Reference no: EM133153928

BUMGT5981 Analytical Decision Making

Assessment Task - Individual report

Purpose

This assignment assesses your ability to calculate and interpret data (analytical skills) plus how this may feed into management plans or strategies (interpretation of analytical results). Take carful note of the marks allocated for each part as a guide to the effort required to provide a sufficient answer that part.

Assessment Question

The Endless Point Rest is a popular and friendly family coastal resort. The resort consists of 122 self contained family style units and 24 hour reception. The pricing policy follows a fixed low rack rate; the same price on every room. This strategy keeps the guest rolling in and makes the resort the envy of other local accommodation providers as these establishments are rarely more than half full. The friendly owners of Endless Point Rest, known as Ma and Pa, have a policy of not charging no shows. As Ma says "if they can't come then we got no right to take away their hard earned money and anyway, we want to see them next time."

Just today, Ma and Pa's son Emmet has returned home after completing his business degree. He sits Ma and Pa down.

"Ma and Pa, we don't have to be losing money - we're fully booked every night of the year - and don't you see that a no show means the room is lost?" Emmet's eyes light up. "I can do some calculations and work out a plan - but we need to overbook!"

"I don't know Emmet" says Pa, "we still got the room for the next night but I can't build another one in just a few hours if too many families show up. And that old tent with holes we used to use for emergencies just aint so popular anymore. "
"Leave that to me" replies Emmet.

Emmet's research has profiled no shows based on a year (365 days) of records:

Emmet has estimates that every no show is a loss if $73 per room per night. So he makes a deal with BillyBob, the manager of Lucky Zest resort. "Billy-Bob, take our walks and we'll pay the charge. I know your rack rate is $230 a night - what about we pay you $90 a room per night for getting our free business? We'll never walk more than 12 to you any one night."

Billy-Bob knows a good deal when he hears it. "Ok, covers our variable costs easy - and we always got rooms - you've got a contract."
Emmet knows the loss from a walk is more than just paying the cost of Billy-Bob's resort room. Even though the walked customer will have already paid The Endless Point Rest $97 (for the unavailable room), Emmet estimates the additional cost (loss of good will, loss of additional services) to be $110 per walked guest.

Tasks:

Question 1. Calculate the expected opportunity loss per night sustained by The Endless Point Rest.

Question 2. Calculate the number of rooms to be overbooked by The Endless Point Rest to minimise the expected loss in the long run (maximum 12 no shows and assume guest length of stay is one night). What is the expected average gain per night from overbooking? Show all workings.

Question 3. Apply the critical fractile criterion decision rule to verify your answer to task 2. Does this confirm or contradict the result for Part 2? Why is this? Explain in plain English what the critical fractile actually indicates with regard to its interpretation.

Question 4. Prepare a 150 words (maximum) script to be used by staff when walking a family (i.e., how staff explain to disgruntled families a room is not available). What other measures may be used or implemented by the Endless Point Rest to support this overbooking strategy?

Attachment:- Analytical Decision Making.rar