Caesars Palace Las Vegas made headlines when it undertook a $75 million renovation. On January...
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Caesars Palace Las Vegas made headlines when it undertook a $75 million renovation. On January 1, 2016, the newly renamed Julius Tower reopened, replacing the Roman Tower. In addition to reno the existing rooms in the former Roman Tower, 20 guest rooms were added to the Roman Tower. With the reno completed, Caesars expects the Julius Tower room rate to average around $149 per night, and increase of $25 or 20.2%.
Annual fixed operating costs for Julius Towers are $5,000,000. This is a $200,000 per year increase compared to before the reno. The variable cost per hotel room night after reno is $27, before the reno it was $20.
Assume occupancy rate for Caesar's Entertainment Corp is 92% and 88% for Las Vegas overall.
1. What cost types, associated with a hotel room in the Julius Tower, are variable with respect to hotel occupancy? What cost types are fixed with respect to hotel room occupancy?
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