Caesars Palace Las Vegas made headlines when it undertook a $75 million renovation. On January 1, 2016, the newly renamed Julius Tower (587 rooms) reopened, replacing the Roman Tower (567 rooms). In addition to reno the existing rooms in the former Roman Tower, 20 guest rooms were added to the Roman Tower.

With the reno completed, Caesars expects the Julius Tower room rate to average around $149 per night, and increase of $25 or 20.2%. Annual fixed operating costs for Julius Towers are $5,000,000. This is a $200,000 per year increase compared to before the reno.

The variable cost per hotel room night after reno is $27, before the reno it was $20. Assume occupancy rate for Caesar's Entertainment Corp is 92% and 88% for Las Vegas overall.

1. After the reno, how many hotel room nights are needed to break even in the Julius Tower? Using Caesars' occupancy rate, what is the margin of safety in units after the reno? What is the margin of safety in units if the Las Vegas hotel occupancy rate is used instead of Caesars' occupancy rate? Which hotel occupancy rate estimate is more appropriate in this case? Why?