# Calculate the average cost per room night for june

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Calculate the average cost per room-night for June. What was Fun Stay Express’ operating income or loss for the month? 2. Gina Johnson estimates that if Fun Stay Express decreases the nightly rates to \$75, weeknight occupancy will increase to 75%. She also estimates that if the hotel increases the nightly rate on weekend nights to \$105, occupancy on those nights will remain at 90%. Would this be a good move for Fun Stay Express? Show your calculations. 3. Why would the guests tolerate a \$30 price difference between weeknights and weekend nights? 4. A discount travel clearinghouse has approached Fun Stay Express with a proposal to offer last-minute deals on empty rooms on both weeknights and weekend nights. Assuming that there will be an average of three breakfasts served per night per room, what is the minimum price that Fun Stay Express could accept on the last-minute rooms? SOLUTION (25 min.) Considerations other than cost in pricing decisions. 13-20
1. Guest nights on weeknights: 18 weeknights × 100 rooms × 65% = 1,170 Guest nights on weekend nights: 12 weekend nights × 100 rooms × 90% = 1,080 Total guest nights in June = 1,170 + 1,080 = 2,250 Breakfasts served: 1,170 weeknight guest nights × 2 = 2,340 1,080 weekend guest nights × 4 = 4,320 Total breakfasts served in June = 2,340 + 4,320 = 6,660 Total costs for June: Depreciation \$ 25,000 Administrative costs 38,000 Fixed housekeeping and supplies 16,000 Variable housekeeping and supplies (2,250 × \$30) 67,500 Fixed breakfast costs 12,000 Variable breakfast costs (6,660 × \$6) 39 ,960 Total costs for June \$198 ,460 Cost per guest night (\$198,460 ÷ 2,250) \$88.20 Revenue for June (\$85 × 2,250) \$191,250 Total costs for June 198 ,460 Operating income/(loss) \$ (7 ,210 ) 2. New weeknight guest nights 18 weeknights × 100 rooms × 75% = 1,350 New weekend guest nights 12 weeknights × 100 rooms × 90% = 1,080 Total guest nights in June l = 1,350 + 1,080 = 2,430 Breakfasts served: 1,350 weeknight guest nights × 2 = 2,700 1,080 weekend guest nights × 4 = 4,320 Total breakfasts served in June = 2,700 + 4,320 = 7,020 Total costs for June: Depreciation \$ 25,000 Administrative costs 38,000 Fixed housekeeping and supplies 16,000 Variable housekeeping and supplies (2,430 × \$30) 72,900 Fixed breakfast costs 12,000 Variable breakfast costs (7,020 × \$6) 42 ,120 Total costs \$206 ,020 Revenue [(1,350 × \$75) + (1,080 × \$105)] \$214,650 Total costs for June 206 ,020 Operating income \$ 8 ,630 13-21
Yes, this pricing arrangement would increase operating income by \$15,840 from an operating loss of \$7,210 to an operating income of \$8,630 (\$8,630 + \$7,210 = \$15,840).
3. Guests typically do not come to the amusement park on weekdays because adults are busy at work and children have to attend school. The weeknight guests are families who stay at the hotel for convenience. They are willing to consider other hotel options or even not travel at all if the price is high and unaffordable. Reducing the weeknight price is important to entice families to try to come to the amusement park on weekdays. The demand of weeknight guests is elastic. In contrast, weekends are really the only time when families can conveniently come to the amusement park given their busy weekday schedules. The demand of pleasure travelers on weekends is inelastic. Because of the differences in preferences of the weeknight and weekend guests, Fun Stay Express can price discriminate between these guests by charging \$30 more on