One question for a finance excel

Final Assignment

Written assignment (case studies)
Activity brief

BAT323 Financial Management in Tourism
Online campus

Professor: Marco Botta – [email protected]

Description The assessment includes four case
studies, each contributing for a
fourth of the total score of the
assessment.

Format This activity must meet the
following formatting requirements:

 Font size 12

 1.5-spaced

 Harvard Referencing
System

Goal(s) This assignment aims at testing the
ability of students to properly use
financial analysis to assess
performance and to make forecasts
and set financial targets

Due date Date: 10 May 2021

Time: 23:59 CEST

Weight
towards final
grade

This activity has a weight of 60%
towards the final grade.

Learning
outcomes

With the present assessment,
students will be meeting the
following learning outcomes:

 Understand financial

management techniques in

the tourism industry

 Use cost-volume-profit
analysis to set revenue
targets and understand the
impact of changes in activity
volume on income

 Understand the use of
financial analysis to establish
pricing policies and to set
average price targets

 Evaluate the financial impact
of revenue management
policies

 Prepare and analyze budgets

Assessment
criteria

9-10: The student demonstrates an
excellent understanding of the
concepts.
8-8.9: The student demonstrates a
good understanding of the
concepts.
7-7.9: The student demonstrates a
fair understanding of the concepts.
6-6.9: The student demonstrates
some, but insufficient
understanding of the concepts.
3-5.9: The student demonstrates
insufficient understanding of the
concepts. They may mention some
relevant ideas or concepts,
although it is clear that the
relationship between them is not
understood by the student.
1-2.9: The student demonstrates
insufficient understanding of the
concepts and does not mention any
relevant ideas or concepts.
0: The student leaves the question
blank or cheats.

Case 1.

The following financial data relates to Tokyo’s EasternSunrise Hotel.

YEAR 2020 2019

REVENUE 5.250 5.000

COST OF SALES 1.080 1.000

GROSS PROFIT 4.170 4.000

SELLING EXPENSES 980 800

ADMINISTRATION

EXPENSES

1.900 1.200

EBIT 1.290 2.000

CASH 220 200

ACCOUNTS RECEIVABLE 360 350

INVENTORY 440 400

FIXED ASSETS 24.660 18.600

TOTAL ASSETS 25.680 19.5550

a.) Using EBIT data, calculate EasternSunrise hotel’s ROI for each year to determine whether

the hotel’s profitability is increasing or decreasing.

b.) Conduct further ratio analysis of the data provided to determine what are the main factors

that lie behind EasternSunrise’s changed ROI level.

Case 2.

Saturn Ltd, a large American hotel organization, has purchased a small rooming house on a

property adjacent to one of its main hotels. The acquisition was made with a view to demolishing

much of the existing structure and building a custom-designed health club that could be used by

hotel guests. Building of the new health club is not due to start for at least a year.

Saturn has been approached by Reg Norman, a contact of the property’s vendor. Norman

specializes in arranging golfing holidays. In keeping with the last 5 years, Norman wants to use the

building for 30 weeks to house a particular niche market of ‘economy golfers’. Norman says that

he can provide between six and fifteen guests per week. Under the proposed arrangement,

Norman will pay Saturn $200 for each guest provided with lodging and morning and evening

meals for a week.

Saturn’s accountant has developed the following cost data, which he believes relevant to the

decision of whether to accept Norman’s offer.

Weekly cost incurred by Saturn per guest:

Food $70

Electricity $6

Laundry, cleaning etc. $10

Casual staff to provide cleaning and other services for 30 weeks:

For 6 to 10 guests per week: $22,000

For 11 to 15 guests per week: $34,000

Other incremental costs if building occupied for 30 weeks:

Maintenance and security: $12,000

(a) From Saturn’s perspective what is the breakeven number of guests per week?

(b) Calculate the change to Saturn’s total profit if 10 guest rooms are sold per week throughout

the 30-week period.

(c) Calculate the change to Saturn’s total profit if 12 guest rooms are sold per week throughout

the 30-week period.

Case 3.

Val Dizzy Air is a hotel complex located in a well-known ski resort in Queenstown, New Zealand.

The town’s population doubles during the skiing months of June through to October, and hotel

activity also doubles during these months.

A new chief administration officer was hired one year ago as part of an initiative designed to

increase the hotel’s profitability. Among the new ideas introduced was responsibility accounting.

This was formally announced in a memorandum accompanying quarterly cost reports supplied to

department heads. Previously, cost data were presented to department heads infrequently.

Excerpts from the announcement and the first cost report received by the supervisor of laundry

services are presented below.

The new administrator constructed the annual budget for 20X3 and then divided it by four to

facilitate the provision of quarterly feedback to the operating managers. The administrator

considered establishing a budget according to an average of the prior three years’ costs, hoping

that installation of the system would reduce costs to this level. However, because of rapidly

increasing prices, 20X2 costs, less 3%, were finally chosen for the 20X3 budget. Activity levels

were set at the volume achieved in 20X2, which was approximately equal to the volume in each of

the previous two years.

(a) Describe two ways that the budget-setting exercise could be improved at the Val Dizzy Air

Hotel. Your answer can refer to technical as well as behavioral aspects of budget setting.

(b) Explain whether the report effectively communicates the level of efficiency of the laundry

department.

(c) Redesign the quarterly performance report so that it provides a more meaningful and fair

appraisal of the performance of the supervisor of the Laundry Department.

Case 4.

The LoveWallabies Hotel in Perth has 200 rooms and it is specialized in hosting visitors that are attending

rugby events (or sports in general) at the nearby stadium. The Revenue Manager of the hotel has just

received a request from a tour operator client who is indicating that he would be interests in booking 50

rooms for two consecutive nights in four months’ time, proposing a rate of 100$ per room night, so that each

room would be paid 200$ (100$ per night for two nights).

The hotel’s revenue management platform predicts that the hotel will reach an 88% occupancy rate for those

two nights if the 50- room grou booking is not accepted. This occupancy would be reached by selling rooms

to guests who would be paying a room rate of $150.

Knowing that the high occupancy is due to an upcoming rugby match between England and Australia taking

place in Perth during those two days, and that many rugby fans would be willing to sharing a room if rates

are discounted, the Revenue Manager wants to examine two options to offer to the tour operator:

1. Nightly room rates discounted to $95 if the tour operator can consolidate the group booking down to

40 rooms

2. Nightly room rates discounted to $90 if the tour operator can consolidate the group booking down to

25 rooms

Based on the information above, discuss the following:

(a) Prepare a financial analysis to demonstrate whether the two proposals would be justified from the

point of view of the hotel (i.e.: show if they increase revenue compared to the alternatives of either

rejecting the tour operator request, or accepting the request as it was originally made)

(b) Which is the best solution for the hotel?

(c) How much would each guest save if the tour operator accepts the offer of 40 rooms at 95$?

(d) How much would each guest save if the tour operator accepts the offer of 25 rooms at 90$?

Rubric: written assignment

Criteria Accomplished (A) Proficient (B) Partially proficient (C) B line (D) Fail (F)

Problem
identification

The business issue
has been correctly
identified, with a
competent and
comprehensive
explanation of key
driving forces and
considerations.
Impact on company
operations has been
correctly identified.
Thorough analysis of
the issue is
presented.

The student
correctly
identified the
issue(s), taking
into account a
variety of
environmental
and contextual
drivers. Key case
information has
been identified
and analyzed.

The student correctly
identified the case (issues),
considering obvious
environmental/contextual
drivers. There is evidence of
analysis, but it lacks depth.

The student
correctly identified
the issue(s) but
analysis was
weak. An absence
of context – the
work is basically
descriptive with
little analysis.

The student failed to
correctly identify the
issue(s); analysis was
incorrect or too
superficial to be of
use; information was
misinterpreted.

Information
gathering

The student showed
skill in gathering
information and
analyzing it for the
purposes of filling the
information gaps
identified.
Comprehensive and
relevant.

Relevant
information gaps
were identified
and additional
relevant
information was
found to fill them.
At least two
different types of
sources were
used. The
student
demonstrates
coherent criteria
for selecting
information but
needs greater
depth.

The student correctly
identified at least one
information gap and found
relevant information, but
which was limited in scope.
Some evidence of sound
criteria for selecting
information but not consistent
throughout. Needs
expansion.

An information
gap was identified
and the student
found additional
information to fill
it. However, this
was limited in
scope. Weak
criteria for the
selection of
necessary
information.

Information was taken
at face value with no
questioning of its
relevance or value.
Gaps in the
information were not
identified or were
incorrect.

Conclusions The student
evaluated, analyzed,
synthesized all
information provided
to create a perceptive
set of conclusions to
support the decisions
and solutions.

The student
evaluated,
analyzed and
synthesized to
create a
conclusion(s)
which support
decisions and
solutions.

The student reached
conclusions, but they were
limited and provided minimal
direction for decision-making
and solutions.

The conclusion
was reasonable
but lacked depth
and would not be
a basis for
suitable strategy
development.

The student formed a
conclusion, but it was
not reasonable. It
was either unjustified,
incorrect or unrelated
to the case in hand.

Solutions The student used
problem solving
techniques to make
thoughtful, justified
decisions about
difficult and
conflicting issues. A
realistic solution was
chosen which would
provide maximum
benefit to the
company. Alternative
solutions were
explored and ruled
out.

The student used
problem solving
techniques to
make appropriate
decisions about
complex issues.
Relevant
questions were
asked and
answered. A
realistic solution
was chosen.
Alternatives were
identified,
explored and
ruled out.

The student used problem-
solving techniques to make
appropriate decisions about
simpler issues. The solution
has limited benefit but does
show understanding of
implications of the decision.
Alternatives were mentioned
but not explored.

The student used
problem solving
techniques to
make decisions
about simpler
issues but
disregarded more
complex issues.
Implications of the
decision were not
considered.
Alternatives were
not offered.

The student formed a
conclusion, but it was
not reasonable. It
was either unjustified,
incorrect or unrelated
to the case in hand.