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Incremental Analysis: The Jefferson Plaza Hotel is a deluxe four star establishment
Incremental Analysis:
The Jefferson Plaza Hotel is a deluxe four star establishment. Late on Friday, it had 10 of its 200 rooms available when the desk clerk received a call from the Riley Hotel. The Riley Hotel made a booking error, and did not have room for three guests (each of whom had a "confirmed" room). The Riley wants to send their customers to the Jefferson, but pay the rate the guests would have been charged at the Riley ($120 per room) rather than paying the normal rate of $200 per room at the Jefferson.
A. If the Jefferson Plaza accepts the guests, what will be the incremental revenue?
B. Provide examples of incremental costs that the Jefferson Plaza will incur if it accepts guests.
C. In your opinion, will the incremental revenue be greater than the incremental cost?
Expert Solution
Incremental Analysis:
The Jefferson Plaza Hotel is a deluxe four star establishment. Late on Friday, it had 10 of its 200 rooms available when the desk clerk received a call from the Riley Hotel. The Riley Hotel made a booking error, and did not have room for three guests (each of whom had a "confirmed" room). The Riley wants to send their customers to the Jefferson, but pay the rate the guests would have been charged at the Riley ($120 per room) rather than paying the normal rate of $200 per room at the Jefferson.
A. If the Jefferson Plaza accepts the guests, what will be the incremental revenue?
B. Provide examples of incremental costs that the Jefferson Plaza will incur if it accepts guests.
C. In your opinion, will the incremental revenue be greater than the incremental cost?
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