms for $120/night. At the current sales level of 440 rooms per night, Glitz currently makes a profit of $30/room:
Sales $120
Costs 90
Profit 30
It costs Glitz $90/night to maintain a room ($60 in depreciation, $25 in variable maintenance and $5 in fixed booking costs).
Each of these are separate situations:
- What is the current number of rooms per night needed to break even.
- What should the price be per room if Glitz wants to make a total nightly profit of $16,000.
- Glitz has been approached by Conventions2000.com to purchase a block of 220 rooms for $80/room per night. If this special order is accepted, Conventions2000.com would take care of all booking costs for the rooms booked through Conventions2000.com, and the $5 fixed booking costs can be eliminated.
Required: Should Glitz accept this special offer (include both qualitative and quantitative analysis)
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