Question

The management of 50-room Gordion Hotel, which has single and double rooms only, has acquired the following internal financial data: • Occupancy of 65.00% • Projected after-tax average daily room rate (ADR) of $54.00 • 25.00% of double room occupancy • A price difference of $15.00 more for double rooms than the singles Based on the financial information given, calculate the individual ADRs for single and double rooms for Gordion.

The operation team of H hotel, which has 25 rooms on daily basis, has projected that the occu-pancy will be 60.00% with total revenue of $620,000 and total expenses of $50,000 for the next year. The income tax bracket is 40.00%. Assume that there are only single and double rooms for H with a double occupancy of 70.00% and the double rooms are sold at a percentage markup of 20.00% over singles. Based on the information given, what are the individual average daily room rates (ADRs) for both single and double rooms for H hotel for the next year (assume that there are 365 days in a year)?

Answer 1

Gordion Hotel

Particulars		Single room	Double room
Total rooms	50
occupancy	65%	25%	40%
	32.50
Projected after tax daily room rate	$54
Daily room rate (ADR)		19.5	34.5
Workings:
Let daily room rate of Single room is 'x' and double room is 'y'
Then, Total room rate	=x+y	54	Equation (a)
Room rate of 'y'	=x+$15	y	Equation (b)
Solving the above 2 equation (a)&(b)	=x+(x+15) = 54
	=2x+15=54
	=2x=54-15
	=2x=39
	=x=39/2
	=19.5
Therefore,
Room rent of single room 'x'	19.5
Room rent of double room 'x'	=19.5+15	34.5

H hotel,

Particulars		Single room	Double room
Total rooms	25
occupancy	60%
Total revenue	$620000
Total expenses	$50000
Total revenue per day	=$620000/365
	1698.63
Revenue from occupied rooms (25*60%)	=1698.63/15
	113.24
the individual average daily room rates (ADRs)		51.47	61.77
Workings:
Let daily room rate of Single room is 'x' and double room is 'y'
Then, Total room rate	=x+y	113.24	Equation (a)
Room rate of 'y'	=(x+x*20%)	y	Equation (b)
Solving the above 2 equation (a)&(b)	=x+(x+x*20%) = 113.24
	2x+.2x=113.24
	x(2+.2)=113.24
	x=113.24/2.2
	x=51.47
Therefore,
Room rent of single room 'x'	51.47
Room rent of double room 'x'	=51.47(1+20%)	61.77