Hotel X believes that there is an opportunity to build a profitable hotel in City XYZ but they are not sure whether to go ahead with the project. They have asked your group for advice. After some research you have the following information. Last year there were 1.25 million visitors to the area and it is expected to be 1.35 next year. Seventy five percent of those visitors stayed in hotels with an average of 3 people per room. The stayed an average of 4 nights. The occupancy rate in the area is 65%. As with most hotels they plan on being open every day of the year. In addition based on your research you believe your market share will be 2%. Currently the community has 5,500 hotel rooms. Based on this information should Hotel X build, if so how many, if not how many excess rooms are there in the community? Provide the formula you use to determine your answer and show all your work.
R = (T x P x L) ÷ (S x N)
R = Rooms demand per night
T = # of tourist
P = % staying in a hotel
L = average length of stay
N = average # of persons per room
S = # of days per year in business