Tonya Stephani is the front office manager/RM at the

Tonya Stephani is the front office manager/RM at the 200-room Hilton Garden hotel. Tonight, she has 100 stay-over rooms and 100 arrivals. Based on her own forecasts, she anticipates 10 no-shows tonight. The average rate to be paid by each arriving guest is $199.99. Tonya has a signed agreement with the local Sheraton hotel that states each property is willing (subject to blackout dates) to accept the other’s walks at the rate of $99.00 per night. Tonight, the Sheraton has available rooms and has agreed to take up to ten walked guests. The cost of transporting guests to the Sheraton and back, as well as other walk related costs incurred by the Hilton, average $15.00 per room. Assume Tonya decides to overbook by ten rooms.

  • Excluding any potential no-show billings, how much extra room revenue will be gained from overbooking if Tonya indeed experiences ten no-shows but overbooks by ten rooms and thus achieves a 100 percent occupancy?
  • How much extra cost will the hotel incur if it sells out, but ultimately walks 1 guest?
  • How much extra cost will the hotel incur if it sells out, but ultimately walks 10 guests?
  • If the hotel walks 10 guests, what would be the net revenue (i.e., difference between the extra room revenue from overbooking and the associated costs of walking those 10 guests)?
  • In addition to added room revenue and potential costs, what are at least three other factors Tonya should consider as she makes this overbook/no-overbook decision for her hotel?

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