According to a promotional material

royal arm hotel may be only hotel in spring spring field so when large number of tourist stay there and there is no vacancy in the hotel then they move to Harrington city for hotels.

royal arm hotel may be small in capacity compared to the biggest hotel in Harrington city.

then both the claims will be correct.

Facts mentioned
1. More people stay in hotels in springfield than horristown
2. More tourists stays in the largest hotel in horristown than stay in the Royal arms hotel in springfield.

Both of the above can be true only if there are other hotels in Springfield

Lets see this in numbers
Total number of tourists in S - 500
Total number of tourists in H - 300

Number of tourists accommodated in the biggest hotel in H - 300
Bumber of tourists accommodated in the Royal arms hotel in S - 200

the rest of the 300 tourists in town S must be accommodates in some other hotels.

option E negates this idea and hence the answer.