Prob #9 The Sheraton Corporation manages a large number of hotels around the world. One of its hotels in New York is having a tough time as several new rival hotels are opening. For accommodation of its flight personnel, American Airlines has offered Sheraton a contract for the coming year, with a willingness to pay $50 per night per room with a minimum of 50 rooms for 365 nights. This contract assures the Sheraton that fifty of its rooms are rented each night, although some of them will be vacant for several nights. The Sheraton manager was a little hesitant about the contract. Because on certain busiest nights, the hotel can charge $95 a night for those rooms. Requested: a. Suppose the contract was signed. What was the opportunity cost for fifty rooms on October 20, one night during a business meeting, when the city's hoffel rooms were all full. What is the opportunity cost on December 28, when only ten of these rooms are expected to be rentable at $75 per room? b. If during the year the average room rate is $90 per night, what percentage of the fifty rooms must be occupied, so that the Sheraton hotel does not have to bother thinking about the offer, because accepting or not being accepted will be the same. c. Assume the variable cost per room per day is $10. If the closest estimate is that an average of 54% of rooms are occupied at a rate of $90 per room for the next year, would Sheraton accept the contract? d. The variable cost per room per day is $10. What is the exact percentage for the fifty rooms, which would make Sheraton indifferent to accept or reject the American Airlines offer? Prob #9 The Sheraton Corporation manages a large number of hotels around the world. One of its hotels in New York is having a tough time as several new rival hotels are opening. For accommodation of its flight personnel, American Airlines has offered Sheraton a contract for the coming year, with a willingness to pay $50 per night per room with a minimum of 50 rooms for 365 nights. This contract assures the Sheraton that fifty of its rooms are rented each night, although some of them will be vacant for several nights. The Sheraton manager was a little hesitant about the contract. Because on certain busiest nights, the hotel can charge $95 a night for those rooms. Requested: a. Suppose the contract was signed. What was the opportunity cost for fifty rooms on October 20, one night during a business meeting, when the city's hoffel rooms were all full. What is the opportunity cost on December 28, when only ten of these rooms are expected to be rentable at $75 per room? b. If during the year the average room rate is $90 per night, what percentage of the fifty rooms must be occupied, so that the Sheraton hotel does not have to bother thinking about the offer, because accepting or not being accepted will be the same. c. Assume the variable cost per room per day is $10. If the closest estimate is that an average of 54% of rooms are occupied at a rate of $90 per room for the next year, would Sheraton accept the contract? d. The variable cost per room per day is $10. What is the exact percentage for the fifty rooms, which would make Sheraton indifferent to accept or reject the American Airlines offer