Takeover of Sunny Resort Hotels (SRH) Two years ago Oli, the Chief Executive of TTC, persuaded the Board to take a rushed decision to take over SRH, which owned six hotels in country Y. This was the first time TTC had owned any hotels. The company had previously relied on other businesses to provide hotel accommodation for its holiday packages. 'By buying and managing our own hotels we will effectively control our accommodation costs in country Y' Oli had told the other directors. 'We will not buy locally produced food and drinks, but instead we will export products from country X. Our objectives for these hotels should be: 80% capacity utilisation, 95% customer satisfaction rating and a low break-even point'. TTC quickly delayered the management structure within SRH. Employee contracts and payment methods within the six hotels were changed without consultation. All employees were expected to be available for flexible working. SRH, although it had not been very profitable, had a culture that 'put the customers first'. TTC adopted the same low-cost strategy for SRH that was being applied to the rest of the business. However, Oli is now disappointed with the failure to achieve TTC's original objectives for this takeover – see Table 1. Table 1: Comparing TTC objectives with actual performance in the SRH hotels Year ending 31 May 2017 Original objective Actual performance Annual break-even point 33800 customers 39000 customers Hotel employees leaving voluntarily (an average of 230 people employed) 42 95 Percentage of customers satisfied with food and accommodation 95% 69% Capacity utilisation (annual capacity = 78000 customers) 80% 68% (a) Refer to the data in Table 1. Calculate: (i) difference in labour turnover between the original objective and actual performance (ii) difference between the margin of safety originally aimed for and that actually achieved. (b) Assess the most likely reasons why the takeover of SRH has so far failed to achieve TTC's objectives.