A study done by the largest hotel in the village has shown t

A study done by the largest hotel in the village has shown that skiers spend on average $50 per person on the first day and $30 per person on each additional day in local restaurants. The study also forecasts that – due to increased hotel prices – the average length of stay for the 2014/2015 season will be reduced to five days. What will be the percentage change in revenues of local restaurants compared to last year (when skiers still stayed for 10 days)? Assume that hotels continue to be fully booked!

Solution

Assuming 1200 skiers in the village were accumulated over the period of 10 days last year.

For 10 day stay:

Total amount spent of the first day by 1200 skiers : 1200*1*$50 = $60,000

Total amount spent on each additional day (there are 9 days left) = 1200*9*$30 = $324,000

Total = $60,000 + 324,000 = $384000

For the 5 day stay

Total amount spent of the first day by 1200 skiers : 1200*1*$50 = $60,000

Total amount spent on the additional days (4 left) : 1200*4*$30 = $144000

Total = $60,000 + $144000 = $204000

Difference on revenue

10 days = $384000

5 days = $204000

Difference: ($180000) , hoteles will not receive $180,000 because skiers will only stay 5 days

This is a reduce of 53.125% (204000 / 384000 = 0.53125)

Note: if the number of skiers is different than 1200 just change the number of the formulas