Determine protection limit that maximizes expected profit

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Reference no: EM131380386

Suppose a Marriot offers a $159 discount rate for a midweek stay. Its regular rate is $225. The hotel has 118 rooms. Suppose it is April 1 and the Marriott wants to maximize profit from May 29 bookings. The Marriott knows it can ll all rooms at the discounted price, but to maximize profit it must reserve or protect some rooms at the high price.

Because business travelers book late, the hotel decides to protect or reserve rooms for late-booking business customers. The question is how many rooms to protect. The number of business travelers who will reserve a room is unknown, and you can assume it is normal with the mean = 27.3 and a standard deviation of 6.

Determine the Protection Limit that maximizes the expected profit. Again assume that there are always enough leisure travelers to pay the discount rate for the unsold rooms.

Reference no: EM131380386

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