Kristin Helmud is the general manager of Highland Inn, a local mid-priced hotel with 100 rooms. Her job objectives include providing resourceful and friendly service to the hotel’s guests, maintaining an 80% occupancy rate, improving the average rate received per room to $88 from the current $85, achieving a savings of 5% on all hotel costs, and reducing energy use by 10% by carefully managing the use of heating and air conditioning in unused rooms and by carefully managing the onsite laundry facility, among other means. The hotel’s owner, a partnership of seven people who own several hotels in the region, wants to structure Kristin’s future compensation to objectively reward her for achieving these goals. In the past, she has been paid an annual salary of $72,000 with no incentive pay. The incentive plan the partners developed has each of the goals weighted as follows: Measure Percent of Total Responsibility Occupancy rate (also reflects guest service quality) 20% Operating within 95% of expense budget 30 Average room rate 30 Energy use 20 100% If Kristin achieves all of these goals, the partners determined that her performance should merit a bonus of $30,000. The partners also agree that her salary will need to be reduced to $60,000 because of the addition of the bonus. The goal measures used to compensate Kristin are as follows: Occupancy goal: 29,200 room-nights = 80% occupancy rate × 100 rooms × 365 days Compensation: 20% weight × $30,000 target bonus = $6,000 $6,000/29,200 = $0.2055 per room-night Expense goal: 5% savings Compensation: 30% weight × $30,000 target bonus = $9,000 $9,000/5 = $1,800 for each percentage point saved Room rate goal: $3 rate increase Compensation: 30% weight × $30,000 target bonus = $9,000 $9,000/300 = $30.00 for each cent increase Energy use goal: 10% savings Compensation: 20% weight × $30,000 target bonus = $6,000 $6,000/10 = $600 for each percentage point saved Kristin’s new compensation plan will thus pay her a $60,000 salary plus 20.55 cents per room-night sold plus $1,800 for each percentage point saved in the expense budget plus $30 for each cent increase in the average room rate plus $600 for each percentage point saved in energy use. The minimum potential compensation would be $60,000 and the maximum potential compensation for Kristin would be $60,000 + $30,000 = $90,000. Required: 1. Based on this plan, compute Kristin’s total compensation if her performance results are: (Round your answers to the nearest whole dollar amount.) a. 30,000 room-nights, 5% saved, $3.00 rate increase, and 8% reduction in energy use. b. 25,000 room-nights, 3% saved, $1.15 rate increase, and 5% reduction in energy use. c. 28,000 room-nights, 0% saved, $1.00 rate increase, and 2% reduction in energy use.
W7 Q10
Kristin Helmud is the general manager of Highland Inn, a local mid-priced hotel with 100 rooms. Her job objectives include providing resourceful and friendly service to the hotel’s guests, maintaining an 80% occupancy rate, improving the average rate received per room to $88 from the current $85, achieving a savings of 5% on all hotel costs, and reducing energy use by 10% by carefully managing the use of heating and air conditioning in unused rooms and by carefully managing the onsite laundry facility, among other means. The hotel’s owner, a partnership of seven people who own several hotels in the region, wants to structure Kristin’s future compensation to objectively reward her for achieving these goals. In the past, she has been paid an annual salary of $72,000 with no incentive pay. The incentive plan the partners developed has each of the goals weighted as follows:
| Measure | Percent of Total Responsibility |
|---|---|
| Occupancy rate (also reflects guest service quality) | 20% |
| Operating within 95% of expense budget | 30 |
| Average room rate | 30 |
| Energy use | 20 |
| 100% |
If Kristin achieves all of these goals, the partners determined that her performance should merit a bonus of $30,000. The partners also agree that her salary will need to be reduced to $60,000 because of the addition of the bonus.
The goal measures used to compensate Kristin are as follows:
| Occupancy goal: | 29,200 room-nights = 80% occupancy rate × 100 rooms × 365 days |
|---|---|
| Compensation: | 20% weight × $30,000 target bonus = $6,000 |
| $6,000/29,200 = $0.2055 per room-night | |
| Expense goal: | 5% savings |
| Compensation: | 30% weight × $30,000 target bonus = $9,000 |
| $9,000/5 = $1,800 for each percentage point saved | |
| Room rate goal: | $3 rate increase |
| Compensation: | 30% weight × $30,000 target bonus = $9,000 |
| $9,000/300 = $30.00 for each cent increase | |
| Energy use goal: | 10% savings |
| Compensation: | 20% weight × $30,000 target bonus = $6,000 |
| $6,000/10 = $600 for each percentage point saved |
Kristin’s new compensation plan will thus pay her a $60,000 salary plus 20.55 cents per room-night sold plus $1,800 for each percentage point saved in the expense budget plus $30 for each cent increase in the average room rate plus $600 for each percentage point saved in energy use. The minimum potential compensation would be $60,000 and the maximum potential compensation for Kristin would be $60,000 + $30,000 = $90,000.
Required:
1. Based on this plan, compute Kristin’s total compensation if her performance results are: (Round your answers to the nearest whole dollar amount.)
a. 30,000 room-nights, 5% saved, $3.00 rate increase, and 8% reduction in energy use.
b. 25,000 room-nights, 3% saved, $1.15 rate increase, and 5% reduction in energy use.
c. 28,000 room-nights, 0% saved, $1.00 rate increase, and 2% reduction in energy use.
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