Add rooms or upgrade experiences in Udaipur?
Before the decision
The resort turns away guests on wedding weekends and has spare rooms most midweeks. The owner sees many rejected enquiries on peak weekends. The operations team points out that more rooms would require recruiting staff before it has reliable demand outside the wedding calendar.
The problem
Should the team choose Room wing or Experience packages for the next 12 months?
Decision owner: The business unit lead.
A new wing needs staffing all year; experience demand depends on local operator capacity.
Option economics
Scroll the table to see all figures.
| Option | Volume (bookings) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Room wing | 13,900 | 3200 | ₹388 lakh | ₹56.8 lakh |
| Experience packages | 15,900 | 2100 | ₹261 lakh | ₹72.9 lakh |
Make the call
- Calculate net contribution for Room wing and Experience packages. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer bookings, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Experience packages. It contributes ₹72.9 lakh after fixed costs and leads by ₹16.1 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Compare the alternatives using the same period and test the cost of committing scarce resources. Check working capital and cash timing separately before funding either option.
- Calculate both options
Room wing: 13,900 bookings × ₹3,200 less ₹388 lakh in fixed costs gives ₹56.8 lakh. Experience packages: 15,900 bookings × ₹2,100 less ₹261 lakh in fixed costs gives ₹72.9 lakh.
- Stress-test the forecast
Experience packages leads by ₹16.1 lakh in the base case. If Experience packages delivers 10% fewer bookings (14,310) at the same margin and fixed cost, it contributes ₹39.51 lakh. Holding the other option constant, the stressed result falls behind. This isolates volume risk. Check whether both options would respond to the same change in demand.
- Set a decision threshold
Holding the other option’s result fixed, Experience packages needs at least 15,134 bookings to match or beat it under the model. Reconcile booking gaps with willingness to pay for the experiences.
A new wing needs staffing all year; experience demand depends on local operator capacity. Compare the cost of a limited test with the loss the business would face if the full commitment failed. Ask the team to agree the decision criterion before collecting more evidence.
Check whether your answer names the trade-off, cites a number from the exhibit and specifies a reversal condition.
What if the whole market moves?
The worked solution tests a change to one option at a time. Here, both options gain or lose the same percentage of volume. Unit contribution and fixed costs stay constant.
| Volume scenario | Room wing | Experience packages | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹12.32 lakh | ₹39.51 lakh | Experience packages |
| Base assumptions | ₹56.8 lakh | ₹72.9 lakh | Experience packages |
| Both gain 10% of volume | ₹101.28 lakh | ₹106.29 lakh | Experience packages |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.
Practise this case as an interview