Question

Poco Miller is the RM at the Hampton Inn. Mark is the property’s FOM and Latisha is the DOSM. All three serve on the hotel’s RM committee. The hotel has 200 rooms. Next month the hotel will serve as the host hotel for the Retired Firefighters Association. The Association originally blocked 100 rooms per night for Thursday, Friday, and Saturday nights at a rate of $99.00 per night. All the rooms in their block have been picked up. The current rooms availability forecast for the three days of the meeting is as follows:

Date:	Thursday	Friday	Saturday
Reserved
Firefighters’ rooms @ $ 99.00/night	100	100	100
All Other rooms @ $129.99/night	55	35	45
Total Reserved	155	135	145
Total Rooms Available	45	65	55

The group has requested that Latisha add 30 rooms each night to its block at the originally contracted rate of $99.00. It states that its members will use all of the additional rooms if they are made available, but if not, they will move their remaining 30 attendees down the street to the Comfort Inn. Latisha is in favor of increasing the block and keeping the group together. Mark is opposed. He is convinced he can sell 20 more rooms on Thursday, 40 rooms on Friday, and 30 rooms on Saturday at the normal rack rate of $129.99. Under his plan, he states, “The hotel can maximize its ADR.”

Based on Mark’s estimate of future sales to be made at rack rate, Poco knows the hotel will sell out and maximize its occupancy percentage under Latisha’s plan. Help Poco analyze the data she needs to answers the questions that follow by filling in the chart.

	Under Latisha’s Plan	Under Mark’s Plan
Rooms sold
Group revenue
Transient revenue
Total revenue
Occupancy %
ADR
RevPAR

A. What would the hotel’s ADR be under Mark’s plan?
B. What would the hotel’s RevPAR be under Mark’s plan?
C. What would the hotel’s ADR be under Latisha’s plan?
D. What would the hotel’s RevPAR be under Latisha’s plan?
E. Who’s plan would you advise Poco to support? Explain your rationale.

Answer 1

Under Latisha's Plan combining all three days

Total Room Sold ( 130 × 3 ) + 55 + 35 +45 = 525

Group Revenue = 390 multiplied by 99 = 38610

Other Revenue = (55 + 35 +45) multiplied by 129.99 =17,548.65

Therefore Total Revenue under Latisha's Plan will be 38,610 + 17,548.65 = 56,158.65

Occupancy % will be

total rooms occupied divided by total rooms for three days

Which is equals to 525 divided by 600

= 87.5%

ADR or Average Daily Rate is equals to

Total revenue earned divided by Total room Sold

Which is equals to 56,158.65 divided by 525 = 106.96

RevPar or Revenue per Available Room is equal to ADR multiplied by occupancy %

Therefore Equals to 106.96 × 87.5% = 93.59

Now Similarly for Mark's Plan

Total Room sold (100×3) + (55+20) +(35+40) +( 45+30)=525

Group Revenue = 300 × 99 = 29,700

Other Revenue = 225 × 129.99 = 29,247.75

Total Revenue = 58,947.75

Occupancy % remains the same

ADR will be 58,947.75 divided by 525 =112.28

RevPar will be 112.28 ×87.5% = 98.245

Therefore I will advise for Mark's plan as both ADR and RevPar is higher in his plan.