Business, Hospitality and Events
The 200-room Hotel PoshPlace is soon to open in Perth, Australia. It is
projected that the hotel will be financed with a loan of $6,000,000 at 12 per cent
annual interest, and the owners will invest $2,000,000. The owners will be
seeking a 15 per cent annual return on their investment. The hotel will be open
365 days per year, and it is expected that it will achieve a 70 per cent average
occupancy. Hotel profits will be taxed at the rate of 40 per cent.
Hotel fixed costs are expected to be:
Insurance $180,000
Depreciation $200,000
Administration $150,000
Information Systems $100,000
Human Resources $ 50,000
Marketing Expenses $140,000
Property Maintenance $200,000
It is estimated that the hotel’s food and beverage department will generate an
annual profit of $150,000 and that variable room cleaning costs will be $12 per
room night sold.
Calculate the minimum average room rate that PoshPlace will need to charge in
order to provide the hotel’s owners with the 15 per cent return on their
investments that they are seeking. For full marks, you must show your workings
out, not just the end answer. Mark: /8
2. The Intercontinental London has a total of 250 rooms. The budgeted occupancy
for the month of March 2022 was 80% and the actual occupancy was 92%.
The actual labour expense of £49 569 exceeded the budget by £10509, and the
budgeted room attendant hours of 3100 increased to 3813. Simone Smith, the
executive housekeeper, has difficulty in reporting on the total labour variance
of £10509 for the month of March 2022.
a) Can you assist Simone in calculating the labour volume, efficiency and
compound variances that resulted in the total labour variance of £10509?
For full marks, you must show your workings out, not just the end answer.
Mark: /8
b) Given your calculations, can you interpret and explain the likely
circumstances that led to the total labour variance experienced by Simone?