the Richardson’s Days Out
Hotel, which has a total of 200 rooms. Xpedia (a travel fare
aggregator company) is offering to
buy your rooms for Valentine’s Day at a rate of $200. On the
other hand, you can book the
rooms through your own website (which is far less popular than
Xpedia) at a rate of $300. The
demand on your own website follows a normal distribution with
mean 20 and standard
deviation 5, and all the rooms that you did not sell to Xpedia
nor booked through your website
result unoccupied.
a. How many rooms should you sell to Xpedia?
Suppose now that, instead of selling rooms to Xpedia, you
partner with them and do all the
bookings through their website. The problem is that, since
Xpedia is an aggregator, many guests
tend to cancel their reservations at the last minute, which
results in hotel rooms being
unoccupied. You see this as a missed revenue opportunity and
decide to implement the practice
of overbooking. The price of each room is $200, and if a guest
shows up and a room is not
available, you have to book a room at the nearby hotel that
costs you $500. Based on historical
data, you know that late cancellations happen according to the
following distribution:
- Q2 You Are In Charge Of The Revenue Management Department At The Richardson S Days Out Hotel Which Has A Total Of 200 1 (6.84 KiB) Viewed 38 times
Due to the same late cancellations problem, you decide to reduce
the price of your rooms to
$150 and request customers to pay a non-refundable fee of $50 at
the moment of booking (as a
result, customers that show-up only pay $100 on sight). Despite
these changes, you estimate
that the distribution of late cancelations will be the same as
before.
How many overbookings should you accept?
Probability Cumulative Probability Number of late cancellations 0 1 2 3 0.1 0.2 0.4 0.15 0.1 0.05 4 HA 01