Reference no: EM133971680

Question

The Big Sky Side Hotel, is a resort hotel is in the Montana hill country. The resort is 4 season resort but 2 seasons dominate visitor occupancy rates, winter and summer. For the hotel, management expects occupancy rates to be 95 % in December, January, February and July & August. At 85% in November and June; and 75% the rest of the year. This hotel has 400 rooms and the room rental is $280.00 per night all year. Of this, on average 10% is received as a deposit the month before the stay, 60% is received in the month of the stay, and 28% is collected the month after. The remaining 2% is never collected and assumed bad debt in the month after as a sales & general admin cost. Most of the costs of running the hotel are fixed. The variable costs are only $60.00 per occupied room, per night. Fixed salaries (including benefits) run $715,000 per month, depreciation is estimated to be $475,000 a month, other fixed costs are $260,000 per month, and interest expense is $645,000 per month. Principal reduction on the note is $500,000 semi-annually. Fixed, variable costs and salaries are paid in the month they.