The MightyAllBlacks Hotel in Wellington has 200 rooms and specialises in hosting guests attending sport events at the Wellington Regional Stadium. The hotels Revenue Manager has just received an email from a tour operator client who is indicating that he would like to book 50 rooms for a Friday and Saturday night in four months time at $100 per room night. The hotels revenue management system is predicting that the hotel will achieve 88 per cent occupancy for the two nights in question if the 50-room group booking is not accepted. This occupancy level would comprise guests who are paying a non-discounted room rate of $150. Knowing that many rugby tour guests are not averse to sharing a room if rates are discounted, the hotels Revenue Manager is considering providing the tour operator with the following two options:

Nightly room rates discounted to $95 if the tour operator can consolidate the group booking down to 40 rooms. Nightly room rates discounted to $90 if the tour operator can consolidate the group booking down to 25 rooms. Required:

Prepare a financial analysis to demonstrate whether the MightyAllBlacks Hotels Revenue Manager would be justified in offering the room rate discounts that are under consideration. If the manager is justified in offering these discounted room rate options, which one is preferred from the hotels perspective?

answer with formulas