- Problem Definition
This blog is the third part analysis for container hotel business: breakeven (BEP) & sensitivity after established final MARR and hotel tariff in previous blog.
Figure 1 KL Container Hotel
- Identify the Feasible Alternative
Two options are foreseen for the analysis. First option is all fixed cost with variable revenue and second option with some variable cost and revenue together with their sensitivity analysis to find the main driver element for this business.
- Development of the Outcome for Alternative
The business element taken from previous blog W6, and they are:
- Ex Container lifetime is 15 years for 10% salvage value
- The hotel tariff price per night is 200 k-IDR
- i for MARR = 23%
- The hotel area will be in East Bandung
Breakeven simulations based on references, , are present hereinafter:
Figure 2 Breakeven Option 1, All Fixed Cost and Variable Revenue
Figure 2 Breakeven Option 2, Fixed + Variable Cost and Variable Revenue
The sensitivity analysis for both BEP options present in Figure 3:
Figure 3 Sensitivity Analysis for BEP Option 1 & 2
- Selection Criteria
The goal for this simulation is finding the number of beds for breakeven condition based on commercial strategy taken in previous blog with their main driver from sensitivity analysis.
- Analysis and Comparison of the Alternative
BEP analysis for shows around 6800 beds per year correspond with fixed cost or some partial annual variable cost compare to 8400 beds taken as “selling strategy” in blog W6. It means that I should sell this number for my business survival otherwise I get bankrupt. It shows from sensitivity analysis that MARR and initial investment [P] are two sensitive factors, but the most important thing is the revenue factor [the reversible sensitive graph on the spider plot] that really required my attention. In other words, if I lock my hotel price as they already in competition line, then my focus should be on beds occupancy.
- Selection of the Preferred Alternative
Important factor that I should monitor during the business life cycle is the hotel revenue from beds occupancy and at least 6800 beds [81% from 8400 beds selling point] for breakeven.
- Performance Monitoring and the Post Evaluation of Result
Since BEP target is quite challenging, I should very creative to attract my customer. Identified marketing actions that I recover so far are: a. lowering the price for holidays, b. family package price, and c. guest “door price” for special day [birthday/marriage anniversary/graduation…etc].
home.ubalt.edu. (2013). Breakeven Analysis and Forecasting. Retrieved from http://home.ubalt.edu/ntsbarsh/business-stat/otherapplets/breakeven.htm
seas.gwu.edu. (2013). Sensitivity Analysis. Retrieved from http://www.seas.gwu.edu/~dorpjr/tab4/publications.html
Sullivan, William G., Wicks, Elin M., & C.Patrick, Koelling. (2012), Engineering Economy 15th Edition (pp. 451-465). New Jersey, United States: Prentice Hall.