Profit Center Essays

1114 Words Jun 30th, 2013 5 Pages
The TallTree2 Hotel Casino is a 640-room resort complex featuring a full range of Nevada-style gaming with slot machines and table games. Besides the hotel and casino, it also operates four restaurants, two entertainment showrooms and three gift shops. Because of the economic environment at the time, TallTree2 wanted to improve its bottom line by launching a range of Special Events like golf tournaments, boxing matches, New Year Parties and a series of pit, keno and slot tournaments. Those special events were specifically designed to compensate for the slow periods and generate additional gaming revenues.
Terrence Wei, the new property president, feels that his department managers appear to be in conflict with each other. The managers
…show more content…
The hotel department should be evaluated as a profit center. The division already has substantial control over pricing since it is based on supply and demand and on seasonal trends. Also, complimentary rooms only account for 8% of the revenue created by the department. Because of the high opportunity costs, room sales account for almost 92%. The Hotel is also one of the main income sources for the gambling industry.
The Food department should be run as a cost center because 20% of the revenue is generated from complimentary sales and also because the restaurants are currently running at a 15% loss. The restaurants’ main purpose is to serve gamblers and should not be established as a standalone business. The restaurants are expected to provide low-cost meals that will attract more people or retain the current customers on the property.
The Beverage department should also be evaluated as a cost center. 77% of the beverage’s division revenues come from complimentary beverages served to the casino customers. The casino has major control over which customers receive the complimentary beverages and the manager of the department has very little control over the division’s profit. The department should however be responsible for controlling costs like the staff and the cost of the inputs supplied.
The synergy between the different departments makes it harder to evaluating those individually. The food and beverage departments have the

Related Documents