Glitz hotel is going to make a $2,000,000 investment in its hotel by completing renovating a floor of the hotel. This is an extensive renovation that will involve removing all of the interior walls and will result in a completely new floorplan. The new floorplay will can have three types of rooms: Luxury Suites, Large rooms, or Regular rooms, or a mix of all three. 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. Large 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 each suite requires an extra $10/night in cleaning costs.

Estimated maximum demand per night is as follows: Suites:10 rooms Large: 25 rooms Regular: no maximum demand

Required:

Part A: How many of each room should they build as part of the renovation?

Part B: What qualitative factors should be considered? Part C: The maintenance manager has commented that is it possible to reconfigure the HVAC (heating, ventilation and Air Conditioning) on this renovated floor at an extra cost order free up additional space to fit either 2 suites, 3 large rooms or 6 regular rooms. What is the maximum they are willing to pay in reconfiguration costs in order to add this additional space if the hotel rents out 200 nights per year and the investment needs to be recovered in 4 years?