CR: Over the last five years, demand for hotel rooms in Ceno

[khoad93]

Over the last five years, demand for hotel rooms in Cenopolis has increased significantly, as has the average price Cenopolis hotels charge for rooms. These trends are projected to continue for the next several years. In response to this economic forecast, Centennial Commerical, a real state developer, is considering a plan to convert several unoccupied office buildings it owns in Cenopolis into hotels in order to maximize it's revenue from these properties.

Which of the following would it be most useful for Cenennial Commerical to know in evaluating the plan it is considering ?

(A) Whether the population of Cenopolis is expected to grow in the next several years.

(B) Whether demand for office space in Cenopolis is projected to increase in the near future.

(C) Whether the increased demand for hotel rooms, if met, is likely to lead to an increase in the demand for other travel-related services.

(D) Whether demand for hotel rooms has also increased in other cities where Centennial owns office buildings

(E) Whether, on average, hotels that have been created by converting office buildings have fewer guest rooms than do hotels that were built as hotels.

OA B

Source: GMAT Prep

Dear tutors,

I got this question but stuck in understanding the reasoning. Initially, I considered between (B) and (E); but then I went for (E) as I think the purpose is to maximize the revenue. So in this case, if YES, then rooms created by converting will be fewer, then the plan will not help maximize revenue. And vice versa if the answer is NO. If the purpose is to maximize PROFIT, then (B) would be better. I had no doubt about the official answer but cannot understand it.

Thank you for your help in advance!

[Sage Pearce-Higgins]

There are two things to consider. First, why is B the right answer? The plan that the company is considering is Centennial is 'to convert several unoccupied office buildings it owns in Cenopolis into hotels'. The aim of this plan is to 'maximize it's revenue from these properties'. Our job in evaluating the plan is to think "would the plan really achieve that goal?".

I'd think of this one as a comparison conclusion: the plan is to maximize revenue, i.e. produce more revenue than any other potential solution. This prompts me to think about other courses of action - what if they could convert the offices into retail, or a health spa, or a secret research lab? One of these other options might provide more revenue than the hotel. In a real-world situation, I imagine that the managers of the company would discuss some of these possibilities. Answer B plays on this - if office space is going to be more in demand, then the plan is not going to achieve its goal.

As for answer E, I could see that you might think "oh, well if the converted office is going to be a terrible-quality hotel, then it won't provide much revenue". That's reasonable, but it's not actually important. Sure, the offices might be smaller than the purpose-built hotels, but that's the wrong comparison. We want to know if the offices-as-hotels will provide more revenue that the offices-as-something-else. They may or may not be less profitable than some other hotels, but that's not the goal of the plan.

Note how, in my analysis of these answers, I kept a clear eye on the plan and the goal of the plan in order not to get distracted by my own assumptions.

[khoad93]

Dear Sage,

Thank you for your speedy and kind reply. I did not expect that I would receive the reply as quickly as this. So grateful for that!

From your reply, I can understand that they compare the offices at hand and some possible solutions (i.e hotels). Not the hotels-to-be and hotels.

I guess I got lost when reading the argument. Like you and Ron usually say, we (examinees) need to engage deeply enough into the argument's content. That is so true. I guess there is no solution to misunderstanding, but to practice reading and reviewing more and more.

Thank you again, and wish you a nice weekend

[Sage Pearce-Higgins]

Good to hear that. Watch out for the precise comparison in those conclusions.

You're welcome.