Question

Your first job is in hotel management and recently you were promoted to Hotel Manager for a large convention hotel in downtown New Orleans. Answer the following questions given the information below for one day. What is the total contribution to profit and overhead? What is your hotel effectiveness percentage?

Characteristic/Variable	Business Hotel Customers (B)	Convention Association Hotel Customers (C)
Customers for this day (D)	280 room nights rented (DB)	400 room nights rented (DC)
Average price/room night (P)	$100 (PB)	$75 (PC)
Variable cost/room night (VC)	$25	$25
Maximum price/room night (called the rack rate)	$150	$110
Maximum number of rooms available for sale this day	300 room nights available	$700 room nights available

What are the following measurements?

• Contribution to Profit and Overhead
• Hotel Management Effectiveness

	A.	$41,000, 46.2%
	B.	$51,000, 47.5%
	C.	$41,000, 47.5%
	D.	$34,000, 29.6%
	E.	$48,000, 56.2%

Answer 1

Working as follows:

	Business Hotel Customer	Convention Association Hotel Customers
Sales	$100	$75
Less: Variable cost	($25)	($25)
Contribution per day	$75	$50
×
Number of customer	280	400
Total Contribution	$21,000	$20,000

Total Contribution to profit and overhead = $21,000 + $20,000 = $41,000

____________________________________________

Hotel Management Effectiveness % = Actual Hotel Revenue / Maximum Possible Hotel Revenue

= [($100*280) + ($75*400)] / [($150*300) + ($110*700)]

= $58000/$122000

= 47.5%

Hence, the correct option is [c]