Terminus Hotels Argumentative Essay Example

calculate the budgeted fixed cost per room. Using this approach, the total cost of a room per day would be ‚¬60 (‚¬35 fixed cost + ‚¬25 fixed cost). Using Master-Budget Capacity Analysis increases the costs to a point at which the room price is uncompetitive and in which the guests are paying for the unused capacity of more than 1/2 the hotel.

It is also important to consider the long-term relationship with a customer. Both offers were from regular- clients and it could be argued that even if their offers fell below their regular bids, they should have been carefully considered. When calculating the Customer Lifetime Value, the retention factor for a client is an important component of the equation. Moreover, financial benefit can be made on any price that is above the direct cost, which in this instant is the ‚¬25 variable cost, signifying benefit on any price above hotel makes a profit from the restaurant business.

This as well should be included in determining the Average Daily Spend for a guest, over and above the room rate. Considering the financial statements provided in case A, if we take the operating profit divided by the days per year and average occupancy rate, the average profit per room was ‚¬14. 25. Adding this to the total cost associated with Practical Capacity, he target price per room could be ‚¬75. 50, which would result in a margin of 24%, at the high-end of the industry (Lloyds August 2008 Hotel ; Catering Review).

At this price, the offers look solid and should be accepted. In conclusion, assuming practical costing and an alignment of prices with previous bids,

a price of ‚¬90 is reasonable. However, due to the economic climate and the use of practical costing, there is room for reducing margin and to price competitively at ‚¬75. Alternatively, a more complex approach to price setting and maximizing the returns of the hotel over the year could e taken. Revenue yield management technologies, such as those offered by Yeelders (http://yeelders. om), permit even a single hotel to take advantage of the strategies used by their much larger chain rivals. By gauging the length of stay, non- refundable rate, or time to arrival, together with a measure of demand that is based on booking patterns, seasonality, and information from local ; international markets, an optimum price can be calculated. This of course should be done in combination with maximizing revenue channels: last minute deals, packages, and holiday sales.