Good Night Motel Сase Ыtudy

PurposeTo discuss the factors which motel owner Justin McGregors should consider when deciding on descent proposal from a well respected community resident George Alward for 2 nights full house accommodations. Offer for half room respect, during low line of work season, for church convention attendees.Background SummaryGood Night motel is a family owned and operated motel, located devout main highways, restaurants and retail shopping in the Canadian town sybaritic 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 atomic number 18a.Due to the global economic recession over the ago few years Good Nights moving in evaluate guide dropped resulting in cut annual revenues and increased competition for guests. 2012 is the commencement time in five years with earned profit.In the low period (Oct 16-May 14) the motel is r arely more than a quarter full at whatever time. During this time the operating and administrative expenses do non vary with the line rate except cleaning supplies ($2.74 rm/nt) and heating ($5 rm/nt).Important FactorsWhen making the closing McGregor should consider both macro and microeconomic factors affecting his business.Global Recession shortly due to the global economic recession and theappreciation of the Canadian horse vs US, less people are travelling, their leisure budgets are sm in aller. Consequentially the revenues are visit and the competition for customers higher. In a competitive environment, customers are non price takers. There are various comparable motels so George Alward potbelly 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 abutting year during slow season. And since Alward is a respected member of the community, his recommendations will have verificatory impact on the image of the motel.Opportunity Cost McGregor should look not only the money he would be bringing in, but in addition at the lost opportunity costs. Although highly unlikely, there is forgone possibility that other(a) 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 additive profit.Conclusion/ComputationsBased on the fact that the global economy has not however fully recovered from the re cession and the seasonal low occupancy of the motel, scorn 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 religious service the local community.