Your hotel has 200 rooms in Dallas. There is a sport event coming up, and fans either book a rooms months before or wait for the last minute

Question

Your hotel has 200 rooms in Dallas. There is a sport event coming up, and fans either book a rooms months before or wait for the last minute. You charge $200 per night for those who book early and $500 per night for those who book at the last minute. Demand for early booking is easy to get. The number of last minute customers is normally distributed with mean 75 and standard deviation 25. How many rooms should be set for early book customer?

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Mary 1 week 2021-10-06T10:40:34+00:00 1 Answer 0

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    2021-10-06T10:41:40+00:00

    Answer:

    89 rooms should be set for early book customer

    Step-by-step explanation:

    According to the given data we have the following:

    OVERAGE(CO) = 200

    SHORTAGE(CS) = 500

    In order to calculate how many rooms should be set for early book customer we would have to use the following formula:

    OPTIMAL BOOKING = MEAN + (Z * STDEV)

    MEAN = 75

    STDEV = 25

    SERVICE LEVEL= CS / (CS + CO) = 500 / (500 + 200) = 0.7143

    Z VALUE FOR 0.7143 = 0.57

    OPTIMAL BOOKING =  75 + (0.57 * 25) = 89

    89 rooms should be set for early book customer

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