Profit of the hotel from confirming n reservation requests

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Reference no: EM132260170

A hotel with 15 rooms needs to determine how many reservations to confirm for a particular night. The nightly room price at this hotel is $200. The fixed cost of the hotel is $300 per night. A variable cost of $80 per room per night is incurred when a room is occupied for the night. The hotel receives reservation requests online and payment is made once the reservation is confirmed. Each customer with confirmed reservation does not show up at the hotel with probability 7% independently of other customers; such a customer does not get a refund on his/her payment. If no room is available extra cost will occur. Such a customer does not get a refund on his/her payment, but costs the hotel $250.

(a) Write down the expected profit of the hotel from confirming n reservation requests.

(b) Construct an Excel sheet to calculate the expected profit and calculate it for n = 15, 16, . . . , 20.

(d) How does the answer to (c) change when the probability that a customer with a confirmed reservation does not show up changes? For which values of this probability, the hotel should not confirm more reservation requests than its capacity?

Reference no: EM132260170

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