Le Montalbert

2. Entrepreneurship, Cost and Choice

Faith and I are spending the New Year at my parents chalet in the French Alps. One of our favourite places for apres ski is Le Montalbert which tends to do a roaring trade. When we visit the apartment during the summer for hiking, however, it's a lot quieter. Let's make some solely illustrative estimates about their costs:

• Mortgage repayments and other fixed costs: €20,000 per month
• Bar staff during the winter: €5,000 per month
• Bar staff during the summer: €10,000 per month
• Electricity and supplies during the winter: €8,000 per month
• Electricity and supplies during the summer: €6,000 per month

Let's also assume that the skiing season lasts for 6 months (November - April) where the resort is full, and turnover is €70,000 per month. During the rest of the year (May - October) there are very few people - turnover is €10,000 per month.

1. It is November 1st - do you open for business?
2. It is May 1st - do you open for business?
3. Assuming constant revenues and costs, what's the long term strategy for the bar?

This is a fictituous case written to enable classroom discussion. It is not intended as a commentary on good or bad management practice. References to real companies are purely to add realism.

Comments

[Nick]

Anthony,

I don't know the answer but looking at the pictures it looks like a nice place to spend Christmas. Tell me what it'd cost to stay there and I'll let you know my consumer surplus.

Nick