Reference no: EM132628980
Accept business at a special price
If you are not familiar with priceline.com, go to its Web site. Assume that an individual bids $50 on priceline.com for a room in Dallas, Texas, on August 24. Assume that August 24 is a Saturday, with low expected room demand in Dallas at a Marriott hotel, so there is excess room capacity.
The fully allocated cost per room per day is assumed from hotel records as follows:
Housekeeping labor cost $25
Hotel depreciation expense 37
Cost of room supplies (soap, paper, etc.) 5
Laundry labor and material cost 10
Cost of desk staff 5 Utility cost (mostly air conditioning) 3
Total cost per room per day $85
Both housekeeping and laundry staff include many part-time workers, so that workload can be matched to demand
Problem 1: Should Marriott accept the customer bid for a night in Dallas on August 24 at a price of $50?