Zeyn Hotel Budget Number of Rooms 150 2019 Operations Budgeting ADR 180 Zeyn Hotel is a 150-room property with food and beverage operations. The CEO would like to increase the ADR to OCC 70% $190 and the OCC to 77%. Food department's revenues are expected to increase by 10% Beverage department's revenues are expected to increase by 12%. Other Operated Departments revenues are expected to decrease by 5%. RevPAR 126 Miscellaneous Income of $120,000 is expected in 2020. REVENUE The expected changes to the some of the expenses are as follows: Rooms 5 6,898,500 An building is scheduled to be purchased in January 2020. The building value is $600,000 and will be financed Food 1,585,300 via long-term debt at 5% interest rate. The purchase of the equipment is expected to increase the depreciation Beverage 412,800 expense and interest expense by $120,000 and $30,000 in 2020. Other Operated Departments 278,000 A new position for revenue management is projected to be open and filled on May 2020. The salary is expected Miscellaneous Income 101,700 to be $80,000. A marketing campaign will start in January and run throughout the year so that the hotel can achive the $190 TOTAL REVENUE $ 9,276,300 ADR and 77% OCC goals. The cost will be $45,000. DEPARTMENTAL EXPENSES Cost Behavior: Rooms $1,492,600 Room, Food and Beverage, and other operated departments expenses are directly variable with respective sales Food 831,900 revenues. Beverage 204,600 Administrative and general is fixed (same as 2019 but consider the new salary). Other Operated Departments 122,700 Marketing is fixed (same as 2019 but consider the marketing campaign). TOTAL DEPARTMENTAL EXPENSES $ 2,651,800 Utilities cost: $120,000 fixed, the remainder is variable with total revenue. Property Operations & Maintenance: $180,000 is fixed, the remainder is variable with total revenue. Franchise fees: 5% of the Room's Revenue. TOTAL DEPARTMENTAL PROFITS $ 6,624,500 Management fees: 3% of the GOP. Capital Reserve: 5% of the GOP. UNDISTRIBUTED OPERATING EXPENSES The property taxes and insurance expense are same as 2019. The income tax rate is same as 2019 tax rate. Administrative & General 659,800 Depreciation and interest expense are fixed (same as 2019 plus the new depreciation and interest expenses due to Marketing 565,100 the purchase of a new asset) Utility Costs 305,800 Based on the given information above and the previous year's income statements (see the excel file) prepare the Property Operation & Maintenance 325,400 operation budgets for the year 2020. TOTAL UNDISTRIBUTED OPERATING EXP $ 1,856,100 GROSS OPERATING PROFIT $ 4,768,400 Franchise Fees S 344,925 Management Fees 143,052 INCOME BEFORE FIXED CHARGES $ 4,280,423 SELECTED FIXED CHARGES Property Taxes 312,900 Insurance 47,900 Reserve For Capital Replacement 238,420 EBITDA S 3,681,203 Depreciation S 180,000 Interest Expense S 120,000 Income Before Income Tax $ 3,381,203 Income Tax @ 28% $ 946,737 Net Income $ 2,434,466