Group Displacement Analysis.Practice Exercise PDF

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The exercise is used to consolidate knowledge in terms of inventory control....

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Group Displacement Analysis - Practice Exercise The Winter hotel has 400 rooms. The Forecast shows that it will be 90% occupied on Dec 15, 2015 with high paying transient guests. a) Calculate how many rooms will be occupied__360__ and how many vacant_40___ on Dec. 15th. 400 rooms x 90% = 360. 400 - 360 = 40 vacant The Director of Sales calls the Revenue Manager, as they have a group that has often booked at the competition and after much work on behalf of the Director of Sales, wants to book at the Peabody for the night of Dec. 15th. This group travels across the country and is well known. It is expected to generate positive press for the hotel. This group wants 80 rooms. Both the group and the transient rooms will be single occupancy. b) How many rooms could the group displace of the transient business on Dec. 15th? ____40 _____ . Group needs 80 rooms so will take the 40 vacant and displace another 40 based on the forecast. You prepare the following comparison. Group – 80 rooms for one night Room Rate $100 Food and Beverage - $50/room Meeting Room Rental - $1000/for the group for the one evening Cost is $20 / room Propensity is 1

Transient Displaced Rooms for one night Room Rate Forecasted at $125 Food and Beverage - $60 /room No other revenue Cost is $10/ room Propensity is 1

c) Using the “customer worth formula”, how much profit will the group produce? 100 + 50 – 20 = $130 x 80 room = $10,400 + $1,000 x1 = $11,400 d) Using the “customer worth formula”, how much profit will the displaced transient rooms produce? 125 + 60 – 10 = $175 x 40 rooms = $7,000 x 1 = $7,000 e) What is the incremental gain (loss) by taking the group? $11,400 - $7,000 = $4,400 is the incremental gain by taking the group. f) Should the revenue manager take the group? Why or why not? Consider all information in this scenario in addition to the financial results of the displacement. $11,400 - $7,000 = $4,400 Group will earn incremental revenue of $4,400 more so take the group. Plus the group is expected to provide positive promotion (free) for the hotel...