Over the last five years, demand for hotel rooms in Cenopolis has increased significantly, as has the average price Cenopolis...

GMAT Critical Reasoning : (CR) Questions

Source: Official Guide

Critical Reasoning

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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?

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

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

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

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

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

Solution

Passage Analysis:

Text from Passage	Analysis
Over the last five years, demand for hotel rooms in Cenopolis has increased significantly, as has the average price Cenopolis hotels charge for rooms.	What it says: Hotel demand and prices in Cenopolis have both gone up a lot in the past 5 years What it does: Sets up the current market situation showing a profitable hotel environment What it is: Market data/background facts Visualization: 5 years ago: Low demand + $100/night → Today: High demand + $200/night
These trends are projected to continue for the next several years.	What it says: The rising demand and prices will keep going up for years to come What it does: Extends the positive market conditions into the future, building on the current trends What it is: Market forecast/projection Visualization: Today: High demand + $200/night → Future years: Even higher demand + $250-300/night
In response to this economic forecast, Centennial Commercial, a real estate developer, is considering a plan to convert several unoccupied office buildings it owns in Cenopolis into hotels in order to maximize its revenue from these properties.	What it says: Based on the good hotel market outlook, Centennial wants to turn empty office buildings into hotels to make more money What it does: Introduces the company's proposed business plan that responds to the market opportunity described earlier What it is: Company's proposed strategy/plan Visualization: Current: Empty office buildings = $0 revenue → Planned: Convert to hotels = $$$$ potential revenue

Argument Flow:

The argument moves from describing current positive market conditions (rising hotel demand and prices) to forecasting these trends will continue, then presents Centennial's plan to capitalize on this opportunity by converting empty office buildings to hotels.

Main Conclusion:

Centennial Commercial should consider converting its unoccupied office buildings in Cenopolis into hotels to maximize revenue from these properties.

Logical Structure:

The premises establish a profitable market environment (increasing demand and prices) and positive future outlook, which logically supports the conclusion that converting office buildings to hotels would be a revenue-maximizing strategy.

Prethinking:

Question type:

Evaluate - We need to find information that would help Centennial Commercial assess whether their plan to convert office buildings to hotels is a good idea. This means looking for assumptions underlying their decision that could either strengthen or weaken their plan when we get more information about them.

Precision of Claims

The key claims are about market conditions (increasing demand and prices for hotels) and a business strategy (converting office buildings to hotels to maximize revenue). We need to focus on the gap between market opportunity and actual execution success.

Strategy

For evaluate questions, we look for underlying assumptions in the argument that aren't directly stated. Then we think about what additional information would help test these assumptions. The company is assuming that because hotel demand and prices are rising, converting their office buildings to hotels will maximize revenue. But there are several gaps here - like conversion costs, competition, feasibility of conversion, and whether their specific properties can actually capture this market opportunity.

Answer Choices Explained

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

While population growth might correlate with hotel demand, we already know from the passage that hotel demand and prices are projected to continue rising. This information would be somewhat relevant but doesn't directly help evaluate whether converting office buildings to hotels is the best revenue-maximizing strategy for Centennial's specific properties.

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

This is crucial information for evaluating the plan. If office space demand is expected to surge, then keeping these buildings as offices or converting them back to office use might generate more revenue than converting to hotels. This directly tests the assumption that hotel conversion is the best way to maximize revenue from these properties. We need to know the opportunity cost of the conversion decision.

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

This information about broader economic effects doesn't help Centennial evaluate their specific plan to maximize revenue from their office buildings. It's interesting market information but doesn't affect their conversion decision.

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

This information is about other markets and other properties, not about the specific decision regarding the Cenopolis properties mentioned in the passage. It doesn't help evaluate the plan being considered for these particular buildings.

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

While this touches on conversion specifics, it doesn't directly address the core question of whether conversion will maximize revenue. Room count alone doesn't determine profitability - revenue depends on occupancy rates, pricing, and costs, not just the number of rooms.

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