Overbooking hotel rooms (Occupancy Management). The practice of overbooking hotel rooms - accepting reservations for more rooms than are available by forecasting the number of no-show reservations with the goal of attaining 100% occupancy - is viewed by the general public with skepticism. Hoteliers and front office managers who practice overbooking do so to meet an organization’s financial objectives, i.e. to maximize profits. Assume you are a front office manager for a hotel with 25 rooms, and you are responsible for administering and developing a policy on overbooking. In this hotel we will assume that all reservations are Guaranteed reservations where prospective guests have made a contract with the hotel for a room. Below are a few facts to help with the problem. •The hotel has a maximum capacity of 25 rooms.•The hotel makes revenue of $100 for each room that is occupied (If a customer cancels or is denied a room the hotel does not get any money from this customer).•The hotel has a policy to make exactly 26 Guaranteed reservations each day.•Any reservation that is not honored by the hotel will cost the hotel $300. The $300 is the cost to pay for a nearby hotel room and provide the customer with a complementary dinner at a nearby restaurant.•Assume that the hotel has a fixed daily operating cost of $1,800 and a variable room cleaning and maintenance cost of $20 per occupied room. Number who show up 23 24 25 26 probability 0.3 0.4 0.2 0.1 revenue variable cost fixed cost profit = revenue - variable cost - fixed cost What is the Expected Daily Profit for this hotel.
Overbooking hotel rooms (Occupancy Management). The practice of overbooking hotel rooms - accepting reservations for more rooms than are available by
•The hotel has a maximum capacity of 25 rooms.
•The hotel makes revenue of $100 for each room that is occupied (If a customer cancels or is denied a room the hotel does not get any money from this customer).
•The hotel has a policy to make exactly 26 Guaranteed reservations each day.
•Any reservation that is not honored by the hotel will cost the hotel $300. The $300 is the cost to pay for a nearby hotel room and provide the customer with a complementary dinner at a nearby restaurant.
•Assume that the hotel has a fixed daily operating cost of $1,800 and a variable room cleaning and maintenance cost of $20 per occupied room.
| Number who show up | 23 | 24 | 25 | 26 |
| probability | 0.3 | 0.4 | 0.2 | 0.1 |
| revenue | ||||
| variable cost | ||||
| fixed cost | ||||
| profit = revenue - variable cost - fixed cost |
What is the Expected Daily Profit for this hotel.
Step by step
Solved in 2 steps
