University of Brighton

School of Service Management

MA Tourism Management

Group Case Study on The Tides Reach Hotel

Diana PIKOVSKAJA, Aditya Joshi , Kazuna, Andi, Todor

SSM15 -Service Managing Service Operations

Module Leader: Chris Dutton

January 19, 2010

Table of Contents

Group Case Study on The Tides Reach Hotel.................................................1

Module Leader: Chris Dutton.........................................................................1

Table of Contents.........................................................................................3

.................................................................................................................... 4

Introduction..................................................................................................5

Current financial and Market position of the Tides Reach Hotel...................5

Hotel...................................................................................................................... 8

Season................................................................................................................... 8

An outline of new products, services and packages for The Tides Reach
Hotel & Leisure Complex .............................................................................9

Budget Proposal for the year to June 2010.................................................16

Appendix A.................................................................................................24

Appendix B.................................................................................................26

Reference...................................................................................................27

Brassington, F. and Pettitt. S. (2003). “Principles of Marketing”, Third Ed.,

London: FT Prentice Hall......................................................................................27

Phillips, P. (1994). “Welsh Hotel: Cost-Volume-Profit Analysis and Uncertainty”,

Vol. 6, No. 3, pp. 31-36........................................................................................27

Victoria Inn (2009). [Online] “Dining at the Victoria Inn” Available at:
http://www.victoriainn-salcombe.co.uk/?page_id=13[accessed on 07.01.2010].
......................................................................................................................... 27
Introduction
This report is prepared for the owners of Tides Reach Hotel to advise them on
the current financial situation of their hotel as well as outline the implications
and possibilities brought by the acquisition of the leisure complex. Also, the
proposals for sales improvement and profitability are being made.

Current financial and Market position of the Tides Reach Hotel

First, the report analyses and evaluates current financial and market position of
the Tides Reach Hotel.

Financial Performance
Profitability

The return on capital employed (ROCE) of the Tides Reach Hotel as calculated for
the year 2009 is 6.99%. This ratio is useful for assessing the profitability through
the comparison of generated return with the investment. The ratio shows that for
every £1 invested the hotel earns 6.99p. To understand whether the capital is
being used efficiently to generate revenue it is useful to compare ROCE among
the competitors of the business. As can be seen from Table 1 ROCE of Tides
Reach Hotel is much lower than that of its competitors. Thus, it can be said that
one of the weaknesses of the hotel is not using its capital efficiently. By
overcoming this problem the owners could increase profitability of their business.

Table 1
Intercontinental Hotels
Tides Reach Hotel Group Accor

ROCE 6.99% 15.00% 14%

Net Profit 3.70% 16% 11%
Asset
Utilization 1.87 times 0.9 times 1.29 times

Liquidity

Liquidity refers to businesses’ ability to pay off its current liabilities and is
therefore closely connected to working capital management. The Tides Reach
Hotel has a positive working capital of £5690 which shows the short-term
financial health and solvency of the business due to its ability to pay off its short-
term liabilities. However, the current ratio of the hotel is quite low (1.18:1)
indicating that the margin of safety that hotel has to cover its short-term
liabilities is low. The Tides Reach Hotel is running a risk of becoming insolvent
unless it improves its efficiency through increasing its current assets, decreasing
current liabilities or both. Moreover, the more strenuous liquidity test – acid test
ratio (0.7:1) shows that Tides Reach Hotel does not possess enough current
assets to cover its current liabilities without selling the stock.

Capital Structure
Capital structure of the business consists from various sources of funding used to
finance the company. The Tides Reach Hotel is financed by the combination of
owners’ investment (equity) and loan (debt). To measure the proportion of
funding capital gearing is used. As noted by Adams (2006:185) “loan financing in
practice tends to be cheaper than equity, but loan funding exposes the
shareholders to greater risk through the obligation to pay interest and the
possibility of changing rates”. The capital employed by the Tides Reach Hotel is
£615,690 financed by £417,770 (66%) equity and £197,920 (34%) debt. This
indicates that owners investment is the dominant form of finance providing them
with the advantage of retaining higher share of profit due to the lower amount of
interest needed to be paid to the debtors. However, there is a concern
associated with the new acquisition as this will change capital structure raising
debt of the hotel to 40%. This is predicted to diminish hotels profit as well as
restrict further development opportunities due to the lacking financing.

CVP analysis

To assess viability of the business in short-term cost-volume-profit analysis was

carried out.

It is widely recognized that “hotels tend to have a high level of fixed cost”
(Phillips, 1994:31). This can be of a benefit when the hotel is full as the profit
rises significantly after the breakeven is reached, however, in the low season the
revenue drops considerably and losses can occur.

As can be seen from Table 2 accommodation operation of the Tides Reach Hotel
has the highest proportion of fixed cost in comparison to the food and beverage
operation. However, it also generates the highest contribution towards its fixed
costs and profit. The high contribution towards fixed costs as well as minimal
variable costs helps operation to overcome the problem of profit instability
associated with the high percentage of fixed costs. Furthermore, accommodation
operation has the highest margin of safety (76%) indicating a high degree of
profit stability. To further improve the profitability of the operation further
reduction of fixed costs is suggested.

While the food operation makes the lowest contribution towards its fixed costs it
generates the highest profit among all of the hotels operations due to the high
volume of units sold. However, the lowest margin of safety makes the operation
most vulnerable to the drop of sales activity. The comparison with the local
hotels showed that Tides Reach hotel is charging too high prices for its dinner
menus. Slight price reduction is suggested to increase the volume of sales and
generate more profit.

While beverage operation has relatively high margin of safety and low proportion
of fixed costs it could benefit from a slight price reduction towards the increase
of sales volume.
It is expected that the new acquisition of the leisure complex will attract more
visitors to the hotel in the coming year and thus boost sales in all operational
department.

Table 2
Accommodation Food Beverage
Sales Mix 22% 55% 23%
Units Sold 5790 38680 30560
Contribution £ 35.2 (86%) £ 9.7 (58%) £ 5.1 (60%)
Breakeven 1364 21185 10852
Margin of Safety 76% 45% 64%
Safest Option 21% 54% 24%
Profit 157565 169706 100511
Fixed Cost : Var. 60 : 40 43 : 57 35 : 65
Cost
Competitiveness
The Tides Reach Hotel does not seem to be competitive when compared with the
similar hotels in the area as well as local hotels. Despite charging lower room
prices the hotel struggles with the occupancy rates especially in the low season.
Being a 4 crown hotel it has lower room rates than some of the 3 crown hotels in
the area. Such a low pricing may make people question the quality of the hotel
thus spoiling its image and detracting customers from coming there. Hence it is
suggested for the hotel to rethink its pricing strategy especially in the light of
new acquisition which will add even more value to it. Besides, the attractive
location and easy accessibility both add value to the hotel which can be reflected
in its pricing.

Table 3
Hotel Season

High Shoulder Low

Tides Reach Hotel (4

crown)
Rate (£) 55 42 32

Occupancy Rate % 82 55 35

4 crown hotels in the

area
Average Rate (£) 68.50 54.50 43.50

Aver. Occupancy 89 74 51
Rate %

3 crown hotels in the

area
Average Rate (£) 55.50 45.50 36.50

Aver. Occupancy 92 68 46
Rate %

Low occupancy rate at the hotel that is situated is such a good location also calls
to rethink the marketing structure and product offer of the hotel. Since the hotel
is close to the airport and it has the potential to develop conference room it
should try to attract more business customers and conferences. This market is
especially attractive as it is not affected by seasonal fluctuations.
An outline of new products, services and packages for The Tides Reach
Hotel & Leisure Complex
As noted by Harris (1994:88) “the majority of products and services produced
and sold in the hotel (…) are derived from the provision of rooms, food and
beverages”. At the moment, accommodation is generating biggest departmental
profit for the hotel. However, relatively low occupancy rate combined with the
high fixed and low variable cost indicate that the profit of this operation could be
increased even further through attracting more customers and generating higher
revenue.

Before looking at the new market is it worth trying to develop the already
existing market. According to the statistics the Tides Reach Hotel relies mainly
on tourist market, as tourists represent 71% of all guests.

The further rise in average disposable income in 2008 resulted in a higher level
of consumer spending in the economy as a whole and leisure sector in particular
(KeyNote, 2009). Although tourism and hospitality industry has suffered
considerable losses brought by recession referring to Marvin Rust, Hospitality
Managing Partner at Deloitte Caterersearch.com KeyNote (2009) state that “both
weekend leisure demand (…) and corporate weekday demand (…) has shown an
upward trend, signalling that the worst may be over for hoteliers.” Short breaks
and second holidays are becoming a stronger trend. Furthermore, “short-break
market has made the hotel a potential destination in itself, which may be chosen
for facilities such as restaurants, spas or the quality of the accommodation”
(Keynote, 2009). Thus, with the value added to the hotel by the newly acquired
leisure centre the Tides Reach Hotel has very good chances of further expansion
of the tourist market. This will be stimulated through the offer of attractive
packages of accommodation, food and leisure facilities.

Business customers account to 25% and conference market to only 4% of the

guest mix. As noted in Keynote (2009) “corporate travel is of particular
importance to hotels as businesses can be targeted with higher rates for
accommodation due to the fact that they are generally more fixed in their
requirements with regards to destinations and dates than the consumer sector.”
Besides, businesses are central users of additional facilities such as meeting,
conference and function rooms as well as food and drink offered by the hotel.
Finally, in contrast to holiday-makers business customers are not affected by
seasonality which is very important for the hotel especially in the low season
(KeyNote, 2009). Thus and taking in to account that the Tides Reach hotel has
the necessary facilities - function room and smaller meeting room can welcome
up to 72 guests overall - it is strongly advised to further develop this market.
This could be done by offering activities such as team building events in the
hotel. Again, the leisure centre makes the hotel more attractive for such events
by offering additional facilities and thus more choice of activities. Discounted
rates for longer stay can be introduced to encourage business clients to stay
overnight.
The newly acquired leisure centre combined with the beautiful countryside
location of the hotel and its function room offers a numerous possibilities for new
product development. One of the suggestions is to market hotel for the
celebration of honeymoons and other special occasions. This will contribute to
dealing with the problem of seasonality of the hotel and attract new market to
the hotel.

Furthermore, to generate more revenue the new leisure centre should be opened
and marketed to local market. The research of the area showed that there is no
similar leisure complex in the area. Thus, having a wide range of facilities on
offer the leisure complex is expected to enjoy popularity among local population.
Annual and monthly membership discounts can be introduced to attract and
keep people.

Opening of the leisure centre to the wider public is also expected to contribute to
the revenue of the restaurant as customers of the leisure centre might choose to
use hotel’s bar and restaurant. It must be noted that food and beverage
department of the hotel will benefit from all of the proposed changes and market
expansions of the accommodation operation as it will be more convenient for
most people staying in the hotel to use the provided facilities.

However, designing attractive product is not enough. Effective means of

communication of the products to the target market have to be developed. Given
the fact that target market of the hotel is spread over a wide geographical
location – not only on national but also international level – the Tides Reach hotel
will benefit from the use of internet as a mean to communicate and sell its
products to their potential audience (Brassington and Pettitt., 2003). Since the
introduction of Internet to the world in 1991 and rapid expansion of its users “the
website has become a marketing tool of varying purposes and importance in
most “traditional” commercial companies” (Brassington and Pettitt., 2003:1055).
According to Starkov and Price (2007) a third of all hotel bookings are generated
from the internet and another third is influenced by it. lThe attractiveness of the
internet as a marketing tool is brought not only by its potential to reach wide
audience at a very low cost, but also, as noted in Marketing Trends Survey
(2006) it has allowed businesses to “respond more quickly and efficiently to
customer needs, and become more solutions oriented”. Thus, it is expected that
establishment of a website will increase revenue as well as boost profit.

Finally, the role of social media should not be underestimated. There are 65
million people, who are accessing Facebook through mobile devices. The same
applies for MySpace and Twitter. These are important examples because they
can provide the opportunity to win over more customers. A wise decision is a
mobile-specific strategy to be adopted in order to increase the accommodation
revenue.
Pricing Strategy for The Tides Reach Hotel & Leisure
Complex

New accommodation rates

Table 4
Low Shoulder High

3 Crown Hotels

Average 46% 68% 92%

Occupancy

Average Rate £36.50 £45.50 £55.50

4 Crown Hotels

Average 51% 74% 89%

Occupancy

Average Rate £43.50 £54.50 £68.50

Tides Reach Hotel

Occupancy 35% 55% 82%

Rate £32 £42 £55

Pricing is one of the main marketing tools. The current pricing strategy of the
Tides Reach Hotel is based on seasonal pricing. This is a common pricing
strategy used by the hotels to deal with the seasonal fluctuations in the demand.
It is aimed at maximizing contribution to profits during high season through price
increase and stimulates demand at low season by dropping the prices. As
already noted, the Tides Reach Hotel is not using the strategy efficiently as it
fails to maximise its profits in the periods of high demand as well as it does not
stimulate enough demand during the low demand periods. This becomes
particularly obvious when comparing the occupancy rate and prices of the hotel
with the similar hotels in the area (see Table 4). The review of the similar hotels
in the area also shows that customers are prepared to pay higher prices than
those that Tides Reach hotel is currently charging. Reflecting general seasonality
of demand in the area it is suggested to leave seasonal pricing as a strategy.
However, the following changes are proposed:

- increase prices charged in each season

- set different prices for the mid-week and weekend to address lower
demand in the mid-week
 - offer lower prices for those staying 7 nights and more to encourage longer
stay

The suggested prices can be found in Table 5.

Table 5

The Tides Reach Hotel

High Season Shoulder Low Season
Season

Current Rates £55 £42 £32

Suggested Rates

Sun-Thurs/7 £70 £58 £47

nights and
more

Fri, Sat £90 £70 £60

The suggested rates are based on the review of the rates charged by
competitors and are set slightly above the the average rate charged by the 4
crown hotels in the area. The reasons for this decision are as follows:

- attractive location

- ease of accessibility

- new acquisition seen as added-value due to the extended choice of leisure

facilities and entertainment in the area

- slightly higher rates of accommodation alone are expected to encourage

customers to purcase package deals outlined below which will contribute
to the sales in all operational departments

- the suggested rates are the highest rates that will be charged in the
coming year and may be reduced – subject to the tactical pricing
decisions.

The hotel will profit from the use of some pricing tactics. Further price
segmentation is suggested to deal with the various problems attributable to the
hotel industry.

As newly acquired leisure complex has the potential of attracting more families
to spend their holidays here it can be of advantage to introduce offer discounted
rates for families with children of up to 16 years old. 30% discount is suggested
as it will make the hotel more attractive for families and still enable it to
generate profit.

It is further recommended to offer 15% group discount for the groups of 10 and
more people to increase the occupancy rate of the hotel.

Also, offering 25% discount to the corporate travellers will help to attract
business travellers. Expansion in this market means the reduction of seasonal
fluctuations. Besides, while looking attractive to the potential customers 25%
discount will still generate higher profit than hotel is taking at the moment.

New food and beverage pricing structure

As noted above restaurant of the hotel will be opened not only for hotel guests
but also for local residents and other extern guests. Thus, the development of
two different rates for hotel guest and external visitors could benefit the hotel to
reflect different pricing of the hotels and restaurant menus.

The review of local restaurants showed that menu pricing of the Tides Reach
Hotel is set in line with the other restaurants in the area. The hotel is charging
average prices in the area which while contributing to the fixed costs and profit
gives the hotel competitive advantage due to its good reputation for French
cuisine and will attract local population. It is thus suggested to keep the existing
prices for the external guest.

Table 6
Average menu price

Victoria Inn £19.50

Burton Farmhouse £23.95

Tides Reach Hotel £19.70

However, the comparison with local hotels showed that Tides Reach Hotel is
charging considerably higher prices for its dinner menu than its competitors (see
Table 7). Being a 4 crown hotel its diner menu rates even exceed those of a 5
crown hotel. It is thus advised to reduce prices for the hotel guests to make the
hotel as a whole and dining in its restaurant in particular more attractive for its
guests. As analysed above, currently, the contribution in food operation is £9.7.
Hence, the average price can be reduced by up to £9.7 without restaurant
starting to make a loss.

Table 7
Dinner Price

New Forest Hotel (4 crown) £12.50

Southern Way Hotel (4 crown) £15.50

Marriott (5 crown) £19.50

Tides Reach Hotel (4 crown) £21.80 (average price of three dinner
menus offered)

It is suggested to reduce the average price of the dinner menu to £15. This
means that contribution towards fixed costs will still be maintained. Furthermore,
it is expected that such price reduction will considerably increase customers’
number and generate higher revenue. It is not advised to lower price even more
as the good reputation of the restaurant can be adversely affected by the too
low set prices.

As for beverage department, it was suggested to have wider verities of choice of

drink. And according to Appendix 1 costumer are spending 1/3 on their drinks of
what they pay for their meal, therefore the price of drinks should be in the range
of £3 to £10.

Leisure club pricing policy

As already discussed the leisure centre is fully equipped and in order to
maximise its functionality it should be operated as a standalone leisure club as
well as an attachment to the hotel. Therefore, as with the restaurant, two set of
pricing policy is recommended.

For standalone yearly membership needs to be introduced in the addition to the

day rates to attract local customers. The review of local leisure clubs showed
that customer’s base for leisure clubs are price sensitive as the number of
members declines with the increase of subscription fee. Therefore a lower yearly
subscription fee could attract more members, which will eventually produce
more income for the hotel. Still the price should not be too low to comply with
the overall image of the hotel and its restaurant. The suggested rates for Tides
Reach hotel are identified in Table 8.

Table 8
Members Year Subscription Day Rate

South Coast Leisure Club 250 £475 £35.00

Ringwood Sports Club 400 £360 £19.50

Drews Leisure Club 450 £330 £17.50

Health & Fitness Centre 550 £295 £14.50

Tides Reach Hotel (as 530 (predicted) £315 £17.00

suggested)

It is predicted that leisure centre will attract more customers due to its relatively
low prices and excellent value that customers will get for this price. The Tides
Reach leisure centre is not just a fitness centre but due to its multiple facilities it
is a wonderful destination for a day out for the whole family.

Furthermore, the centre will benefit by offering corporate deals for local
business. Offering 25% discount for corporate memberships is predicted to
considerably boost members’ number.

For the Tides Reach hotel customers the price of using leisure centre is
suggested to be set at £10. While making the hotel more attractive for the
potential customers it will help to generate additional revenue from hotel visitors
staying for a short period of time. The package deals will be designed for holiday
makers staying 7 days and more.

Packages of Accommodation and Food, Leisure

With the economical down turn, more and more people are willing to stay in the
country for holiday rather than to go aboard. This trend produces an opportunity
for Tides Reach to be marketed as a resort hotel on the nice south coast.

To make people stay in the hotel for a long period of time as well as use hotels’
owned restaurant and leisure facilities the package deal has been designed. The
price calculated is based on the assumption that two people will be staying in the
room. A fee of £15 a day will be asked for any additional person staying in the
room. The package deal outlined in Table 9 includes the room, breakfast, lunch
and dinner as well as the unlimited use of leisure centre facilities.

Table 9

The Tides Reach Hotel

High Season Shoulder Low Season
Season

The Package Deal

Rates as £117.50 £105.5 £94.50

calculated for
the product

Suggested £95 £77 £65

Rates for the
Package Deal
Budget Proposal for the year to June 2010
Budget

Budget is the well analyzed approximated evaluation of all the incomes and the
expenses of the property on a whole wherein the liabilities would include the
depreciation on the fixed assets, building maintenance costs, salaries and wages
of the staff, sundry charges; the assets would include the departmental incomes
as well as any other incomes a property could have in order to evaluate the
profit or loss for the property on a whole for the specific period of time.

As some of the authors say A budget is a financial document used to project

future income and expenses. [Budget :January,2009(online)].

Proposal

Proposal may be said to be a presentation which maybe formal or informal. As

the business dictionary clearly defines Proposal as a ‘ Solicited or unsolicited
submission by one party to supply (or buy) certain goods or services to (or from)
another.[Proposal: January 2009(online)]

Therefore it could be concluded that the presentation of budget could be

referred to as a budget proposal which may or may not be approved.

Departmental Operating Statements

Departmental Operating budgets are basically the budgets of the specific

department and do not include the fixed assets. Business Dictionary defines
operating budget as a ‘Detailed projection of all estimated income and expenses
based on forecasted sales revenue during a given period (usually one year).’

Having defined the basic concepts in the question we would try to analyze the
sales forecasts for accommodation:

Taking the figures from page number 6 Table 4 we could see the average
increase in the price for high season we have proposed is £25. Taking the
percentage increase in the accommodation rates into account we could see that
there is a 45% increase in the proposed accommodation rate.

Considering the 45% increase in accommodation rates for the high season we
assume to have the sales of accommodation in high season to be 4% that is
sales would increase from 1845 for the high season to 1918. This shows that the
occupancy percentage would increase from 82% to 85%.

The 4% increase in the sales is concluded taking into account the response of
the guests to the steep increase in the prices.

While in the shoulder season the average price proposed is £64 which shows £22
increase that is 52% increase in price. Taking into account the ratio of price:sales
ratio in high season we could see the increase of 5.46% in the sales of shoulder
season from 2475 to 2610 which would show an increase in occupancy
percentage of 55% to 58%.

As in the Low Season the average price proposed is £53.5 which shows a £21.5
increase that is 67% increase in price. Taking into account the ratio of price:sales
ratio in the seasons before we assume to have 6.09% increase in the sales of the
low season that is 1470 to 1559 that shows the increase of occupancy
percentage to be 37.11%

Therefore the sales for high, shoulder and low season would be £153440,
£167040, £83406.5

= £403886

Taking Food and Beverage Departments into account, the covers sold would
have a radial increase of 4% by average as the accommodation sales have
increased therefore

Lunch Dinner
Functions

Covers Sold A- 3794 – 9.5 5093 - 10 1456 - 9

Assumption B- 4571 – 13.5 6189 – 18.5 5841 - 14

and Price C- NA 5841 – 28.5 1034 –

19.5

D- NA NA 608 –
28.5

Keeping the Breakfast rates same we assume the covers for breakfast to be sold
= 8445

That is the sales for breakfast would be 50670

According to the above table the sales for Food Department on a whole would be
£36043+£61708+

£50930+£114496+£166468+£13104+£81774+£20163+£17328 that is
£612684.
The average food cost is 6.92 per cover. Therefore the predicted food cost for
the year 2010 would be 296674

Taking the Beverage Department into account since the profit margin is low
therefore the prices have been kept the same but since the number of covers
sold would increase 31782 covers would be sold taking a average 4% increase.

Therefore the sales for the beverage department would be £35826+£117787+

£35167= £188780

Keeping the bars revenue unchanged because of lack of information the total
sales for beverage department would be £267510
Departmental Operating Budget For the Year Ending June 2010

Accommodation £ £ £

Sales 403886

Other Revenue 15350 419236

Direct Labour Costs 49420

Direct Operating Costs 33130 82550

Departmental ______________________________________________________

Operating Profit
336686

Food £ £ £

Sales 612684

Food Cost 296674

Direct Labour Cost 193331

Direct Operating Cost 18146 508151

________________

Departmental Operating Profit

104533

Beverage £ £ £

Sales 267510

Beverage Cost 108509

Direct Labour Cost 50042

Direct Operating Cost 6895 165446

Departmental Operating Profit

102064
Total Departmental Operating Profits
543283

Less Indirect Expenses

Salaries and Wages 106312

Fuel 25766

Cleaning and Maintainance 32670

Business Rates 36500

Administration Expenses 14070

Business Expenses 25787

Advertising & Promotion 17412

Motor Expenses 8322

Miscellaneous Expenses 3982

Depreciation 35000
305821

Hotel Operating Profit

237462

Before Interest

Less Interest
14400

Net Profit
223062

Narration:

Salaries and Wages taken for the months starting October to June
Fuel Charges 50% paid in January

Business Rates: 50% paid in January

Budgeted Proposal for the year 2010 uptil June.

Fixed Assets Value Deprn.

New Value

£ £ £

Premises 490000
490000

Furniture and Equipment 154000 62000

92000

Motor Vehicle 16000 6000

10000

Total Fixed Assets 502000

Current Assets

Stocks Food 5980

Beverage 9270 15250

Debtors 161814

Bank Balance 12760 189824

Current Liabilities

Creditors 33765 33765

156059

Capital Employed 658059

Financed by:
Capital 350000

Retained Profits 46680

Net Profit 223062

Loans 40000

Capital Employed 659742

We could see from the balanced sheet clearly that the proposed budget would
very well fulfil the immediate liabilities of the property and the rates applied
seem to have a great impact on the resort which we could see through the
departmental budget plan.
Appendix A
Graph 1

Breakeven for Tides Reach Hotel

Breakeven Point
Sales and Costs

Total Costs

Fixed Costs

Total Sales

Revenue

Graph 2

Breakeven for Accommodation Operation

Total Sales
Sales and Costs

Total Costs
Breakeven

Fixed Costs

Revenue
Graph 3

Breakeven for Food Operation

Total Sales
Sales and Costs

Breakeven Point
Total Costs

Fixed Cost

Revenue

Graph 4

Breakeven for Beverage Operation

Total Sales
Sales and Costs

Breakeven Point
Total Costs

Fixed Cost

Revenue
Appendix B
Comparison of three operating departments within Tides Reach Hotel

Accommodation Food Beverage Total

Sales 252465 641586 260250 1154301

Direct Variable
Costs 32480 267880 104305 404665
Indirect Variable
Costs 3895 3895 3895 11687

Contribution 216090 369811 152050 737951

Fixed Costs 369304

Net Profit 368647

C/S ratio 86% 58% 58% 64%

Sales Mix 22% 55% 23%

Percentage Point 19 32 13 64
Reference

Brassington, F. and Pettitt. S. (2003). “Principles of Marketing”, Third Ed., London:

FT Prentice Hall.

Burton Farmhouse. (2009). [Online] “Sample Menu”, Available at:

http://www.burtonfarmhouse.co.uk/restaurant/menu.html [accesssed on
07.01.2010].

Harris, P. (1992). “Profit Planning”, Oxford: Butter-Heinemann Ltd.

KeyNote. (2009). [Online] “Hotels 2009”, Available at:

http://www.keynote.co.uk.ezproxy.brighton.ac.uk/market-
intelligence/view/product/10332/hotels?utm_source=kn.reports.browse
[accessed on 12.12.2009].

Phillips, P. (1994). “Welsh Hotel: Cost-Volume-Profit Analysis and Uncertainty”,

Vol. 6, No. 3, pp. 31-36.

Starkov, M. and Price, J. (2007). [Online] “Hotelier’s 2007 Top Ten Marketing
Resolutions”, Available at http://www.hospitalitynet.org/news/4029822.print
[accessed on 06.01.2010].

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http://www.victoriainn-salcombe.co.uk/?page_id=13[accessed on
07.01.2010].
http://biztaxlaw.about.com/od/glossaryb/g/Budget.htm- Jean Murray

HTTP://WWW.BUSINESSDICTIONARY.COM/DEFINITION/PROPOSAL.HTML

http://www.investopedia.com/terms/l/liquidityratios.asp