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Over the last five years, demand for hotel rooms in Cenopoli

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Over the last five years, demand for hotel rooms in Cenopoli

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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

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If we want to EVALUATE an argument, we need to establish the conclusion of the argument and its supporting premises. We then need to determine what information is MISSING.

Premises:
- demand for hotel rooms in Cenopolis has increased significantly
- so has the average price Cenopolis hotels charge for rooms.
- These trends are projected to continue for the next several years.

Conclusion:
Centennial Commerical is considering a plan to convert several unoccupied office buildings into hotels in order to maximize its revenue from these properties

Missing Information:
If a conclusion is about PROFIT, we need information about both REVENUE and COSTS. We're given that demand & price for hotel rooms are both high, so that suggests that revenue will be high. But there is missing information:
- will the revenue increases exceed the costs of converting these buildings?
- will the converted office buildings be as appealing to customers as the other hotels are?
- will this MAXIMIZE profit? In other words, are there other ways to maximize revenue and/or minimize costs?

Before we look at the answer choices, a note about EVALUATE question strategy: each answer choice on an evaluate question will be posed as a QUESTION. If we want to determine whether that question helps us to evaluate the validity of the argument, we should ask ourselves:
What would a "yes" answer do to the conclusion? What would a "no" answer do?
We're looking for a question for which a YES answer would WEAKEN the argument, and a NO answer would STRENGTHEN (or vice versa):

(A) Whether the population of Cenopolis is expected to grow in the next several years.
- if yes... maybe demand for hotels would increase? But maybe not, since hotels might be used primarily by out-of-towners. This doesn't address any of our questions.

(B) Whether demand for office space in Cenopolis is projected to increase in the near future.
- if yes... developers could get revenue from from these buildings without the additional cost of converting them to hotels. This would weaken the argument, since it suggests that converting to hotels might not maximize costs.
- if no... this strengthens the plan: hotels are likely to bring in more 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.
- if yes... this has no impact on the revenue or costs associated with converting office buildings to hotels.
- if no... it also has no impact on the argument.

(D) Whether demand for hotel rooms has also increased in other cities where Centennial owns office buildings
- if yes... this has no impact on the argument, which is only concerned with Cenopolis.
- if no... no impact either.

(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.
- if yes... it's tempting to think that this could be lower revenue than traditional hotels. But that's not the point - our conclusion is not that Centennial will make more money than traditional hotels will. The conclusion is that converting will maximize the company's profits. That could certainly still be true even if the hotels are small. This doesn't give any additional information about the revenue v. cost comparison of office buildings --> hotels.
- if no... no change to the argument.

The only answer that helps us to answer one of our outstanding questions is B.

_________________


Ceilidh Erickson
Manhattan Prep GMAT & GRE instructor
EdM in Mind, Brain, and Education
Harvard Graduate School of Education


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