Assignment Part A:
To answer Questions 1 to 4 you may create a simulation model in one worksheet. Use sample size of 1000 for all your simulations.
Question 1: What is the expected profit at the current allocation strategy of 50 rooms for the premium price of $500? Calculate the 95% confidence interval for the expected profit. What does this confidence interval indicate about the expected profit of the hotel?
Question 2: Under the current allocation strategy of 50 rooms at the premium price of $500:
a. What is the probability that the hotel will sell out?
b. What is the probability of having a profit of more than $50,000?
Question 3: Vary the number of premium rooms offered from 5 to 50 (in increments of 5 rooms). What is the optimal number of rooms to be offered at premium price of $500?
Question 4: Under the optimal room allocation strategy from Question (3):
a. What is the probability that the hotel will sell out?
b. What is the probability of having a profit of more than $50,000?
c. Calculate the 95% confidence interval for the expected profit. Compare this interval with your answer to (1). Explain why the hotel's profit would change if you change the room allocation strategy.
Assignment Part B:
To answer Questions 5 and 6 you may create a simulation model in one worksheet. Use a sample size of 1000 for all your simulations.
No-shows
A customer who books a regular room has a 15% chance of cancelling, for which the hotel receives no revenue. A customer who books a premium room at $500 per night has a 5% chance of not showing up, for which the hotel DOES receive the $500 in revenue because those rooms are non-refundable. In both cases, the room is now available to be re-booked to walk-in customers that night. Walk-in demand is in addition to the regular demand and has discrete uniform distribution with a minimum of 5 and maximum of 10 customers, regardless of the price. Walk-in guests are charged the most recent regular room rate. If the hotel is or becomes full, extra walk-in customers are turned away, and the hotel receives no revenue.
Question 5: Considering the no-shows and cancelations, what is the optimal number of rooms to allocate to the premium category at the price of $500 per night?
Question 6: You want to evaluate the impact of changing the daily price increase of the regular room rate. Run a simulation varying the daily price increase from $30 to $70, inclusive, in increments of $5. Explain how the value of the daily price increase affects your premium room allocation strategy.
Attachment:- Monte Carlo Simulation.rar