Over the last five years, demand for hotel rooms in Cenopolis has incr

This is a GMAT Prep question and the OA is B.

If the demand for office space goes up - it may generate more revenue than hotel rooms. If the demand for office space space doesnt rise - a hotel is the viable option.

Hence 2 opposing answers to option B change the overall answer.

I will go for - B

The aim of the plan is to maximize its revenues.

If the demand for office space in Cenopolis is projected to increase in the near future, Centennial Commercial needs not to spend its money to convert its office buildings into hotels.

Converting into hotel costs a lot(purchasing furniture, hiring employees, promoting hotel, renovating, and so on.)

Compare to the situations.

Just lenting Office facilities without further investment(in the near future, the demand for office space in Cenopolis would increase) or converting into hotel.

What if you are a CEO of Centennial Commercial, which way would you choose to maximize its revenues?

e) it's too complicate to calculate. we need lots of information to know e) is correct or not.

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.

Type -Evaluate
Boil it down - Plan to convert several unoccupied office buildings it owns in Cenopolis into hotels in order to maximize it's revenue from these properties.
Pre-Thinking - Whether these office buildings are likely to remain unoccupied in the near future

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. Irrelevant
B.Whether demand for office space in Cenopolis is projected to increase in the near future. Correct
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. Out of scope
D.Whether demand for hotel rooms has also increased in other cities where Centennial owns office buildings. Irrelevant
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. Out of scope

Answer B

IMO B
Option B gives us additional reason from which we can evaluate the argument to convert office space into hotels .
If office space is going to rise then the plan to convert office to space will not be successful .


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Hi Expert.

Why E is incorrect?

In my opinion, choice E , if yes , then fewer guest lead to fewer revenue so it weakens.
On the other hand, if no , then more guest lead to more revenue so it strengthens.


Expert please explain.

Yeah, good question. And here's a question always worth asking with comparisons - in Sentence Correction, in Critical Reasoning, and in business - where you say "fewer revenue" and "more revenue," what are you comparing that revenue to? More revenue than...what?

The stimulus is making that comparison between revenue if we convert this office building to a hotel and revenue if we keep this building as an office building. Those are the two logical options.

E is trying to reframe the comparison and make it between revenue if we convert this office building to a hotel and revenue of other hotels that weren't converted from office buildings. But Centennial Commercial doesn't have that option - it currently has an office building and has to determine what to do with it, but it's not deciding on whether to invest in a separate, new-construction plan. Choice E hijacks the comparison, and that's why it's incorrect.

Option B is correct.

If there was an answer choice like:

Whether, on average, hotels that have been created by converting office buildings have fewer *guest* than do hotels that were built as hotels.
or
whether on average newer hotels had fewer guest than do the older hotels?

Can these be the right answer as well?

No, your proposals still make the same mistake as choice (E), comparing this building to other hotels. But that's not the comparison we're looking for. We need to determine whether the current office buildings would earn more revenue if they stayed as office buildings vs. if they were converted to hotels. We're looking to compare office space to hotel space, not one type of hotel to another type of hotel.

Consider this - let's say that these office buildings are 5 floors tall whereas the hotels built as hotels are all at least 10 floors tall. Your proposals will always then mean that the hotels built as hotels will have more rooms and probably more guests. But as long as the office converted to a hotel is making more money than it used to, it doesn't matter if it's less full than or not making as much money as other hotels.

Where a "converted buildings to hotels" vs. "hotels that started as hotels" comparison might work is if you had percentage (as opposed to actual number) evidence suggesting that people would not be inclined to stay at a converted building. I think that's pretty tough to write as an answer choice in this "which question would be best to ask" kind of format because you'd need compelling evidence (in a weaken context something like "because of consumer preferences, converted hotels have on average less than half the occupancy rate of actual hotels," then you may have some evidence that this is a bad idea. In this format, maybe something like "are travelers willing to stay at hotels that were converted for such a purpose, as opposed to being initially built for that purpose" could be written to have a chance...

I was thinking fewer guest meant less money, ignoring the possibility of "converted buildings to hotels" could charge more and still make more money.

Thanks VeritasPrepBrian. Very Nicely explained

Solution
Passage Analysis
• Over the last five years, demand for hotel rooms in Cenopolis has increased significantly,
o During the last five years, demand for hotel rooms has increased a lot in Cenopolis.
• as has the average price Cenopolis hotels charge for rooms.
o The average amount charged per room has also increased there.
• These trends are projected to continue for the next several years.
o This increase is expected to keep going for the upcoming many years.
• In response to this economic forecast, Centennial Commerical, a real estate developer, is considering a plan to convert several unoccupied office buildings it owns in Cenopolis into hotels
o A real estate developer called Centennial Commercial responded to this prediction with a plan.
o The plan is to convert many unused office buildings they have in the city into hotels.
• in order to maximize it's revenue from these properties.
o The purpose is to maximize Centennial’s revenue from these buildings.

Question Stem analysis
Which of the following would it be most useful for Cenennial Commerical to know in evaluating the plan it is considering?
We need to find which new information will help to evaluate this plan of Centennial commercial.

Prethinking.
Since the purpose is to maximize revenues, we need to see if converting the office spaces into hotels is the best method to do this. A number of things could be considered.

For example
What if there is some other business for which CC could use the unused office space which will yield higher revenue than hotel business in the upcoming years?

What if renting out office spaces commands higher revenue than hotels in the present and upcoming years?

With this Prethinking in mind let us explore the options.

Answer choice Analysis
(A) Whether the population of Cenopolis is expected to grow in the next several years.
INCORRECT
Whether the population of Cenopolis grows or not has no relevance to our conclusion because we have no idea if it is the Cenoplis population that uses the hotel rooms. Plus, it has no say in identifying whether the office buildings can maximize the profit as hotels.

(B) Whether demand for office space in Cenopolis is projected to increase in the near future.
CORRECT
If the demand for office space is also increasing , then they can rent the buildings out as such with no extra expense and get higher revenues from the buildings as it is. There is a question of whether hotels or office spaces give maximum profits, but the option only needs to strengthen and weaken the conclusion at both ends. Let us see:
Variance Analysis
YES- Demand for office space is projected to increase in the near future. - This weakens the conclusion that converting to hotels can maximize revenue.
NO- Demand for office space is not projected to increase in the near future-This strengthens the conclusion that says converting office space to hotel rooms is a good idea to maximize revenue.

(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.
INCORRECT
Other travel-related services are out of the scope of this question. Hence the answer choice is incorrect.

(D) Whether demand for hotel rooms has also increased in other cities where Centennial owns office buildings
INCORRECT
Other cities and what happens there is out of the scope of this question. Hence this answer choice is incorrect.

(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.
INCORRECT
This question compares the revenue made by office spaces to hotel rooms. This option wrongly compares the guest rooms in converted hotel rooms to hotels built for the same purpose.
 

I still don't understand why E is not the best answer? as we are not concerned about the office space we only consider hotels and profits from them.

 

­Then why would you choose E, which compares hotels to office spaces? We actually DO want to compare which option is more profitable, but just knowing that the avg # of rooms per building may be low tells us nothing about the profitability of switching.