The Santord Hotels chain embarked on a new customer loyalty program for the year The year-end data have been collected, and if is now time for you to determine whether the loyalty program should be continued, discontinued, or perhaps altered to improve loyaity and profitability levels at Sanford Sanford's loyalty program consists of three different customer loyalty levels Following are some characteristics of the hotel chain and its loyalty programs (Click the icon to vow the characteristics.) Note that an average Gold Customer would have received the 15% discount for his or her first 25 stays, received the 25% discount for the next 25 stays and the 35% discount only for the last 10 nights. Assume that all program members signed on to the program the first time they stayed with one of the chain's hotels Also, assume the restaurants are managed by a 100%-owned subsidiary of Sanford. Required Requirement 1. Calculate the program contribution margin for each of the three programs, as well as for the group of customers not subscribing to the loyally program. Which program is the most profitable? Which is the least profitable? Do not atlocate fixed costs to individual rooms or specific loyalty programs (Round percentages to (wo decimal places) The group of customers has the highest contribution margin per revenue dollar, while the group of customers has the lowest contribution margin per revenue dollar Requirement 3. What is the average room rate per night? What are average variable costs per night inclusive of the loyalty program? (Round your ariswers to the nearest cant.) The average room rate por rught is $ The-average vanable costs per night inclusive of the loyality program, is S Requirement 4, Explain what drives the profitability (or lack thereof) of the most and least profitable loyalty programs (again, one of these may be the "no program' option) The icyalfy programs are designed to attiact a high number of stays at their hoteis will customers Given the variable costs, increasing the number of the overall operating income, contribution margin per revenue dollar. Required 1. Calculate the program contribution margin for each of the three programs, as well as for the group of customers not subscribing to the loyalty program. Which program is the most profitable? Which is the least profitable? Do not allocate fixed costs to individual rooms or specific loyalty programs. 2. Develop an operating income statement for Sanford for the year ended December 31. 3. What is the average room rate per night? What are average variable costs per night inclusive of the loyalty program? 4. Explain what drives the profitability (or lack thereof) of the most and least profitable loyalty programs (again, one of these may be the "no program" option). Hotel chain and loyalty program characteristics All new customers can sign up for the Sanford Bronze Card - this card provides guests with a complimentary bottle of wine (cost to the chain is $6 per bottle), $20 in restaurant coupons (cost to the chain is $10 ), and 15% off the nightly rate. The program enables the chain to track a member's stays and activities. Once a customer has stayed and paid for 25 nights at any of the chain's locations worldwide, he or she is upgraded to Silver Customer status. Silver benefits include the bottle of wine (cost to the chain is $6 per bottle), $28 in restaurant coupons (cost to the chain is $14 ), and 25% off every night from the twenty-first night on. A customer who reaches the 50 -night level is upgraded to Gold Customer status. Gold status increases the nightly discount to 35% and replaces the $6 bottle of wine with a bottle of champagne (cost to the chain is $25 per bottle). As well, $36 in restaurant coupons are granted (cost to the chain is $18 ). The average full price for one night's stay is $230. The chain incurs variable costs of $55 per night, exclusive of loyalty program costs. Total fixed costs for the chain are $144,290,000. Sanford operates 10 hotels with, on average, 500 rooms each. All hotels are open for business 365 days a year, and approximately average occupancy rates are around 85%. The following are some of the statistics on the loyalty programs