Question

ABC hotel has 200 rooms and has a policy to determine its room rates based on consumers capacity to pay. For example busniess clients pay $1,200 per night and group tours $900 per night. The incremental cost of servicing a room is worked out at $110 per room. On average, most guest stay for three (3) nights. Rooms division manager is trying to establish if four (4) week advance reservation should be taken for a group booking of 40 rooms and three (3) nights of 7th , 8th and 9th June 2018. According to the reservation record, 80 rooms for the three (3) nights of 7th , 8th , and 9th , June 2018 are already booked by various business clients, and the historical trends of the past four (4) years suggest that 90% of the remaing 120 rooms would be sold to other busniess clients. Your are required to b) In the highly competitive environment, tourism and hospitality busniess can aspire to optimise revenue for the long term survival. Discuss " one pricing strategy " and its effect on tourism and hospitality businesses as a whole focus on the pricing strategy in tourism and hospitality business and highlight their strengths and weaknesses as reported in the published literature.

Answer 1

Answer)

The pricing strategy that I would select for tourism and hospitality business would be customer based pricing.

A customer based pricing is one that after adding all our costs with margin,the customer is even willing to pay more if your hotels satisfy all their needs then it is better charge premium price for avoiding over demand.This type of pricing will be followed by most of the world around by most of hotels like taj falaknama hotel in Hyderabad etc. as it helps in increasing the profits.

Strengths of ABC hotels:

1)Although ABC hotels charges high price for business clients still over 188 rooms are occupied by business clients which is an advantage for the hotel.

2)In most of the cases the hotels rooms are filled completely.

3)The cost of servicing to room charge is seen to be having a huge margin and if fixed costs included then it results in good profits.

Weakness:

1)It is obeserved that groups tours occupants are less even though their price charged for them is less.

2)The strategy followed by the manager as it is not always possible for the customers to plan tours before 4 weeks.