Question
Glitz hotel is going to make a $2,000,000 investment by completing renovating a floor of the hotel.The floorplan will be entirely redone, and they can
Glitz hotel is going to make a $2,000,000 investment by completing renovating a floor of the hotel.The floorplan will be entirely redone, and they can have a mix of three types of rooms: Luxury Suites, Large rooms, or Regular rooms.Due the size of the floor, they can build a maximum of 20 luxury suites or a maximum of 40 large rooms or a maximum of 60 regular rooms or a mix of all three.
Luxury suites will rent for $400 per night.
Lrrge rooms will rent for $200 per night.
Regular rooms will rent for $135 per night.
The cost to maintain each room, excluding depreciation, is $30/night ($25 in variable maintenance and $5 in fixed booking costs).
The food and beverage manager noted that since the suites are often used for conventions as private hospitality suites, they purchase an average of $200 per night in room service.Large rooms purchase an average of $40 and Regular $10 per night for room service.Room service generates a 70% gross profit.The cleaning manager noted that the suites generally require an extra $10/night in cleaning costs due to these conventions.
Estimated maximum demand per night is as follows:
Suites:10 rooms
Large: 25 rooms
Regular: no maximum demand
How many of each room should they build as part of the renovation?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started