Sharjah City Hotel is involved in a major renovation that will have space for 130 standard hotel
Question:
Sharjah City Hotel is involved in a major renovation that will have space for 130 standard hotel rooms. The management is wondering whether some of that space should be used for “luxury” rooms, each of which would be twice the size of a standard room. For example, you could plan for 20 suites, in which case you would have remaining space for 90 standard rooms (130 – 2*20 = 90). Your overall construction costs won’t be impacted by this decision, because a suite costs about twice as much to build as a normal hotel room.
It is predicted the SCH will be able to get AED 890/night and AED 1490/night for standard and luxury rooms, respectively. The anticipated demand for Standard rooms follows a normal distribution with a mean of 57, standard deviation of 10, while Luxury rooms follows a normal distribution with a mean of 25 and a standard deviation of 10. SCH can upgrade a customer from standard to luxury, if the better room is available.
Occupied rooms incur the following nightly cost (for cleaning/upkeep/”utilities”): Standard rooms – AED 155
Luxury suites – AED 250
They estimated fixed costs (including amortized building costs and other overhead such as staff salaries) at AED 65000 per night.
1. Construct a simulation model with 1500 trials to estimate the mean yearly profit and the probability that that the hotel will incur a loss.
2. During a recent board meeting, the hotel CFO, mentioned a report about a new local authority regulation that could potentially double the nightly cost. Assuming that the final nightly cost be uniformly spread between the two extremes, what would be the implication of the new regulation?
Elementary Statistics
ISBN: 978-0538733502
11th edition
Authors: Robert R. Johnson, Patricia J. Kuby