Booking Limit and Protection Level Examples

Problem 1: Eastman Tower Hotel of Rochester, New York has 210 “Deluxe” rooms. The hotel
gets two types of customers: leisure and business. Leisure customers are price sensitive and book
early whereas “business” customers are quite inflexible in terms of their schedule and book late
and are willing to pay a higher price. The hotel has two fare classes: full price which is $159 per
night and discount price which is $105 per night.

The manager at Eastman Tower wants to determine the booking limit for the discounted price
and the protection level for full price.

Booking limit is defined as the maximum number of rooms that may be sold at the discount
price.

Protection level is defined as the number of rooms that will be kept aside for business customers
who will book at full price.

Demand for rooms at full fare is given below:

Demand for
rooms at full # days with
fare demand
0-70 12
71 3
72 3
73 2
74 0
75 4
76 4
77 5
78 2
79 7
80 4
81 10
82 13
83 12
84 4
85 9
86 10
above 86 19

Assume on any day there is infinite demand for discount fare.

Problem 2: WMZU is a television station that has 25 thirty second advertising slots during each
evening. The station is now selling advertising slots for January 25th. They could sell all the slots
for $4000 each, but because January 26th is an Election Day, the station may be able to sell slots
to political candidates at the last minute for a price of $10,000 each. If a slot is not sold in
advance and is not at the last minute, it may be used for promotional message worth $2500.

How many slots should WMZU sell in advance?

The sales force has created the following demand distribution data of last minute sales:

Demand Probability
8 0
9 0.05
10 0.1
11 0.15
12 0.2
13 0.1
14 0.1
15 0.1
16 0.1
17 0.05
18 0.05
19 0