Question 2

Recall that Harrah's computes its clearing prices by splitting its forecasts for multiple-day stays (LOS>1) into distinct single-night stays. This calculation does not fully capture the effect of multiple-night stays, however. For example, if you honor a request for LOS = 3, then a room must be blocked for three consecutive nights. How can you modify the clearing price calculation to explicitly account for the effect of multiple-night stays? As in Question 1(b), assume that Tiers 1 and 2 customers will be charged aminimumof $250 per night.

(a) With these assumptions in mind, develop a method to account for multiple-night stays, and apply that method to determine revised clearing prices for the nights of August 31 through September 4. Explain the methodology that you used and report your modified clearing prices. (Note: the goal here again is for you to show that you have considered the trade-off with multi-night stays and that your response is consistent. We will discuss specific alternatives in class.)

(b) How do clearing prices compare to the clearing prices shown in Table 8 of the Case? If they differ, why? If not, why not?

Case: https://www.coursehero.com/file/163074396/harrahs-rev-mgmt-casepdf/

Tables broken out: https://www.coursehero.com/smart-scan/308182966/file/