To read the full version of this content please select one of the options below:

Welsh Hotel: Cost‐Volume‐Profit Analysis and Uncertainty

Paul A. Phillips (Lecturer in Financial Management at the School of Consumer Studies, Tourism and Hospitality Management in the University of Wales College of Cardiff, Cardiff, UK.)

International Journal of Contemporary Hospitality Management

ISSN: 0959-6119

Article publication date: 1 June 1994

Abstract

Hotels tend to have a high level of fixed costs, which means that high losses will result if revenue is significantly reduced below the break‐even point. Hence, the traditional cost‐volume‐profit (CVP) model, which is widely used within the hotel sector to determine break‐even analysis, is an important managerial tool. However, is the basic CVP model adequate, bearing in mind that certainty does not always exist during the decision‐making process? Examines the basic CVP model and describes how to include uncertainty during the decision‐making process. By way of illustration uses a hypothetical Welsh hotel, to show how to determine probability estimates for various desired profit levels. Also considers some of the other inherent operational difficulties of the basic CVP model.

Keywords

Citation

Phillips, P.A. (1994), "Welsh Hotel: Cost‐Volume‐Profit Analysis and Uncertainty", International Journal of Contemporary Hospitality Management, Vol. 6 No. 3, pp. 31-36. https://doi.org/10.1108/09596119410059236

Publisher

:

MCB UP Ltd

Copyright © 1994, MCB UP Limited