Case
Business Simulation HOTS
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,Table of Contents
Assignment 1 4
Strategy 4
Smart goals 4
In-depth analysis 6
Analysis of the relation between results and decisions 7
Adjustment and motivation of our decisions 7
A motivated promotion budget 7
Assignment 2 8
Fixed and Variable costs of the F&B department 8
Motivation 8
Variable Cost Percentage of the F&B department 8
Cost allocated to profit centres 8
F&B Break-even Sales Revenue 10
Conclusion Break-even revenue 10
Assignment 3 11
Solvency ratio 11
Interest coverage ratio 11
Gross return on assets 11
Profit Margin of year 1 12
Assignment 4 12
Operating profit and depreciation 12
Cash flow from operating activities 12
Cash flow from investing activities 13
Cash flow from financial activities 13
Change in Liquid Assets 13
Statement of Cash Flow Indirect Method 15
Conclusion Cash Flow Statement 15
Assignment 5 16
SMART goal 16
Income statement 17
Statement of Income 28
Cash Flow 29
Balance Sheet 30
Assignment 6 34
Bibliography 36
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, Assignment 1
Strategy
The chosen strategy for KAFILI for the HOTS game is differentiation on quality. According to Porter
M.(2007) to maintain cost leadership you have to reduce your prices in comparison to the competitors.
Therefore it will attract more guests to visit our hotel. However this is not what we are aiming for.
Moreover, according to Porter M. (2007), differentiation strategy is about your products and services
being unique in comparison to your competitors, making them different and more attractive than
those of your competitors. Therefore, we want to offer products and services that are different from
our competitors to our guests and we focus more on the quality.
One of the reason that we chose for this strategy is because we want to focus on our brand image and
to build a good relationship with our guests. Therefore, we need to offer good quality of services in
order to get a high guest satisfaction level to keep the loyalty of our guests at KAFILI. We believe when
offering a good quality of services and experiences to the guests, they are more willing to return.
Smart goals
In order to make the right decisions and to achieve certain goals, we created SMART targets for the
Average Daily Rate (ADR), the Occupancy Rate and the Revenue per Available Room (REVPAR).
Moreover, we selected several ratios and created a SMART target for each, such as F&B revenue,
GOPPAR and Costs. These SMART targets will provide an indication of the hotel’s performance in a
certain period.
First of all, the ADR is very important because as mentioned before KAFILI is aiming for differentiation,
which means the price will be higher because we wants focus on better quality. Since we are ambitious
to set a high ADR goal, it is very important that the goal is achievable.
Therefore, we have set the following SMART target concerning the Average Daily Rate (ADR):
➔ Our goal is to increase the ADR to $115 by June. In order to do this, we have to increase our
prices and our minimum sales price (e.g. weekday and weekend transient and groups).
This goal is achievable, because last November the hotel had an average daily rate of 105.33 so it is
possible, plus with our new facilities we can ask a higher price per room than before. If the ADR
increases, our revenue will also increases when the room occupancy is right. The time of period we
have set for this goal is three months, by the end of June.
Secondly, the occupancy rates is also important, because this will improve the revenue and lead to
more profit. Moreover, the occupancy rates will give us an overview on how our hotel is doing and how
we can improve to attract more guests. Most important, this will have an affect on our brand image. It
is important for us to keep the consistency.
Therefore, we have set the following SMART target concerning the Occupancy Rates:
➔ Our next goal for the occupancy rate is going to be 80% in 3 months. To attract more guests
to stay at our hotel, we may offer some packages, which include for instance a breakfast.
The Occupancy Rate has been increasing from 18.7% in January, to 56.9% in March, which means our
occupancy rate is raising. These Occupancy rates already increased a lot but in order to make more
profit, we need to sell more rooms. If you look at the growth over the past few months, it becomes
clear that this goal is achievable. The occupancy rate is already at 56.9% and with the help of
renovations, new guests will be attracted and this also results in a higher occupancy rate. We think
that this target is relevant, because a high occupancy rate results in a higher profit. The more rooms
you sell, the more money you earn. This is very crucial in order to have a successful business. We give
ourselves 3 months to reach this goal and to check the increasements.
Thirdly, the REVPAR also plays an important role, because this determines the revenue made per
available room. For most companies it is important to make profit and so does KAFILI as well. We want
to generate as much revenue possible in order to improve and keep our high level of quality services.
Therefore, we have set the following SMART target concerning the Revenue per Available Room
(REVPAR):
➔ We want to achieve an average REVPAR of $92 at least each day in the second year, from
January until December. To achieve this goal, we will first look to the occupancy of our hotel.
When the occupancy is high we will raise the prices and when the occupancy is low we will try
to sell all the rooms.
This number is based on our goal for the average daily rates and the occupancy rates. With an ADR of
$115 and an occupancy rate of 80%. Therefore, the REVPAR will be $92. The room revenue of the first
quarter was $381,698. Moreover, there are 4158 rooms sold in the first quarter. This means that we
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