Refer to the Interfaces (Mar.-Apr. 1990) study of La Quinta Motor Inns, Exercise 10.13 (p. 578).The researchers used state population per inn (x1), inn room rate (x2), median income of the area (x3), and college enrollment ( x4) to build a first-order model for operating margin (y) of a La Quinta Inn. Based on a sample of n = 57 inns, the model yielded R2 = .51
a. Give a descriptive measure of model adequacy.
b. Make an inference about model adequacy by conducting the appropriate test. Use a = .05
Exercise 10.13
Location is one of the most important decisions for hotel chains and lodging firms. A hotel chain that can select good sites more accurately and quickly than its competition has a distinct competitive advantage. Researchers S. E. Kimes (Cornell University) and J. A. Fitzsimmons (University of Texas) studied the site selection process of La Quinta Motor Inns, a moderately priced hotel chain (Interfaces, Mar.-Apr. 1990). Using data collected on 57 mature inns owned by La Quinta, the researchers built a regression model designed to predict the profitability for sites under construction. The least squares model is given below:
All variables were "standardized" to have a mean of 0 and a standard deviation of 1. Interpret the ß estimates of the model. Comment on the effect of each independent variable on operating margin, y. [Note: A profitable inn is defined as one with an operating margin of over 50%.