Good Night Motel Сase Ыtudy

PurposeTo discuss the factors which motel owner Justin McGregors should consider when deciding on business sector proposal from a well respected community resident George Alward for 2 nights full house accommodations. Offer for half room rank, during low business season, for church convention attendees.Background SummaryGood Night motel is a family owned and operated motel, located or so main highways, restaurants and retail shopping in the Canadian town high-sounding Bend. The town is a summer resort with local businesses exposed to seasonal business patterns. Such is the Good Night motel, which has 30 units and charges $80/nt, rate comparable to the high-end motels in the ara.Due to the global economic recession over the former(prenominal) few years Good Nights line of work place shed dropped resulting in unhorse annual revenues and increased competition for guests. 2012 is the send-off time in five years with earned profit.In the low limit (Oct 16-May 14) the motel i s rarely more than a quarter full at each time. During this time the operating and administrative expenses do non vary with the occupancy rate except cleaning supplies ($2.74 rm/nt) and heating ($5 rm/nt).Important FactorsWhen making the decision McGregor should consider both macro and microeconomic factors affecting his business.Global Recession before long due to the global economic recession and theappreciation of the Canadian long horse vs US, less people are travelling, their leisure budgets are small(a)er. Consequentially the revenues are take down and the competition for customers higher. In a competitive environment, customers are non price takers. There are various comparable motels so George Alward bum simply take his business to the competition.Possibility for repeat business If McGregor accepts the offer he will create an opportunity for possible repeat client attached year during slow season. And since Alward is a respected member of the community, his recomme ndations will have autocratic impact on the image of the motel.Opportunity Cost McGregor should look non only the money he would be bringing in, but similarly at the lost opportunity costs. Although highly unlikely, there is forgone possibility that otherwise people may wish to rent the 30 rooms at the standard rate of $80 per night.Qualitative Factors In the event of full occupancy there is a possibility of lower efficiency. If the staff has to accommodate all 30 rooms at the analogous time, they may not be able to provide good quality service.Pricing Strategy Accepting lower price for the room may set precedent for future clients demanding lower rates.Accounting Figures Assuming all other operating and administrative expenses are the same for both cases accept or reject the offer do not vary with occupancy. For low season, accepting the offer results in positive incremental profit.Conclusion/ComputationsBased on the fact that the global economy has not up to now fully recove red from the recession and the seasonal low occupancy of the motel, patronage the possibility of higher opportunity cost and unwanted precedent effect, it would be beneficial for McGregors business to take the offer. The motel will benefit from positive incremental surplus, hopefully some repeat clients and good marketing from table service the local community.