You have just been hired as the manager of a four-star city center hotel. Your prices are 20 per cent

You have just been hired as the manager of a four-star city center hotel. Your prices are 20 per cent cheaper than comparable competitors. You have decided to increase your prices by 15–20 per cent. What are the implications of this decision?

Expert Solution

This is a great topic for group discussion as it allows the students to consider the broader implications of pricing and how it is viewed by customers, competitors, and others. Inevitably, many companies must eventually raise prices, but they do this knowing that price increases may be resented by customers, dealers, and their own sales force. A successful price increase can greatly increase profits, but it is important to consider the fact that increased prices work best when customers perceive the price increase to be justified. Competitors are most likely to react when the number of firms involved is small, when the product is uniform, and when buyers are well informed. In this case, the other city center hotels will look with interest at the reaction to the price increase and take action accordingly.

Group discussion topic: Examining pricing strategies' impacts on customers, competitors, and stakeholders; addressing customer perceptions, competitive reactions, and profit implications.

Junaid answered 8 months ago

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