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A national chain of hotels has established the policy to allow more bookings than they have rooms as part of a novel revenue management program. Assume that a particular hotel as 50 rooms but allows for up to 54 bookings. Let's also assume that there is only a 4% chance that someone who booked a room will not show up at the hotel.
a) Let's assume that 54 rooms have been booked. What is the probability that at least one customer holding a booking will have to be turned away?
b) Let's assume 54 rooms have been booked. What is the probability that the hotel will have at least two empty rooms?
c) Let's assume 54 rooms have been booked. If every customer that has to be turned away receives a $80 voucher, what can this hotel expect to pay, on average, for vouchers on any day?
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