St. Ashton Maui Resort Background St. Ashton Resorts operates high-end, all-inclusive vacation destinations in 12 locations, including Maui, Hawaii; Los Cabos, Mexico; and the Great Barrier Reef, Australia. At St. Ashton properties, the guest pays a flat daily rate that includes lodging, all meals and beverages, golf, and spa treatments. Each resort is treated as a profit center, and the managers of the resort receive bonuses for achieving or beating the budget. Under the profit center approach, each resort management team is rewarded based on the difference between budgeted and actual profits. Last year, St. Ashton switched its budgeting methodology. Previously, the CFO's office of St. Ashton set each property's annual budget based on the projected occupancy rate and expected costs. The annual budget was then broken down into monthly budgets adjusted for the number of days in the month and any seasonal fluctuation in the occupancy rate. The new CFO, hired in the middle of last year, felt the old budget approach, which was set before the year began, did not take into account the dynamic nature of the tourism market. Travelers used to plan their leisure travel 6-9 months ahead, which allowed resorts to develop reasonably accurate forecasts of demand and hence accurate budgets. The Internet and global markets caused the once-predictable demand to become more unpredictable. The old budget was out of date shortly after the new year began, causing managers rewarded under the budget great consternation. The new CFO changed the budgeting system for the current fiscal year to a monthly rolling model. Before the current fiscal year began, the CFO's office sets the spending targets per guest room occupied for each department in each resort (lodging, food and beverage, golf, and spa) as well as annual budgets to cover each department's fixed costs. The annual departmental budgets are converted to monthly budgets by taking the annual budget, dividing it by 365, and multiplying that by the number of days in the month. The following table illustrates the new budget model for the St. Ashton Maui Resort for the current year. Budget $1.700 500 75% 375 $637.500 Revenue per room day Number of rooms Average occupancy rate Expected occupancy Total expected revenue per day Variable costs per room Food and beverage Golf Spa Lodging Total variable cost per room day Total expected variable cost @ average occupancy Fixed cost per year Food and beverage Golf Spa Lodging Administration Grounds Total annual fixed cost Total annual fixed cost per day (365 days) Total profit per day $300 $30 $200 $70 $600 $225,000 $18,000,000 $2,300,000 $1.600.000 $88,000,000 $14.000.000 $1.700.000 $125.600.000 $344.110 $68.390 St. Ashton Maui Resort Background St. Ashton Resorts operates high-end, all-inclusive vacation destinations in 12 locations, including Maui, Hawaii; Los Cabos, Mexico; and the Great Barrier Reef, Australia. At St. Ashton properties, the guest pays a flat daily rate that includes lodging, all meals and beverages, golf, and spa treatments. Each resort is treated as a profit center, and the managers of the resort receive bonuses for achieving or beating the budget. Under the profit center approach, each resort management team is rewarded based on the difference between budgeted and actual profits. Last year, St. Ashton switched its budgeting methodology. Previously, the CFO's office of St. Ashton set each property's annual budget based on the projected occupancy rate and expected costs. The annual budget was then broken down into monthly budgets adjusted for the number of days in the month and any seasonal fluctuation in the occupancy rate. The new CFO, hired in the middle of last year, felt the old budget approach, which was set before the year began, did not take into account the dynamic nature of the tourism market. Travelers used to plan their leisure travel 6-9 months ahead, which allowed resorts to develop reasonably accurate forecasts of demand and hence accurate budgets. The Internet and global markets caused the once-predictable demand to become more unpredictable. The old budget was out of date shortly after the new year began, causing managers rewarded under the budget great consternation. The new CFO changed the budgeting system for the current fiscal year to a monthly rolling model. Before the current fiscal year began, the CFO's office sets the spending targets per guest room occupied for each department in each resort (lodging, food and beverage, golf, and spa) as well as annual budgets to cover each department's fixed costs. The annual departmental budgets are converted to monthly budgets by taking the annual budget, dividing it by 365, and multiplying that by the number of days in the month. The following table illustrates the new budget model for the St. Ashton Maui Resort for the current year. Budget $1.700 500 75% 375 $637.500 Revenue per room day Number of rooms Average occupancy rate Expected occupancy Total expected revenue per day Variable costs per room Food and beverage Golf Spa Lodging Total variable cost per room day Total expected variable cost @ average occupancy Fixed cost per year Food and beverage Golf Spa Lodging Administration Grounds Total annual fixed cost Total annual fixed cost per day (365 days) Total profit per day $300 $30 $200 $70 $600 $225,000 $18,000,000 $2,300,000 $1.600.000 $88,000,000 $14.000.000 $1.700.000 $125.600.000 $344.110 $68.390