Phuket Beach Analysis
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Phuket Beach Resort Case AnalysisGraduate School of BusinessDe La Salle University
I.Statement of the Problem
Should the management of Phuket Beach Resort accept the offer made by PlanetKaraoke Pub to set up an outlet inside the hotel or should the managementoperate a pub, Beach Karaoke Pub, by itself?
II.Case Background
Mike Campbell, General Manager of Phuket Beach Hotel is considering an offermade by Planet Karaoke Pub, a fast expanding company, which is looking for avenue in Patong beach area for setting up another outlet. The Board of Directorsof the establishment had previously rejected several old offers because it offerslow return on investment. The space was located on the second floor of the main building and was verymuch under-utilised. Planat Karaoke Pub offered to sign a four-year leaseagreement with the hotel for rending part of the unused space. It proposed topay:a.a monthly rental fee of 170,000 baht for the first two years; andb.thereafter, a 5% increment for the next two years.Planet Karaoke Pub required only 70% of the unused space measuring 3,000 sq.feet. This would allow the hotel to keep the remaining space for the creation of analley two years later.Mike Campbell is contemplating on creating a pub operated by the managementof the hotel itself since such establishments attract a lot of customers andtourists.Mike Campbell sought the assistance of Kornkrit Manming, the hotel’s FinancialController to review the offer from Planet Karaoke Pub and estimating revenuesand costs associated with an alternative project, Beach Karaoke Pub.
III.Objectives
With the given two alternatives on hand, this case aims to:a.come up with a concrete recommendation to the board of directorsof Phuket Beach Resort of which of the two alternatives will offer a higherreturn on investmentb.determine if operating a pub in the hotel, whether by a third party orby management, will be a good investment on the part of the hotel.c.compute for
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Phuket Beach Resort Case AnalysisGraduate School of BusinessDe La Salle University
I.Statement of the Problem
Should the management of Phuket Beach Resort accept the offer made by PlanetKaraoke Pub to set up an outlet inside the hotel or should the managementoperate a pub, Beach Karaoke Pub, by itself?
II.Case Background
Mike Campbell, General Manager of Phuket Beach Hotel is considering an offermade by Planet Karaoke Pub, a fast expanding company, which is looking for avenue in Patong beach area for setting up another outlet. The Board of Directorsof the establishment had previously rejected several old offers because it offerslow return on investment. The space was located on the second floor of the main building and was verymuch under-utilised. Planat Karaoke Pub offered to sign a four-year leaseagreement with the hotel for rending part of the unused space. It proposed topay:a.a monthly rental fee of 170,000 baht for the first two years; andb.thereafter, a 5% increment for the next two years.Planet Karaoke Pub required only 70% of the unused space measuring 3,000 sq.feet. This would allow the hotel to keep the remaining space for the creation of analley two years later.Mike Campbell is contemplating on creating a pub operated by the managementof the hotel itself since such establishments attract a lot of customers andtourists.Mike Campbell sought the assistance of Kornkrit Manming, the hotel’s FinancialController to review the offer from Planet Karaoke Pub and estimating revenuesand costs associated with an alternative project, Beach Karaoke Pub.
III.Objectives
With the given two alternatives on hand, this case aims to:a.come up with a concrete recommendation to the board of directorsof Phuket Beach Resort of which of the two alternatives will offer a higherreturn on investmentb.determine if operating a pub in the hotel, whether by a third party orby management, will be a good investment on the part of the hotel.c.compute for