Hospitality Revenue Management final exam review

What is the industry term used to describe the sum of prices paid by a business's customers?

total revenues

Historically, what concept have hospitality managers chiefly used to calculate their selling prices?

costs

What is an algebraic equivalent of the formula: Sales = Costs + Profit?

profit=sales-costs

What is the name for the net value achieved by both parties in a business transaction?

profit

What element is not present in a barter economy?

money

What is the formula used to calculate an owner's ROI?

Owner's Investment Return / Owner's Original Investment = Owner's Return on Investment

Sandy has 100 hotel rooms to sell. This Saturday night has enough customers to sell 125 rooms so she will be refusing 25 requests for rooms. What is this an example of?

constrained supply

Which industry was the first to use Yield Management principles?

airline

What is the industry term used to describe the selling of rooms which are not actually available for sale?

overbooking

What is the formula used to calculate Average Daily Rate?

Total Room's Revenue / Total Rooms Sold = Average Daily Rate

Tashia's hotel sold 175 rooms last night at an ADR of $200.00. Her hotel has 250 rooms. What was Tashia's occupancy % last night?

70%

Tashia's hotel sold 175 rooms last night at an ADR of $200.00. Her hotel has 250 rooms. What was Tashia's RevPAR last night?

$140

What is the industry term for the average revenue generated by each occupied guestroom during a defined period of time?

RevPOR

What is the formula used to calculate GOPPAR?

(Total Revenue - Management Controllable Expenses) / Rooms Available to Sell = GOPPAR

What is the industry term for a customer group which can be readily identified by one or more common characteristics?

market segment

What is a rack rate?

The price of rooms when no discounts of any type are offered

What is:

Total period revenue

(Number of available seats) x (hours of seat availability)

RevPASH formula

What is the term used to identify a management philosophy that places customer gain ahead of short-term revenue maximization in revenue management decision making?

Customer-centric revenue management

What is the term used to describe the potential customers to whom a business's marketing activities and messages are directed?

target market

What is the term used to describe efforts undertaken to encourage travel and tourism to a specific geographic area or attraction?

destination marketing

What is the name for the value given up by a buyer and a seller in a business transaction?

price

Charging guests for watching a "Pay-Per-View" movie in their hotel guestroom is an example of what type of pricing?

two-tiered pricing

What is the fundamental assumption upon which the concept of consumer rationality is based?

Buyers act in ways that are of personal benefit to them

What is the revenue management term used to describe the perceived benefit gained, minus the price paid, in a business transaction?

value

What is created when a seller communicates to a buyer a description of a product to be sold and the price at which that product will be sold?

value proposition

Which of the following terms would be included in the Place portion of a hotel's marketing mix?

distribution channels

What is the fundamental assumption upon which the Law of Supply is based?

The higher the demand for a product the more of it will be produced by sellers

According to Alfred Marshall's work, if the price of a product is lower than the natural, or equilibrium price, what will happen?

The demand for the product would exceed its supply

Assume an equilibrium price (P1) is in place for a product. What would the law of supply and demand predict as an outcome if demand for that product increased?

The new price (P2) would be higher than the previous price (P1) and supply would increase

What concept is displayed by the intersecting point on a supply and demand curve?

An estimate of the amount of a product that would be purchased at a known price and point in time

What must be true if a product producer is to continue creating and selling products?

Revenues must exceed costs

What is the specialized branch of accounting that focuses on recording and analyzing the expenses incurred by an organization?

cost accounting

What is the industry term for the point at which an organization's revenues exactly equal its costs?

break-even point

Which of the following foodservice costs is a variable cost?

food

Which of the following lodging costs is a fixed cost?

mortgage payments

In a hospitality industry break-even analysis graph the Total Revenues line starts at 0. Why does the Total Costs line always start farther up the y axis?

Because fixed costs are incurred even if no guests are served or rooms are sold

Which of the following statements about unit costs in the hospitality industry is true?

Unit costs will vary based upon how high or low an item is priced

Which of the following statements about the relationship between costs and pricing is true?

An appropriate selling price for a product or service must dictate its allowable costs

If a Revenue Manager implements an organization's strategic pricing plan what personal characteristic of that Revenue Manager will be most important for ensuring the plan's success?

an understanding of an organization's customers

Which formula represents a buyer's view of a sales transaction?

Perceived Value - Selling Price = Personal Profit

What type of benefit is lacking in material qualities and is not able to be touched or seen but nonetheless can still be perceived?

intangible

What will be the typical case in an auction when the initial price bid for the item being sold is very low?

the number of potential bidders will be high

Penny Larson is travelling to San Francisco for a personal vacation. Which of economist Milton Friedman's buyer value formulas would apply to her purchase of the hotel rooms she will need during her trip?

spending her own money on herself

Penny Larson is travelling to San Francisco on business. Her company will reimburse 100% of her travel expense. Which of economist Milton Friedman's buyer value formulas would apply to her purchase of the hotel rooms she will need during her trip?

spending someone else's money on herself

Penny Larson is buying a $100.00 restaurant gift card as a present for her niece who is graduating from hospitality management school. Which of economist Milton Friedman's buyer value formulas would apply to her purchase?

spending her own money on someone else

Penny Larson is a travel agent arranging a one-week San Francisco vacation for Mr. and Mrs. Rafael Ochoa. Which of economist Milton Friedman's buyer value formulas would apply to her purchase of the hotel rooms the Ochoa's will need during their trip?

spending someone else's money on someone else

What special challenge do buyers of hospitality products such as hotel guestrooms or restaurant meals face?

difficulty in quality evaluation prior to purchase

If quantity and quality are held constant how will a reduction in price affect buyers' perceptions of value?

perceived value will increase

If quantity and price are held constant how will reductions in product or service quality affect buyers' perceptions of value?

perceived value will decrease

Which of the Four I's of service refers to the fact that the quality of service often depends upon the skill level of the individual who supplies it?

inconsistency

Which of the Four I's of service refers to the fact that services most often cannot be held, touched, or even seen before they are purchased?

intangibility

Ahmed is the sole waitperson on duty at the Athenian restaurant during the very slow 2:00 p.m. to 4:00 p.m. time period. Which of the Four I's of service refers to the fact that employees such as Ahmed must be scheduled to work anytime a service business is open and regardless of low volume levels?

inventory

Which of the Four I's of service refers to the tendency of consumers to equate the quality of service provided with the attitude of the person who actually provides the service?

inseparability

Which of the Four I's of service addresses the fact that a hotel room that goes unsold on a specific night cannot be discounted and offered for sale the next day?

inventory

Randall is the revenue manager for a franchisee who owns a five unit quick service restaurant company. Which feature would be the easiest for Randall to change if he sought to increase the value his company provides its customers?

quality of service offered

What is the most common guest complaint about hotel guest rooms?

service deficiencies

What is the most common guest complaint in the food service industry?

service quality

Consider the formula: (A + B) - C = D

Where: A = Perceived tangible product benefit

B = Perceived intangible service benefit

C = Price

D = Value

If all other variables are held constant, which statement is also true?

as C decreases, D increases

Which two factors do successful revenue managers employ when they devise and implement strategic pricing plans?

data management and insight

Which statement about revenue management in the hospitality industry is true?

It is best understood by experienced hospitality managers

What is value-based pricing?

A pricing system based upon a buyer's view of product or service value

All except one of the following pricing systems are marketing-based. Which one is not an example of marketing-based pricing?

Return on Investment (ROI) pricing

What is the term used to describe a pricing system in which all customers are charged the same price at all times?

fixed pricing

What is true for franchised hotel operations in the United States?

Their prices are established by the hotel owners

What is the economic term used to describe the difference between what a consumer is charged for a product or service and the price that consumer would willingly pay for it?

consumer surplus

What is the relationship between differential pricing and consumer surplus?

Differential pricing is a strategy used by sellers to minimize consumer surplus

Which course of action would be most beneficial to the profit generating ability of a revenue manager's business?

The majority of any consumer surplus is captured by the business

Hottickets.com is a web-based business that buys popular concert tickets in bulk. It buys the tickets at a low price because it qualifies for group ticket discounts offered by concert promoters. Hotticket.com then marks up and immediately resells the tickets it has purchased to interested individuals who visit the Hotticket website. What is the name of the activity Hottickets.com is engaging in?

arbitrage

What is the purpose of a price fence or barrier?

To identify who is and who is not eligible for a special pricing offer

Which differential pricing strategy would in most cases be illegal or unethical if implemented?

Pricing based on the ethnicity of the buyer

The use of a formal customer rewards program is an example of what type of differential pricing strategy?

Pricing based on customer characteristic

The requirement that a buyer present a coupon at the time of purchase is an example of what type differential pricing strategy?

Pricing based on customer characteristic

The premium prices charged for dinner served at the restaurant Le Jules Vernes on the second level of the Eifel Tower in Paris, France can be attributed, in part, to which type of differential pricing strategy?

pricing based on location

A business hotel's promotion targeting local area residence and designed to offer them significantly reduced room rates on Sunday nights is an example of which type of differential pricing strategy?

pricing based on location

Which statement about high volume buyers in the hospitality industry is true?

The per-unit cost of selling to them is less than the cost associated with low-volume buyers

Offering reduced room rates only to those room buyers willing to book their reservations via an internet website is an example of which type of differential pricing strategy?

Pricing based on distribution channel

What is the formula revenue managers use to calculate Net ADR Yield?

Net Room Rate

Standard ADR = Net ADR Yield

Offering guests the opportunity to purchase a sandwich, fries and a soft drink at a price lower than that which would be charged for those same items purchased separately is an example of which type of differential pricing strategy?

pricing based on bundling

Which statement about revenue management and revenue optimization is true?

Revenue management seeks to maximize income while revenue

optimization seeks to maximize long-term profits

Alice is the revenue manager at the Granger hotel. A large volume customer wants a price quote from Alice on 50 rooms per week for the next 52 weeks. Each room would be rented for two days at a time. How many room nights will Alice be quoting on?

5200

Hotel revenue managers face hard supply constraints. In which industry below are hard constraints also likely to be encountered?

hair salons

Lisa is the revenue manager of a 500 room hotel property. Next week-end demand for her rooms will exceed the number of rooms she has available for sale. Which high demand pricing strategy will optimize revenue for her property?

Implement a differential pricing strategy and allocate the limited supply to those market segments who value the rooms most highly

What two factors establish a restaurant's weekly customer capacity?

Number of seats and number of hours open per week

What is the name for the laws and regulations aimed at preventing abusive business behavior or anti-competitive practices?

anti-trust legislation

What is the name used to describe a consortium of independent organizations formed to limit competition by controlling the production, distribution and pricing of a product or service?

cartel

What is the name of the US legislation that outlawed all contracts and conspiracies that unreasonably restrain interstate trade?

sherman antitrust act

What is the name of the US legislation that prohibits competing hospitality managers from meeting to agree upon the room prices that will be charged for upcoming events or charged to specific groups of customers?

sherman antitrust act

What is the name of the US legislation that prohibits illegal discrimination in pricing?

clayton act

Which US law would be violated if a hotel charged different room rates based upon a room buyer's race, religion or ethnic background?

civil rights act

What is the name for the price perceived by consumers to be the normal or standard price for a product or a service?

reference price

What is true about the way buyers generally view variance in a seller's prices?

Discounts are viewed more favorably then surcharges

In the revenue management field, what do the letters "STR" refer to?

A company that specializes in helping hospitality managers evaluate their effectiveness

What is the name of the hospitality management position responsible for the housekeeping and front office areas of a hotel?

rooms manager

What is the name of the hospitality management position responsible for the accounting functions in a hotel?

a controller

To whom would a Revenue Manager likely report if consistency across multiple properties was of most importance?

a corporate level executive

According to the most recent Hospitality Sales & Marketing Association International (HSMAI) survey, to whom do the largest percentage of hotel revenue managers report?

their hotel's general manager

Which group of employees is most responsible for implementing the revenue optimization strategies and tactics developed by a revenue management team?

line-level employees

What vehicle do effective revenue managers use to best develop and evaluate their organizations' pricing and revenue management strategies and tactics?

regular strategy meetings

Who should lead the revenue management efforts of a lodging or foodservice organization?

a qualified revenue manager

Donna is a hotel revenue manager preparing next year's rooms forecast. Donna knows that in November of next year a new hotel is opening near her own. As a result, she is considering reducing her rooms forecast for that month. If she does so, what data type will she be primarily using to make her decision?

future data