Question

In: Finance

You are the revenue manager of a 200-room hotel in Memphis. The management controllable costs (variable...

You are the revenue manager of a 200-room hotel in Memphis. The management controllable costs (variable room costs) incurred when selling 1 room are $50. You are interested in evaluating hotel performance for two scenarios: fixed pricing and differential pricing.

Scenario one is that you used a fixed pricing strategy: at a selling pricing $200 per night your hotel would sell 150 rooms on a given day.

Scenario two is that you implement a three-price strategy: low rate $150 per night, regular rate $200 per night, and high rate $250 per night. Your hotel would sell 100 low-priced rooms, 60 regular-priced rooms, and 20 high-priced rooms per day.

2. Discuss which scenario generates more revenue for your hotel and why?

Solutions

Expert Solution

Revenue per day

Scenario 1=200*150=30000

Scenario 2=100*150+60*200+20*250=32000

Hence, Scenario 2 generates more revenue because it is able to capture different segments and also extract higher consumer surplus

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

How does a hotel property manager respond to the challenge of revenue management?
How does a hotel property manager respond to the challenge of revenue management?
A resort hotel annual sales revenue of $1,000,000, Variable costs of $350,000, and a fixed costs...
A resort hotel annual sales revenue of $1,000,000, Variable costs of $350,000, and a fixed costs of $570,000. The fixed costs include $80,000 a year for land rental lease. a) Calculate the hotel's breakeven point. b) If the owners had an equity investment in the hotel of $1,200,000. What level of sales revenue is required for an operating income (BT) representing a 15% return on their investment? c). In a renegotiation of the land lease, the landowner has offered management...
The manager of a hotel is negotiating with a client the room rate that will be...
The manager of a hotel is negotiating with a client the room rate that will be charged to the attendees of an assembly to be held at the hotel. In this type of activity, the organizers are responsible for obtaining a rate for the rooms that is competitive for the attendees and for a minimum number of people to stay during the activity. The cost of the rooms is paid by the attendees and is NOT included in the cost...
Hubbart approach The Pimlico Hotel is a 200-room hotel and it is projected to cost $15...
Hubbart approach The Pimlico Hotel is a 200-room hotel and it is projected to cost $15 million including land, building, equipment, and furniture and working capital. The hotel is financed with a $10 million loan at 8% interest rate. The owner’s investment in the property is $5 million. The owners desire a 16% return on investment. The hotel projects 80% occupancy rate and it will be open 365 days a year. The income tax rate is 40%. Room’s department direct...
The Harriet Hotel in downtown Boston has 100 rooms that rent for $150 per night. It costs the hotel $30 per room in variable costs
In Crystal BallThe Harriet Hotel in downtown Boston has 100 rooms that rent for $150 per night. It costs the hotel $30 per room in variable costs (cleaning, bathroom items, etc.) each night a room is occupied. For each reservation accepted, there is a 5% chance that the guest will not arrive. If the hotel overbooks, it costs $200 to compensate guests whose reservations cannot be honored.How many reservations should the hotel accept if it wants to maximize the average...
PROBLEM In the Hotel management domain, we have the following concepts: Hotel Hotel chain Hotel room  ...
PROBLEM In the Hotel management domain, we have the following concepts: Hotel Hotel chain Hotel room       Reservation Hilton Hilton San Diego Bayfront Meeting room Ballroom Guest Room Catering Service Internet Service       TV Service Guest Parking Service       Item on bill       You are asked to design a model, using a UML class diagram to relate the abovementioned concepts: Correctly use UML notations for relations such as generalization, association, aggregation, composition. Be careful to distinguish objects from classes. You...
If a hotel sells room nights for $80 with a $20 variable cost per room and...
If a hotel sells room nights for $80 with a $20 variable cost per room and incurs $17,000 in fixed expenses monthly. What is the breakeven revenue? $22,666.97 $22,666.87 $22,666.77 $22,666.67
Forecasting labour costs is a key aspect of hotel revenue management that enables hoteliers to appropriately...
Forecasting labour costs is a key aspect of hotel revenue management that enables hoteliers to appropriately allocate hotel resources and fix pricing strategies. Mary, the President of Hellenic Hoteliers Federation (HHF) is interested in investigating how labour costs (variable L_COST) relate to the number of rooms in a hotel (variable Total_Rooms). Suppose that HHF has hired you as a business analyst to develop a linear model to predict hotel labour costs based on the total number of rooms per hotel...
Forecasting labour costs is a key aspect of hotel revenue management that enables hoteliers to appropriately...
Forecasting labour costs is a key aspect of hotel revenue management that enables hoteliers to appropriately allocate hotel resources and fix pricing strategies. Mary, the President of Hellenic Hoteliers Federation (HHF) is interested in investigating how labour costs (variable L_COST) relate to the number of rooms in a hotel (variable Total_Rooms). Suppose that HHF has hired you as a business analyst to develop a linear model to predict hotel labour costs based on the total number of rooms per hotel...
Forecasting labour costs is a key aspect of hotel revenue management that enables hoteliers to appropriately...
Forecasting labour costs is a key aspect of hotel revenue management that enables hoteliers to appropriately allocate hotel resources and fix pricing strategies. Mary, the President of Hellenic Hoteliers Federation (HHF) is interested in investigating how labour costs (variable L_COST) relate to the number of rooms in a hotel (variable Total_Rooms). Suppose that HHF has hired you as a business analyst to develop a linear model to predict hotel labour costs based on the total number of rooms per hotel...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT