Question

I need an answer to problem 5.6 of the Financial Management for the Hospitality Industry. Thanks

The Rainbow Motor Motel is a 50-room facility with a restaurant to accommodate its guests. The motel is open 365 days a year, even on leap years; as Lurena Boucha, the proprietor, closes down the facility every February 29, her birthday, for an all day celebration of four years of successful operations. On the average, 98% of the rooms are available for sale. For the year just ended, the actual number of rooms sold totaled 15,000 and the number of guests for the year totaled 20,000. The projected occupancy rate for the next year is 82% of the available rooms based on past experience. The food information is as follows:

Sales $150,000, Beg Inventory 8,000, Purchases $70,000, Ending Inventory, $ 13,000 Consumption by employees (free of charge) $3,000, Number of checks 64,139. Cost of sales ?

Total room sales were $450,000

1. Compute the following:

a) paid occupancy percentage for year

b) Number of guests per occupied room

c) Food cost percentage

d) Average room rate

e) REVPAR

2. Estimate the room sales in dollars for next year. Assume the average room rate will increase by 10% over the current year.  

Answer 1

a & b.

Rooms available	50
Average availablity of rooms	49	50*98%
No. of working days	365
Maximum rooms that can be sold..(A)	17885	49*365
Actual rooms sold…(B)	15000
Paid occupancy for the year…(B)/(A)	83.87%
No. of guests (Actual)..(C)	20000
No. of guests per occupied room..(C)/(B)	1.33

c.

Food cost = Consumption + Consumption by employees	68000	8000+70000-13000
Food cost as a % of sales	45.33%	68000/150000

d.

Total Room sales..(i)	450000.00
Actual rooms sold….......(ii)	15000.00
Average room rate….......(i)/(ii)	$30.00

e. REVPAR = Average Room Rate *Occupancy % = 30*83.87% = $25.16

2.

Average room rate….....(X)	33	30*1.1
Projected occupancy	82%
Rooms occupied (Max rooms that can be occupied * projected occupancy)…....(Y)	14665.70	17885*82%
Estimated sales….......(X)*(Y)	483968.10