Hotel Room PricingA hotel has 500 rooms. During a typical week in the holiday season, the hotel is b
Hotel Room PricingA hotel has 500 rooms. During a typical week in the holiday season, the hotel is busy onMonday, Tuesday, Wednesday, and Thursday nights, primarily with business people, but there isgenerally space available on Friday, Saturday, and Sunday nights.Hotel management provided the following demand estimates, as shown in Table 8.1:Assume linear demand functions over the range of all non-negative room rates and demands.Table 8.1: Demand EstimatesRoom Rate160160175175DaysMon, Tue, Wed, ThurFri, Sat, SunMon, Tue, Wed, ThurFri, Sat, SunEstimated Demand(rooms/day)500200350125AssignmentWhat is the revenue-maximizing room rate if the hotel posts only a single rate good for any dayof the week? What weekly occupancy results?What are the revenue-maximizing room rates if the hotel posts a “mid-week†rate good for thepeak demand period (MTWT), and a different “weekend†rate good for Friday, Saturday, orSunday. What is the new weekly occupancy? What is the revenue increase?Another option is for the hotel to offer a discounted weekly rate in order to attract vacationerswho will stay for the full week. Management estimates that demand will be 40 per week at$900/week and 160 per week at $800/week. Again assume a linear demand curve.If the hotel posts a weekly rate and a single daily rate (good for any night), what are the revenuemaximizing prices? What is the occupancy rate? What is the revenue gain?If the hotel posts three rates: a mid-week rate, a weekend rate, and a weekly rate, what are therevenue-maximizing prices? What is the occupancy rate? What is the revenue gain?OverbookingYou have 100 hotel room/nights to sell at $300 each. The no-show rate for bookings is 10%. Thecost of looking after a customer with a reservation whom you cannot provide with a room is$1,000. How many reservations should you accept?
