The Miami Beach City Council Has Offered to Subsidize Hotel

question 105

Short Answer

The Miami Beach City Council has offered to subsidize hotel development in Miami Beach, and it is hoping for at least two hotels with a total capacity of at least 1,800. Suppose that you are a developer interested in taking advantage of this offer by building a small group of hotels in Miami Beach. You are thinking of three prototypes: a convention-style hotel with 500 rooms costing $100 million, a vacation-style hotel with 200 rooms costing $20 million, and a small motel with 50 rooms costing $4 million. The City Council will approve your plans, provided you build at least one convention-style hotel and no more than two small motels. How many of each type of hotel should you build to satisfy the city council's wishes and stipulations while minimizing your total cost

__________ convention-style hotel(s), __________ vacation-style hotel(s), and __________ small motel(s).

Now assume that the city council will give developers 20 percent of the cost of building new hotels in Miami Beach, up to $70 million. Will the city's $70 million subsidy be sufficient to cover 20 percent of your total costs

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