Caesars Palace Las Vegas made headlines when it undertook a $75 million renovation. In mid-September 2015, the hotel closed its then-named Roman Tower, which was last updated in 2001, and started a major renovation of the 567 rooms housed in that tower. On January 1, 2016, the newly renamed Julius Tower reopened, replacing the Roman Tower. In addition to renovating the existing rooms and suites in the former Roman Tower, 20 guest rooms were added to the Roman Tower. With the renovation completed, Caesars expects the Julius Tower room rate to average around $149 per night. This increase, a $25 or 20.2% increase, reflects, in part, the room improvements. Assume that the annual fixed operating costs for the Julius Tower in Caesars Palace® Las Vegas will be $5,000,000. This amount represents an increase of $200,000 per year compared to pre-renovation. Also assume that the variable cost per hotel room night after the renovation is $27; before the renovation, the variable cost per room night was $20. The average hotel occupancy rate, in 2014, for Caesars Entertainment Corporation was 91.2%, according to its 2014 Form 10-K. By comparison, the average hotel occupancy rate in Las Vegas overall, for that same time period, was 86.8%, according to Stastia.com. What is each room's contribution margin after therenovations
Caesars Palace Las Vegas made headlines when it undertook a $75 million renovation.
In mid-September 2015, the hotel closed its then-named Roman Tower, which was last updated in 2001, and started a major renovation of the 567 rooms housed in that tower. On January 1, 2016, the newly renamed Julius Tower reopened, replacing the Roman Tower. In addition to renovating the existing rooms and suites in the former Roman Tower, 20 guest rooms were added to the Roman Tower. With the renovation completed, Caesars expects the Julius Tower room rate to average around $149 per night. This increase, a $25 or 20.2% increase, reflects, in part, the room improvements. Assume that the annual fixed operating costs for the Julius Tower in Caesars Palace® Las Vegas will be $5,000,000. This amount represents an increase of $200,000 per year compared to pre-renovation. Also assume that the variable cost per hotel room night after the renovation is $27; before the renovation, the variable cost per room night was $20. The average hotel occupancy rate, in 2014, for Caesars Entertainment Corporation was 91.2%, according to its 2014 Form 10-K. By comparison, the average hotel occupancy rate in Las Vegas overall, for that same time period, was 86.8%, according to Stastia.com.
What is each room's contribution margin after therenovations?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
