An offer from Alitalia has been given to the general director of Le Centre Sheraton Hotel for a one year contract to supply 40 hotel rooms at $42 a night. The contract will offer the Alitalia crew an allowance and lower food and beverage costs. Last year they sold out 115 hotel rooms at $105 a night. Georges Villedary has to decide whether or not to sign the contract.
Identification of Issues
Georges Villedary has to decide whether or not to sign the contract with Alitalia. Not only does he has to take into consideration all the additional costs but he has to consider if the offer from Alitalia will give him the return on investment he needs.
The incremental revenue to take the offer from Alitalia is $105,930 This takes into consideration the cost of the rooms and food and beverage revenue the airline crew will supply to the hotel which is $757,156 The hotel would normally make $528,336 from selling 115 rooms a year at $105 a night. The additional costs from the extra employee and labour costs plus all the amenities would be $122,890 The total revenue is $757,156 and the total cost is $651,226 Other Factors to Consider
Georges Villedary would have to consider the cost of supplying the $25,000 to the Alitalia crew. The money would be reimbursed each week but there would still be a cost to supply this money. Due to the hotels cash flow issues of negative 2,000,000 last year the hotel has to look into whether or not the off from Alitalia will give them the 12% return on investment they need.
-Taking the offer will help them gain more clients in the future -They will be able to continue their relationship with Alitalia and won`t lose business to their competitors -the hotel will be busy all year long
-the airline will suggest the hotel to its` passengers and other employees if they are happy with the service they receive
-hotel loses selling at the full rate
-the airline crew may not...
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