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A hotel operation involves a complicated sales structure. Included in the total sales are room, catering, telephone, club and other sales. Catering sales include the sale of food at various outlets; in some instances the same item may be sold in an 'up-market' restaurant and will be at a higher profit margin than, say, a coffee shop style restaurant. Margins will therefore vary throughout the hotel.
To my knowledge there has not been a simple way of arriving at breakeven occupancy for a hotel operation. During my 19 years in the industry, I and all of my colleagues have avoided senior management's favourite question, 'What level of occupancy will/did the hotel breakeven?'. As you may imagine the answer has varied from an estimate such as 'around 45 per cent' to being honest in saying, 'Owing to the complicated sales and cost structure it is not possible to arrive at a breakeven occupancy'.
However, within all the combinations of sales there is one common, but fixed, item which in this case is the number of rooms available in a hotel. It is also relevant to note that if a hotel closes its room operation it cannot be classified as a hotel and other related sales will cease. Also in a hotel operation, in the short to medium term, catering, telephone, club and other sales have a remarkable and fairly consistent sales ratio to room sales.
Based on the above facts, Illustration A is...