(Continued from the previous question) To offset no-shows, t…
(Continued from the previous question) To offset no-shows, the motel is considering overbooking by selling 20 additional reservations, bringing the total to 220 reservations. Given high demand, the hotel will be able to sell all 220. However, if more guests arrive than there are available rooms, the hotel must provide compensation (rebooking at a nearby hotel and providing a future hotel credit) for each displaced reservation. The compensation cost per displaced reservation is normally distributed with a mean of $700 and a standard deviation of $150. Run a simulation of 1,000 trials. Based on the simulation, estimate the probability that the revenue from this overbooking strategy exceeds the revenue from Question 12. Would you recommend implementing this strategy? Why or why not?