Question
A hotel spends $1 million per year on rent and other fixed costs. The hotel rents out rooms at a rate of $100 per night,
A hotel spends $1 million per year on rent and other fixed costs. The hotel rents out rooms at a rate of $100 per night, and incurs variable costs of $50 per night for each occupied room. In past years, the hotel has rented out 21,000 rooms per year. However, the city has become a less popular tourist destination, causing consumers to travel there less frequent.y. The hotel anticipates that it will have 10% fewer customers in coming years. What should the hotel do?
-Stay in business without making changes
-Decrease prices to $50 per room
-Exit the industry
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