Rest "R" Us-- A multi-year green budget Business Case:

The Gordon family’s Rest “R” Us is a 45 upper scale hotel chain with 5,000 executive suite rooms. Twenty-five hotels/ 3,500 room (average $225 a night) are located in 10 major Canadian cities from Halifax to Vancouver; 15 motels/ 1,000 rooms (average $140 a night) are located in 15 mid-size Canadian cities; and, five year-round resort condo-hotels/ 500 rooms; (average $250 a night): one near Mont Tremblant, in Collingwood, the City of Banff and two at Whistler.

In 1985, theGordon brothers, Tom and Jerry began Rest “R” Us with a downtown Winnipeg hotel. Tom had 20 years and Jerry had 15 years hospitality business experience. By September 2008, the business was being managed by three cousins: Alison as CEO, Kevin as VP Operations and Gemma as VP Marketing with Tom Gordon Chairman of the Board. Since September 5, 2008, you have been the CFO. The previous CFO, George Gordon, left for Australia where he bought a condo-hotel in Surfers Paradise.

With Jerry Gordon’s death in Fall 2006, the Rest “R” Us growth rate has been limited to two new locations, one in Calgary and the other in Montreal. Rest “R” US will not be operated by third generation Gordons. The Gordon’s ten-year exit strategy is to sell to an international hotel chain whenever the right offer comes along! Rest “R” Us’ seven Board of Directors are the four Gordon family members: Tom, Alison, Kevin and Gemma and three independent directors.

Three key Tom and Jerry management policies that has led to Rest “R” Us’ financial success have been: 1) making an extra effort to ensure repeat business by offering excellent facilities, services and modern room amenities; 2) Jerry Gordon’s ability to buy/ build successful new locations; and, 3) its employee profit-sharing program that has enabled Rest “R” US to retain a core of top notch, loyal, staff at all of its 45 operations.

For fiscal year September 30, 2008, the 25 Big City hotels grossed $225 million in rentals and earned a 20% EBITDA. The 15 Small City hotels grossed $33 million in rentals and earned 20% EBITDA. The 5 resorts grossed $30 million in rentals and earned 25% EBITDA.

In 2008, Gordon family members received $5 million annual dividend from the family business.

For fiscal year September 30, 2008, the 25 Rest “R” Us Big City operations had a 78% annual room occupancy rate, down from 82% in 2006/07. The 25 Big City motels need a 60% annual room occupancy rate to meet its annual operating cash flow breakeven point. The 15 Small City operations had a 66% occupancy rate for 2008 down from 70% in the previous year. The 15 Small Cities motels need a 55% annual room occupancy rate to meet its annual operating cash flow breakeven point.

For 2007/2008, Rest “R” Us five resorts condos had 100% occupancy rate for the 4-month high season; a 60% occupancy rate for the 5 months near-season, and, a 20% occupancy in the low season period of April, May and November. These resorts need a 50% annual room occupancy rate to meet its operating cash flow breakeven point.

Ignore revenues from auxiliary services. All 25 Big City hotels have a full restaurant. Small City hotels offer a complimentary continental breakfast and like Big City Hotels and at the resorts offer free morning newspapers. Each resort has a cozy après ski/ golf/ tennis bistro.

When financing new city property locations, banks require a 10% down payment. A 25% down payment was required for each resort which were built between summer 2000 and summer 2006. Fifteen of the 25 Big City and eight of the 15 Small City properties are fully paid. The 10 outstanding Big City hotel mortgages annual payments are $20 million a year.
- 2 -

The seven outstanding Small City hotel mortgage annual payments are $3 million. The 5 resort hotels which have substantial mortgages require $4 million in annual mortgage payments.

On October 24, you met with the Gordons. Gemma, “Our competitors are going green. We must be competitive.” Kevin Gordon was concerned that new green costs could eat into the employees profit sharing plan and not really increase business. Alison Gordon asked that you prepare a multi-year 2009 -2011 “green” budget climate change strategy plan. She said, “I want you to identify easy to implement, cost saving, climate-change friendly technologies and services. I will then promise our customers that Rest “R” Us ‘will be going green, now and forever” The only two green initiatives Rest “R” Us has done so far has been to change light bulbs in all 45 operations to energy efficiency bulbs and its paper/glass recycling program at each hotel.

Your Rest “R” Us Climate Change Initiatives plan was developed with Alison’s, Kevin’s and Gemma’s Gordon inputs.

Required Part 1

Prepare for the Board’s December 14, 2008 meeting, your Rest “R” Us Climate Change Initiatives (CCI) multi-year, 2009 to 2011, Strategy Plan and budget that includes pay back periods for each CCI action.

In your CCI plan, Identify and list (but no more) up to five Rest “R” US Climate Change Initiatives actions, using the format below. Make a rough estimate of the capital cost outlays required, potential savings, payback period and implementation timeframe for each initiative.

            Rest “R” Us Climate Change Initiatives Plan
                                                            To be implemented between January 1, 2009 and December 31, 2011

Required Part 2  Match your 5 Rest “R’ Us climate change initiatives to the eight Australia EPA Carbon Management Principles: Measure, Set Objectives, Avoid, Reduce (modify-recover), Switch (Renew-Exchnage, Sequester, Assess Offset.
 Australia EPA Carbon Management Principles www.epa.vic.gov.au Publications. search words: carbon management principles. Download.
EPA has developed Carbon Management Principles (the Principles) to provide a step-by-step framework that organisations can use to drive good environmental and business outcomes. The Principles reflect a continuous improvement model. Regular review is essential to ensure you make the most of new practices and technologies as they emerge over time. We encourage you to use the Principles in your own carbon management decisions, assess their value, and work with us to improve them.

Click the icon below to access this publication in PDF format (400 kB).
Also: www.epa.vic.gov.au/climate-change/carbon-management/default.asp