Question

Chuck Stout is the RM for the Holiday Inn Express. His 220-room property normally sells 85 percent of its rooms on Tuesday nights at an ADR of $141.50. All variable costs related to selling his rooms are $55.00 per room. The DOSM at his Holiday Inn Express is proposing to place a bid to sell 125 rooms for a Tuesday night next month at a rate of $109.00 per room. Chuck believes that if the hotel wins this group rooms bid, the transient room sales for that day will ensure a sell-out at the rate of $141.50.

What would be the total amount of after-variable costs rooms’ revenue the hotel will achieve if it wins the group rooms contract?

$14,967.50

$13,442.50

$16,175.50

$18,747.50

What would be the after-variable room’s income if the hotel does not win the contract?

$16,175.50

$14,967.50

$18,747.50

$14,547.00

Answer 1

If contract is awarded
	No of rooms	Room Price	Room Variable cost	Contribution per room: Room Price less Room cost	Total Income: Contribution * No of rooms
Group Award	125.00	109.00	55.00	54.00	6,750.00
Individual	95.00	141.50	55.00	86.50	8,217.50
Total	220.00			Total	14,967.50
So option A is correct
If contract is not awarded
	No of rooms	Room Price	Room Variable cost	Contribution per room: Room Price less Room cost	Total Income: Contribution * No of rooms
Group Award	-	109.00	55.00	54.00	-
Individual	187.00	141.50	55.00	86.50	16,175.50
Total	187.00			Total	16,175.50
So option A is correct