The Blue Lagoon Water Park Resort : a case Study

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The Blue Lagoon Water Park Resort : A Case Study

Paige Vincent had just been offered (and accepted) the position of general manager of the 50,000-square-foot Blue Lagoon Water Park Resort. An indoor park with 240 guest rooms, the facility was a destination resort that would also be one of the largerst hotels in a 200-mile area.

The investment group that owned the park and had hired Paige was impressed with her undergraduate degree in hospitality, her ten years of progressive advancement with a well-know full-service hotel chain, and her five years of multi-unit food service operations experience. A commitment to outstanding guest service was one of Paige’s greatest strengths. However, she also knew that she had impressed the park’s owner with her knowledge of the financial management skills needed to operate a facility expected to gross in excess of $ 25,000,000 per year in total revenue with $ 14,000,000 plus in rooms revenue alone.

The new job paid well but wis a big one. In addition to being responsible for 150 full-and part-time employees, as general manager, Paige was responsible for all of the resourt’s operating units including:

  • 240 guest rooms and suites with an average daily rate (ADR) of $ 200 (including room and park admission fees) and an average hotel occupancy of 80%.

  • A 50,000-square-foot water play area with :

    • Four-story water slides

    • Hob tub/whirlpools

    • Kiddie pool play area with two slides

  • Adults only lounge area

  • Snack bar

  • Full service restaurant

  • Full service bar and louge

  • Guest activity areas including:

    • Video arcade

    • Retail store

    • Tanning/spa facility

    • Excercis facility

  • Employee cafeteria

Paige understood well that it would take all of the managerial accounting skills she possessed, as well as many new ones she would learn, to effectively manage the Blue Lagoon. She was excited about her new position and very anxious to get started.

Paige’s water park will generate revenue from a variety of sources. These revenue sources include:

  • Room sales (including water park admission)

  • In-room sales of movies and games

  • Telephone toll charges

  • Meeting room rentals

  • Gift shop sales

  • Restaurant

  • Lounge/bar

  • Snack bar

  • Video/arcade games

In addition to generating revenue, Paige will, of course, generate expenses and incur cost as she operates each of these major revenue centers. Her goal should be to generate a profit in each of the revenue centers she manages. In fact, many hospitality managers call each indivicual revenue generating segment within their business a profit center.

The revenue – expense = profit formula holds even in what is not typically considered a for a for-profit segment of the hospitality industry. Cost center to generate costs but no revenue, management’s goal may be to maintain or achieve a predetermined cost for operating the center. Whether they are operating a profit center or a cost center, however, hospitality managers must know as much as they can about how their revenues and expenses are generated if they are to maximize their revenues and control their costs. Thus, if Paige is to operate the most successful water park she possibly can, she must fully nderstand the revenue and expense generation in all of her profit (and cost) centers.

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