Question
Room Pricing A proposed budget inn of 150 guestrooms is scheduled to open. The occupancy is expected to be 70%. The owner seeks your advice
Room Pricing
A proposed budget inn of 150 guestrooms is scheduled to open. The occupancy is expected to be 70%. The owner seeks your advice on pricing. Although he knows that he will modify your recommendation based on revenue management results, he desires a minimum target room rate. Determine the required ADR (Average Daily Rate) from the following information.
Owner investment = $2,000,000
Desired ROI = 20%
Tax rate = 20%
Funds borrowed = $3,000,000
Interest rate = 12% annual
Forecasted annual costs
Fixed charges other than interest = $600,000
Management fees = 5% of room sales
Room department expenses = 25% of room sales.
Undistributed operating expenses = $200,000 + 5% of room sales
- For a new restaurant food revenues are forecasted to be 2,000,000 per year with a total customer count of a 150,000. Furthermore, total costs of food sold are expected to be 40%, and the standard food cost for one item on the menu was calculated to be $4.00. The menu items price by using the Gross Profit approach should be:
- When the desired food cost percentage is 40%, the multiple used for determining prices using the ingredient mark-up approach is:
- When the desired food cost percentage is 30%, and the food cost for a menu item is $5.00 the price using the mark-up approach is:
4. Assume we have a 100-room hotel with its original ADR at $50 and rooms sold per week at 560 rooms (Week 1). The next week (Week 2) the hotel raised the ADR to $55 and sold 550 rooms. The hotel has a rack rate of $80.
Requirements:
- What is the price elasticity, E, of the demand measured in terms of rooms sold and what is the type of the demand?
- What are the total room revenues in Weeks 1& 2, respectively?
What are the yields in Weeks 1 & 2, respectively?
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