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Should a hotel stay open during the slow season if they are not covering their fixed...

Should a hotel stay open during the slow season if they are not covering their fixed costs? What if they are not covering their variable costs?

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Answer #1

Hotel should continue their business even in slow season even if they are not covering

their fixed costs as fixed cost are sunk cost and decision making should not depend on

sunk cost ( which is already incurred and cannot be recovered in any season )

If variable cost is also not recovering in off season so they should check whether profit

in peak season can setoff the losses incurred in off season and profit is left. If revenue recovered

in peak season is less than the cost incurred then they should discontinue their operations.

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