Question

1. A 335-room hotel property recorded in 2004 a 66.6% occupancy and an ADR of $117.98. What is the property’s franchise fee (1) on a per available room basis and (2) as a percentage of rooms revenue if the agreement required the hotel to pay a reservation fee of $7.65 per available room per month; a royalty fee of 5% of rooms revenue; an advertising fee of 2.3% of rooms revenue; and a frequent traveler program fee of $5.00 per occupied room. The hotel had frequent stay guests totaling 6% of the occupied rooms. The initial fee is a minimum of $45,000 plus $300 per room for each room over 150.

             Please calculate annual room revenue (round to a whole number) $ ___

2.Please use the information from Question 1 to calculate the Royalty Fee.

           Royalty fee (round to a whole number) $ ___

3. Please use the information from Question 1 to calculate the Reservation Fee.

             Reservation fee (round to a whole number) $ ___

4. Please use the information from Question 1 to calculate the Advertising fee.

        Advertising fee (round to two decimal places) $ ___

5.Please use the information from Question 1 to calculate the Frequent traveler fee.

              Frequent traveler fee (round to two decimal places) $ ___

Answer 1

1. Annual Room Revenue = Number of Rooms * Occupancy Rate * ADR * Number of days in a year

= 335 * 66.6% * 117.98 * 365

= $9,607,719

2. Royalty Fee = Room Revenue * 5%

= 9,607,719 * 5%

= $480,386

3. Reservation Fee = Number of Available Rooms * Rate * Number of Months

= 335 * 7.65 * 12

= $30,753

4. Advertising Fee = Room Revenue * 2.3%

= 9,607,719 * 2.3%

= $220,977.54

5. Frequent Traveller Fee = Number of Rooms * Occupancy Rate * Frequent Guest Occupancy * Rate * Number of Days

= 335 * 66.6% * 6% * 5 * 365

= $24,430.55