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Hanson Inn is a 96-room hotel located near the airport and convention center in Louisville, Kentucky. When a convention or a special event is in
Hanson Inn is a 96-room hotel located near the airport and convention center in Louisville, Kentucky. When a convention or a special event is in town, Hanson increases its normal room rates and takes reservations based on a revenue management system. The Classic Corvette Owners Association scheduled its annual convention in Louisville for the first weekend in June. Hanson Inn agreed to make at least 50% of its rooms available for convention attendees at a special convention rate in order to be listed as a recommended hotel for the convention. Although the majority of attendees at the annual meeting typically request a Friday and Saturday two-night package, some attendees may select a Friday night only or a Saturday night only reservation. Customers not attending the convention may also request a Friday and Saturday two-night package, or make a Friday night only or Saturday night only reservation. Thus, six types of reservations are possible: convention customers/two-night package; convention customers/Friday night only; convention customers/Saturday night only; regular customers/two-night package; regular customers/Friday night only; and regular customers/Saturday night only. The cost for each type of reservation is shown here. The anticipated demand for each type of reservation is as follows: c. What is the optimal allocation and the anticipated total revenue? Total Revenue =$ d. Suppose that one week before the convention, the number of regular customers/Saturday night only rooms that were made available sell out. If another nonconvention customer calls and requests a Saturday only room, what is the value of accepting this additional reservation? The shadow price for constraint 10 is $ and shows an added profit of \$ if this additional reservation is accepted
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