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Running Head : Majestic Lodge Case Study

Majestic Lodge Case Study

To : Directors of the Majestic Lodge

From : Mr . Kacheck (Manager

Our present policy to keep the business closed during off-season has adverse effects on the

profits that we make during season time . Our profit and loss statement for the year 2000

reveal that off the 160 ,800 revenue earned during the business season 149 ,157 was paid

out as Majestic Lodge is

running a profit of mere 7 .24 on its annual turnover

In to remedy this situation I

believe we ought to keep the property open to business

even during the off-season . I further recommend investing in a heated swimming pool this

facility will undoubtedly attract visitors even during non skiing season . I strongly believe that

implementation of this recommendation will yield success since Majestic Lodge overlooks

some of the most scenic spots of the mountain and the village and people would love to spend

summer holidays in such pleasant setting . Initially we could implant this idea by keeping the

30 rooms of the west wing open for occupancy while the east wing remains closed

By implementing my recommendation I presume that we would have between 20 -40

occupancy for the 30 rooms of the west wings . However occupancy rate is bound to increase

gradually over the years . By committing 4000 dollars for advertising we will have a high

probability of attaining 40 occupancy during off-season . It will be necessary to offer our

services at a discount during the off-season months in to get the have a favourable

occupancy rate . I recommend that we offer I west wing rooms at 10 for single occupancy

and 15 for double occupancy

In to minimize the cost of operation we can work without most of the manpower that

we usually employ during the business season . We may do without a clerk during the off-

season and employ the services of only 2maids rather then the usual 4 Additionally Mrs

Kacheck agrees to work at 100 a week as compared to 140 a week which she is paid during

seasonal months . So our of fringe benefits and other taxes

An additional expense of 2000 will be incurred towards maintenance and 500 for insurance

if the west wing remains open round the year . The cost of utility (Electricity and Phone ) will

increase by an estimated 2340 , cost of linen will presumably increase by 10 ,440 while cost

of cleaning supplies will increase by 384

The cost of running the west wing for 8 months would amount to 32 ,144 At an estimated

40 occupancy with 2 :8 single versus double occupancy ratio and at discounted rates of 10

and 15 for single and double occupancy respectively we can expect increased revenue of 39 ,600 . Thus the profit would be 7 ,456 which is 23 .20 of our 8 monthly expenditure

In to produce better results we will have to target a higher occupancy rate , this will be

possible only if...