Probability Distribution

May 2007
11
0
Okay, so I have to do a presentation on Probability distribution in regards to my major (Hotel Management). Just want to make sure that my data makes sense and goes along with probability distribution.

So here we go..:

_________________________________________________________________
The Ritz-Carlton in Avon, CO hires G.A. Consulting for their professional opinions and knowledge in the hospitality industry. Being a "seasonal" resort, the General Manager is contemplating whether or not he should shut the when it's not the Winter season due to less revenue. The GM also has information in regards to the hotel's occupancy rate and rates during the non-Winter months available.

Season | Total Revenue (X) | Months in Year ( P(X) ) | X*P(X)
Peak $10,400,350 .33 $3,432,115.50
Non-Peak $3,889,390 .77 $2,994,830.30

Expected Value = $3,432,115.50-$2,994,830.30 = $437,285.20

Is it worth shutting down the resort during non-peak months? No, because you make a difference of $437,285.20 during non-peak months.

_________________________________________________________________

Does this make sense and would it work? If not, what kind of situation would work for this....

Thanks guys!
 
Nov 2009
517
130
Big Red, NY
Okay, so I have to do a presentation on Probability distribution in regards to my major (Hotel Management). Just want to make sure that my data makes sense and goes along with probability distribution.

So here we go..:

_________________________________________________________________
The Ritz-Carlton in Avon, CO hires G.A. Consulting for their professional opinions and knowledge in the hospitality industry. Being a "seasonal" resort, the General Manager is contemplating whether or not he should shut the when it's not the Winter season due to less revenue. The GM also has information in regards to the hotel's occupancy rate and rates during the non-Winter months available.

Season | Total Revenue (X) | Months in Year ( P(X) ) | X*P(X)
Peak $10,400,350 .33 $3,432,115.50
Non-Peak $3,889,390 .77 $2,994,830.30

Expected Value = $3,432,115.50-$2,994,830.30 = $437,285.20

Is it worth shutting down the resort during non-peak months? No, because you make a difference of $437,285.20 during non-peak months.

_________________________________________________________________

Does this make sense and would it work? If not, what kind of situation would work for this....

Thanks guys!
I'm not exactly sure what you are doing, but I think it should be:

Non-Peak
Total Revenue: $\(\displaystyle 3,889,390;\) Months: \(\displaystyle \color{red}{.67};\) Expected Revenue: $\(\displaystyle \color{red}{2,605,891.30}.\)

And it may be more appropriate to compare like this:

\(\displaystyle .667\cdot12 = 8\) months in Non-Peak.
So, on an average non-peak month you earn \(\displaystyle \frac{3889390}{8} = 486173.75\)
Compared to an average peak month \(\displaystyle \frac{10400350}{4} = 2600087.5\)

You would need other information to decide wether to stay open. If Net Income is positive for an average non-peak month then you should probably stay open.