Question

Park Hyatt Philadelphia has 118 king/queen rooms that it offers to both leisure and business travelers. With leisure travelers in mind, the Hyatt offers a $125 low fare for a midweek stay, which contrasts with the regular fare of $300. The forecasted demand for business travel is normally distributed with a mean of 60 customers and standard deviation of 20 customers. Assuming that leisure travelers always reserve their rooms earlier than business travelers. To maximize the revenue, the Hyatt decides to save some rooms for business travelers. The optimal number of rooms protected should be:__________ a. <60 b. >118 c. >60 d. =60

Answer 1

c. >60

Step-by-step explanation:

Given that:

Overage (CO) = 125

Shortage (CS) = 300

The Service level =
`(CS)/(CS+CO)`

`=(300)/(300+125)`

`=(300)/(425)`

= 0.7059

The Z value of 0.7059 is 0.55

where;

the mean
`\mu` = 60

the standard deviation
`\sigma`= 20

Optimal booking =
`\mu +(Z * \sigma)`

Optimal booking = 60 + (0.55 × 20)

Optimal booking = 60 + 11

Optimal booking = 71