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TallTree2 Hotel Casino Case Solution

Solution Id Length Case Author Case Publisher
1180 1210 Words (5 Pages) John R Mills, Jeffrey Wong IMA: IECJ0212CC
This solution includes: A Word File A Word File

The department like rooms, food, and beverages was used as complementary by the TallTree2 Hotel Casino in order to ensure better facilities for the customers who are going to gamble in Casino. The main purpose of these departments was to maximize the revenue generated by casino gaming. As the customer would feel comfortable to have the food, beverages, and room at the same place, where they were gambling. No doubt their departments are successful in satisfying the customers and increasing the revenue generated by the gaming in the casino. But they would be used as the profit centers if they are more profitable in themselves as compared to their impact on the overall revenue generation, from the gaming in the casino.

Following questions are answered in this case study solution

  1. Should the departments be run as profit centers? Explain.

  2. Evaluate the items in Bill’s report specifically addressing the suite and room comps and hotel overhead.

  3. Was the Stars and Stripe event profitable? Show your calculations.

  4. Evaluate Bill’s argument about displacement costs. When should they be used? 

Case Analysis for TallTree2 Hotel Casino

Thus the answer to the question of whether the departments should be made profit centers or not depends, upon the revenue generated by these departments after satisfying the costs related to them. Moreover, by reviewing the progress of the departments, it was clear that the department would be able to generate greater profits if they work as Profit Centers. The reason for the argument can be considered, as it was written in the text that the food department facing a loss of 15%. And the complimentary food sales which were made to the casino gamblers constitute 20% of the whole sales by the restaurant which is a considerable amount. Moreover, the department could earn more profit if it was made independent to set the prices for the complimentary sales according to the demand of the products. Furthermore, the department of rooms would also earn greater profits than it did when used as complementary to Casino. As during the times of high demand, mostly over the weekends. The rooms could be charged for $145 per night, but they had to be charged at $45 for the Casino customers at the discounted Casino rate, as complementary. Consequently, these reasons prove that it would be more profitable to use the departments of the Rooms and Food as the profit centers because they could earn greater profits than they could when used as complementary.

Apart from this, the department of beverages was good and it should remain as complementary to Casino. As the low prices of the beverages would appeal to the customers to drink more, and when they would drink more, they would gamble more, as shown by history.

Evaluate the items in Bill’s report specifically addressing the suite and room comps and hotel overhead.

Bills report compares the projected and actual contribution of the items to the overall revenue generated from the special events, Stars and Stripes. As it is displayed that the expected number of the guests was 100 but in actual 171 guests came. This shows that Bill underestimated the demand of Casinos on special events. Although special events were organized in the slow period still the demand was more than the estimation. Subsequently, the revenue generated by the Entry fees was also greater than the estimation by $9159= $22059 - $12900. Apart from this the complementary rooms that were reserved by the management on estimation, for the Special event, Stars and Stripes were more than the actual rooms used. Thus the revenue related to the rooms was also overstated.

It was expected that the customer would not pay for the suites, but in real 4 suites were paid by the customer. It was quite a wrong estimation by the management. As they considered not even a single suite to be paid by the customers. Thus the total actual revenue generated by the Star and Stripes event was $8489(=$30119 - $21630), more than the estimation. Coming towards the costs related to the special event. The room and suite comps catch the sight as their actual values show significant variation from the expected values. The criteria of the giving comp in the TallTree2 Hotel Casino were how well the customer knows the casino. The actual suite Comps were quite less than the expected values. This showed that the customer that paid for the suites were not well known by the Casino and vice versa. Moreover, the actual room comps were more than the estimated value which shows that the customers that paid for the room for the night were mostly well known by the Casino. Furthermore, the total costs related to the special event were more than the estimated value of $8566(=$39005 - $30439). Thus in the Bills report it can be seen that the special event was not profitable. 

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