Finally, recommendations will be made as to how Fairview Manor can look to improve its potential profits based on the figures calculated and other issues surrounding the operation of the Fairview Manor.
Fixed Costs per Apartment
This calculation will look at all of the fixed costs associated with the buildings, regardless of the level of occupancy. One of the assumptions that is being made in this calculation is that the apportionment of the fixed costs will be made based on the number of rooms in each apartment, over the year, which is 15,288.
The total annual fixed costs for the property are as follows
Rate50.69TypeOccupancyFixed Cost per Apt per yearStudio2101.381 Bed4202.762 Bed6304.14
These costs will be apportioned to each apartment, every year, regardless of whether or not they are occupied at all. The rationale behind selecting the number of rooms is that this would impact on the amount of usage that is made of the fixed facilities such as depreciation and maintenance costs. It is likely, for example, that the maintenance costs on a 1-bed apartment are likely to be less than that for a 2-bed apartment and therefore a degree of apportionment of these fixed costs is necessary.
Variable Costs per Apartment
(Calculations are contained in the appendix.)
As well as the fixed costs associated with each apartment type, there are also variable costs dependent on the level of occupancy and these will be calculated based on full occupancy for each apartment in any given week.
It is noted that some of the variable costs are per room and others are per occupant and this is taken into account within the calculations.
The total weekly variable cost (depending on when the properties are occupied or not) are as follows for each property type
Weekly CostStudio1 Bed Apartment2 Bed ApartmentTotal48.267.6101.4
Break Even Points
The break even point needs to take into account what the minimum amount is that needs to be charged for each apartment type in order for it to be breaking even. This will take into account both the fixed and the variable costs. There is an assumption that the fixed costs will be apportioned based on a 52 week year.
The weekly fixed costs for each apartment, based on type are as follows
TypeFC Per Appt Per WeekStudio1.951 Bed3.902 Bed5.85
The weekly variable costs for each apartment, based on type are as follows
TypeVC per week Studio48.21 Bed67.62 Bed101.4
Based on these figures, the breakeven point for each apartment type for a week is as follows
TypeBE Point (FCVC)Studio50.151 Bed71.502 Bed107.25
Profit Levels
As breakeven points have now been established, it is possible to determine what the profit levels for each type of apartment would be based on the proposed charges (or rather range of charges).
ProfitStudio Lower174.85Studio Higher199.851 Bed Lower203.501 Bed Higher228.502 Bed Lower292.752 Bed Higher 317.75
Future Suggestions
Based on the figures above, it is clear to see that there are considerable profit levels to be received from all types of properties and also in relation to all of the proposed price ranges. Due to the nature of the fixed costs, it is worked on a 52-week occupancy. Clearly, the nature of timeshare is that there will not be a full occupancy and with that in mind the key focus, going forward, needs to be on maintaining a high occupancy rate.
It is, therefore, suggested that pricing is undertaken in a way that encourages occupancy during the quieter weeks of the year and that those who choose to own their properties are made aware of this issue. Furthermore, it may be desirable for the sale price to be amended in a way that encourages the sale of some of the less profitable apartments, going forward, namely the studios.
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