Question

Fadwa is the general manager at the 125-room select-service. Fadwa has just taken a call from Lawrence's hotel. Because of an internal oversight, Lawrence's hotel is overbooked by 70 group rooms next Saturday. Lawrence would like to purchase that number of rooms from Fadwa at their previously agreed upon walk rate of $75 per night. Fadwa's normal ADR is $129.00 and her cost of cleaning a room is $17. Currently, Fadwa had 55 occupied rooms (arrivals and stayovers) on the books for that day. She forecast that she could sell, at her normal ADR, another 30 rooms by Saturday. Fadwa typically generates $8 in ancillary revenue from each of her occupied rooms. Before replying to Lawrence's request, she summarized her forecasted rooms sale-related information in a chart so she could better understand the impact of accepting or rejecting Lawrence's walked guests. FILL IN THE CHART AND ANSWER THESE QUESTIONS BELOW

Harley House Hotel: Saturday Forecast
Total rooms available for sale	125
Current rooms sold forecast	55
Additional rooms to be sold forecast	30
Walk rooms requested	70
Normal ADR	$129.00
Walk rooms ADR	$75.00
Ancillary revenue per room	$8.00
Room cleaning cost	$17.00

Next Saturday Night	With Lawrence Walks	Without Lawrence Walks
Rooms Sold
ADR		$129.00
Total Rooms Revenue Estimate
Daily per Room Ancillary Revenue	$8.00	$8.00
Total Rooms plus Ancillary Revenue
RevPOR
Rooms Dept. Cost POR
Net Total Revenue

a. What would be Fadwa’s ADR if she accepted all of Lawrence’s walked rooms?

Answer:

b. What would be Fadwa’s RevPOR with the walked rooms?

Answer:

c. What would be Fadwa’s RevPOR without the walked rooms?

Answer:

d. What would be the net total revenue (RevPOR – Rooms dept. cost POR) difference in her hotel's revenue if Fadwa agree to take the rooms?

Answer:

e. What would be the percentage difference in her hotel’s net total revenues if Fadwa agree to take the rooms?

Answer:

f. If you were Fadwa, would you accept the walked rooms from Lawrence’s hotel? Why or why not.

Answer:

Answer 1

Harley House Hotel: Saturday Forecast
Total rooms available for sale	125
Current rooms sold forecast	55
Additional rooms to be sold forecast	30
Walk rooms requested	70
Normal ADR	$129.00
Walk rooms ADR	$75.00
Ancillary revenue per room	$8.00
Room cleaning cost	$17.00
Next Saturday Night	With Lawrence Walks	Without Lawrence Walks
Rooms Sold	125	85
ADR	$98.76	$129.00
Total Rooms Revenue Estimate	$12,345.00	$10,965.00
Daily per Room Ancillary Revenue	$8.00	$8.00
Total Rooms plus Ancillary Revenue	13345	11645
RevPOR	106.76	137
Rooms Dept. Cost POR	$17.00	$17.00
Net Total Revenue	11220	10200

a. ADR cost with all of Lawrence’s walked rooms = (55 * 129 + 70 * 75) / 125 = 98.76

b. Fadwa’s RevPOR with the walked rooms = (Total room plus ancillary revenue) / No. of occupied rooms

= 13345 / 125 = 106.76

c. Fadwa’s RevPOR without the walked rooms = 11645 / 85 = 137

d. Net total revenue (RevPOR – Rooms dept. cost POR) difference in her hotel's revenue if Fadwa agree to take the rooms = Net total revenue with walked rooms - Net total revenue without walked rooms =11220 - 10220 = 1000

e. percentage difference in her hotel’s net total revenues =

(Net total revenue with walked rooms - Net total revenue without walked rooms ) / (Net total revenue without walked rooms) = 1000 / 10220 = 9.8%

f) Yes I would accept the walked rooms from Lawrence's hotels because the Net total Revenue was coming more 9.8% more in this case.