Reference no: EM132970714

Three years ago, GBB was able to charge $145 per night for its rooms, but due to increased competition from Airbnb and several newer or renovated B&Bs, it can now only obtain bookings at $95 per night. Based on the current price and bookings, Audrey is concerned about GBB's profitability. She asks you to determine the number of B&B bookings required to break even, and the number of bookings needed to achieve a $1,000 profit per month, based on $95 per night for their eight rooms.

• To increase demand and return to a nightly price of $145, the Hallidays are considering a major renovation. To ensure consistency with the 1920s era, the renovation will use items such as claw foot tubs and glass doorknobs.
• Ken tells you: "To limit the time that the B&B needs to be closed, we plan to begin our renovation this September and complete it in stages over the next few years.
• "On September 1, we will close for two months and expect to lose some profit as a result. The contractor informed me that, as it is an older home, the initial renovation might take longer than expected and incur additional costs, for example, if demolition reveals something that needs to be updated to current building codes. Next year, we will continue renovating while remaining open.

Problem 1: Recommend whether we should proceed with the renovation.

Problem 2: What is the break even point for the bookings? and what is the profitability of the renovations?