In a mature tourist market such as Bellaria there are only two ways ho

Was in b/w A and D but chose A. What's OA?

A - since approx 100% occupancy rate already exists so whatever facilities along with pricing are available is sufficient to pool the tourists and only way to extend that facility is either to extend the hotel or build another hotel of same standard

B - Irrelevant

C- It applies even if another hotel is built. Infact it will worsen the situation in that case.

D- It gives an indication of the service and standard the Hotel provides. Just catering to wealthy people doesn't ensure higher profitability because proportion of the wealthy tourists is not known. Middle class people can be majority.

E - Too many assumptions are required to choose this as an option.

I chose C because due to rising costs even renovations are not possible. D of course is a very good choice but I feel it's a trap because while wealthy patrons may have been stretched to the limit it does not mean that if better facilities are created - these wealthy people may not revise their limits; alternatively new wealthy folks may come in than those already there... this still leaves scope for proceeding with renovations. But if as C says there is upward pressure on costs due to shortage of skilled labor then the hotel does not have an option to upgrade...

Find a reason why hotels at Bellaria cannot increase their profits??
(A) are already operating at an occupancy rate approaching 100 percent year-round
This can charge more now, if its working at full occupancy.

(B) could not have been sited any more attractively than they are even in the absence of land-use laws
Irrelevant

(C) have to contend with upward pressures on the cost of labor which stem from an incipient shortage of trained personnel
Upward pressures -> Out of scope.

(D) already provide a level of luxury that is at the limits of what even wealthy patrons are prepared to pay for
So now this is what we were looking for, level of luxury is at its peak, this means that they can now get a fixed level of profit. -> Correct

(E) have shifted from serving mainly Bellarian tourists to serving foreign tourists traveling in organized tour groups
Organized tour groups, they can still charge more money from them. More people, more profit

VeritasKarishma GMATNinja - Can you explain why B option is wrong?

Thanks
Nikita

2 ways to increase profits:
1. Increase capacity
2. Improving current facilities (providing better services in the current set up)

Land use laws do not allow increase in capacity. The argument concludes that hotels cannot increase profits. This means that they are unable to improve current facilities too. So the correct option should tell us why they cannot improve the current facilities.


(B) could not have been sited any more attractively than they are even in the absence of land-use laws

This is irrelevant. The site of the hotel doesn't matter. We are given that there are only two ways to increase profit. Moving the hotel to another site is not one of them. The two ways are building more rooms at current site or improving what is there.

(C) have to contend with upward pressures on the cost of labor which stem from an incipient shortage of trained personnel

How cost factors impact is irrelevant. Inspite of all these factors, there are two ways and only two ways to increase profit.

(D) already provide a level of luxury that is at the limits of what even wealthy patrons are prepared to pay for

Correct. This is why improvement in not possible. They are already at the peak of services provided.

(E) have shifted from serving mainly Bellarian tourists to serving foreign tourists traveling in organized tour groups

Irrelevant

Answer (D)