Hotel Room Pricing - A hotel has 500 rooms
Question # 00396046
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Updated on: 09/27/2016 05:35 AM Due on: 09/27/2016
Hotel Room Pricing
A hotel has 500 rooms. During a typical week in the holiday season, the hotel is busy on
Monday, Tuesday, Wednesday, and Thursday nights, primarily with business people, but there is
generally 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 Estimates
Room Rate
160
160
175
175
Days
Mon, Tue, Wed, Thur
Fri, Sat, Sun
Mon, Tue, Wed, Thur
Fri, Sat, Sun
Estimated Demand
(rooms/day)
500
200
350
125
Assignment
What is the revenue-maximizing room rate if the hotel posts only a single rate good for any day
of the week? What weekly occupancy results?
What are the revenue-maximizing room rates if the hotel posts a “mid-week” rate good for the
peak demand period (MTWT), and a different “weekend” rate good for Friday, Saturday, or
Sunday. 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 vacationers
who 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 the
revenue-maximizing prices? What is the occupancy rate? What is the revenue gain?
Overbooking
You have 100 hotel room/nights to sell at $300 each. The no-show rate for bookings is 10%. The
cost of looking after a customer with a reservation whom you cannot provide with a room is
$1,000. How many reservations should you accept?
A hotel has 500 rooms. During a typical week in the holiday season, the hotel is busy on
Monday, Tuesday, Wednesday, and Thursday nights, primarily with business people, but there is
generally 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 Estimates
Room Rate
160
160
175
175
Days
Mon, Tue, Wed, Thur
Fri, Sat, Sun
Mon, Tue, Wed, Thur
Fri, Sat, Sun
Estimated Demand
(rooms/day)
500
200
350
125
Assignment
What is the revenue-maximizing room rate if the hotel posts only a single rate good for any day
of the week? What weekly occupancy results?
What are the revenue-maximizing room rates if the hotel posts a “mid-week” rate good for the
peak demand period (MTWT), and a different “weekend” rate good for Friday, Saturday, or
Sunday. 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 vacationers
who 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 the
revenue-maximizing prices? What is the occupancy rate? What is the revenue gain?
Overbooking
You have 100 hotel room/nights to sell at $300 each. The no-show rate for bookings is 10%. The
cost of looking after a customer with a reservation whom you cannot provide with a room is
$1,000. How many reservations should you accept?
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Rating:
/5
Solution: Hotel Room Pricing - A hotel has 500 rooms