Royal Resorts and Hotels (RRH) operates a chain of 30 resorts across the country. It prides itself on the comfort of the rooms in its hotels and the quality of service it offers to guests.

The majority of RRH hotels are located along the costline and have previously been successful in attracting upscale customers. In recent years, however, the number of customers has started to decline as a result of tough economic conditions in the country.

RRHs policy is to set standard prices for the rooms in each of its hotels, with that price reflecting the hotels location and taking account of competitors prices. However, hotel managers have the authority to offer discounts to regular customers, and to reduce prices when occupancy rates in their hotel are expected to be low. The average standard price per night, across all the hotels, was 140 EURO in 2020, compared to 135 EURO in 2019.

In addition to room bookings, the hotels also generate revenue from the additional services available to customers, such as restaurants and bars.

Summary from RRHs management accounts:

2021 2020

mln EURO mln EURO

Revenue rooms at standard price per night 111,000 104,000

Room discounts or rate reductions given 16,000 11,000

Other revenue: food, drink 24,000 23 000

Operating costs 95,000 92,000

Capital employed (Note 1) 40,000 38,200

Additional information:

Average occupancy rates (Note 2) 74% 72%

Average employee satisfaction score (Note 3) 4.2 4.5

Note 1: Capital employed is calculated using the depreciated cost of non-current assets at all RRHs hotels.

Note 2: Occupancy rates for the year ended 30 June 2020 were budgeted to be 72%.

Note 3: Employee satisfaction scores are graded on a scale of 15 where 5 represents Excellent.

Two themes are becoming increasingly frequent in the comments RRH customers make alongside the scores:

(1) Repeat customers have said that the standard of service in recent visits has not been as good as in previous visits.

(2) The rooms need redecorating, and the fixtures and fittings need replacing. For example, the customers complained about the bathrooms comfort.

RRH had planned a two-year refurbishment programme beginning in 2020 of all the rooms in each hotel. However, this programme has been put on hold, due to the current economic conditions, and in order to reduce expenditure.

Requirement:

1. Using the information provided, evaluate of RRHs performance for the year 2020. Comment on the results.

2. Financial measures are known for their short-termism and encouragement to mind profit center manager own business. What type of accounting or administrative tools a company may use in order to promote cooperation between divisions aiming at maximalization of companys value? Provide at least 4 different solutions and critically evaluate your proposals