Professor Elam

Two of the speakers at the two day CPE Expo this past week emphasized service to the client. One used examples of traveling with his wheelchair bound wife, of course the airline lost the wheelchair, the hotel never had the room with  wheelchair accessible shower as promised, and on and on, one wondered that he was surprised at such outcomes.

Still the very hotel where we had the meeting was making the same sort of mistake, Thursday some sponsor provided sandwiches for lunch  and  a speaker, Friday we were on our own for lunch, Now stop and think.

the hotel had a captive 150-200 potential lunch customers

We were right there after all.

And stop and think, the kitchen staff of their high priced in hotel cafe were fixed costs, on salary already anyway, right?  so the logical thing to do would be to set up a buffet line for say a bargain ( well by Omni Hotel standards) lunch, right?  Wanna guess what they did? If you guessed nothing move to the head of the class. Hotel restaurants are notoriously expensive so of course we all trooped out to Jason's Deli across the parking lot.

This is a great example of relevant decision making. the actual cost of the buffet would be less than the manager thought as the fixed cost of the kitchen staff is already a sunk cost. Hence all he was out was the cost of food, that actually raises the contribution margin.

And while I am at it, did they make up some sort of Egg McMuffin in the mornings to sell for say three bucks, or just think we would buy a breakfast for ten bucks plus in the cafe, again, wanna guess?  of course not, and then they wonder why the hotel cafe is never full. I don't understand this kind of thinking but that is the sort of thing one can learn from mangerial accounting.