Kristin Helmud is the general manager of Highland Inn, a local mid-priced hotel with 100 rooms. Her job objectives include providing resourceful and friendly service to the hotel's guests, maintaining an 80% occupancy rate, improving the average rate received per room to $108 from the current $105, achieving a savings of 5% on all hotel costs, and reducing energy use by 10% by carefully managing the use of heating and air conditioning in unused rooms and by carefully managing the onsite laundry facility, among other means. The hotel's owner, a partnership of seven people who own several hotels in the region, wants to structure Kristin's future compensation to objectively reward her for achieving these goals. In the past, she has been paid an annual salary of $92,000 with no incentive pay. The incentive plan the partners developed has each of the goals weighted as follows: Percent of Total Responsibility Measure Occupancy rate (also reflects guest service quality) 15% Operating within 95% of expense budget 35 Average room rate 35 Energy use 15 100% If Kristin achieves all of these goals, the partners determined that her performance should merit a bonus of $42,000. The partners also agree that her salary will need to be reduced to $80,000 because of the addition of the bonus. The goal measures used to compensate Kristin are as follows: Occupancy goal: Compensation: 29,200 room-nights = 80 % occupancy rate x 100 rooms x 365 days 15% weight x $42,000 target bonus = $6,300 $6,300/29,200 = $0.2158 per room-night 5% savings Expense goal: Compensation: 35% weight x $42,000 target bonus = $14,700 $14,700/5 = $2,940 for each percentage point saved $3 rate increase Room rate goal: Compensation: 35% weight x $42,000 target bonus = $14,700 $14,700/300 = $49.00 for each cent increase 10% savings Energy use goal: Compensation: 15% weight x $42,000 target bonus = $6,300 $6,300/10 = $630 for each percentage point saved Kristin's new compensation plan will thus pay her a $80,000 salary plus 21.58 cents per room-night sold plus $2,940 for each percentage point saved in the expense budget plus $49 for each cent increase in the average room rate plus $630 for each percentage point saved in energy use. The minimum potential compensation would be $80,000 and the maximum potential compensation for Kristin would be $80,000+ $42,000 = $122,000 Required: 1. Based on this plan, what will Kristin's total compensation be if her performance results are: (Round your answers to the nearest whole dollar amount.) a. 30,000 room-nights, 5% saved, $3.00 rate increase, and 8% reduction in energy use. b. 25,000 room-nights, 3% saved, $1.15 rate increase, and 5% reduction in energy use. c. 28,000 room-nights, 0% saved, $1.00 rate increase, and 2% reduction in energy use. a. Total compensation b Total compensation C. Total compensation
