Question

(10 pts). Lauren Lacy, manager of the Lucky Traveler Inn in Las Vegas, is tired of customers who make reservations and the dont show up. Rooms rent for $100 a night and cost $25 to maintain p customers can be sent to the Motel 5 for $70 a night. Lauren has kept track of the no-shows over the pa months and that data is shown below. d the LTI sart overbooking? If so, how many rooms should be overbooked? # No shows 1 Court 45 75 90 90

Answer 1

Let X be the number of no shows and P(x) be the probability of x numbers of no show

x	0	1	2	3
P(x)	45/300 = 0.15	75/300=0.25	90/300=0.3	90/300=0.3

Thus the Expected number of no shows =

rP )

= 0* 0.15 + 1* 0.25 + 2 * 0.3 +3*0.3

=1.75

Thus on an average there will be approximately 2 no shows . Thus according to me

LTI should start overbooking .And the number of rooms that should be overbooked is about 2.