HM 350 - KA 2

What is a "price point" in hotel pricing?

Multiple levels of rates offered based on demand

• Think: Demand Curve

• Relationship between Qd and Price

• We want to capture as much of the area below the demand curve.

What are some of the key risks associated with discounting hotel rates? (Select all that apply)

A. It makes it difficult to return to original rates due to price anchoring.

B. It may trigger price wars with competitors, reducing profitability for all hotels in the market.

C. It can lead to lower guest perceptions of quality.

D. Increased guest satisfaction.

E. It helps increase long-term profitability by consistently attracting price-sensitive customers.

A. It makes it difficult to return to original rates due to price anchoring.

B. It may trigger price wars with competitors, reducing profitability for all hotels in the market.

C. It can lead to lower guest perceptions of quality.

The _________ is the publicly available base price of a hotel room with no restrictions, also known as the rack rate or Best Available Rate (BAR). 

retail rate

What is a "qualified discount"?

A discount tied to a marketing promotion and specific restrictions.

True or False.

A hotel’s segment mix directly impacts ADR because selling too many rooms at discounted rates lowers the overall revenue potential, even if occupancy remains high.

True

Which of the following statements are true?

A. The concept of “leaving money on the table” refers to charging more than a guest is willing to pay.

B. Differential pricing is unethical because it charges different prices for the same product.

C. Price is always the most important driver when customers are booking a hotel.

D. Predatory pricing is a viable long-term strategy for hotels to eliminate competition.

E. Guests traveling for business and leisure may fall into different market segments depending on the context of their trip.

F. Perceived value is directly tied to the cost of producing a hotel room.

E. Guests traveling for business and leisure may fall into different market segments depending on the context of their trip.

Which of the following scenarios would most likely be perceived as unfair by consumers, based on pricing fairness research?

A. A hotel raises prices due to increased labor costs.

B. A hotel offers loyalty members a lower rate.

C. A hotel increases prices during a natural disaster.

D. A hotel offers a discount for early bookings.

A. A hotel raises prices due to increased labor costs.

• Buyers are more willing to pay higher prices due to cost increases to the seller, as opposed to supply shortages

• Labor is considered a supply shortage.

C. A hotel increases prices during a natural disaster.

Which of the following best explains why differential pricing is considered a strategic revenue management tool in hospitality?

A. It captures more consumer surplus by aligning price with perceived value across segments.

B. It ensures all guests pay the same price for fairness.

C. It reduces the need for market segmentation.

D. It allows hotels to charge more during low-demand periods.

A. It captures more consumer surplus by aligning price with perceived value across segments.

What is the primary purpose of price points in hotel pricing strategies?

A. To match customer willingness to pay based on demand

B. To avoid price transparency for competitors

C. To eliminate low-paying customers during high demand

D. To set a flat rate regardless of market conditions

E. To maximize occupancy only during the off-season

A. To match customer willingness to pay based on demand

Which of the following describes a measure of price sensitivity?

Elastic Demand

Which pricing method ensures that rooms are sold at different rates based on customer segmentation?

Differential Pricing

Which of the following statements are true? (Select all that apply)

A. Price sensitivity is the maximum amount an individual is willing to sacrifice to purchase a product

B. When the customer’s value of a product meets or exceeds the price, the customer will buy it

C. Surcharges are viewed more favorably than discounts

D. Collusion occurs when excessively high prices are charges for goods or services

E. Reasons for discounts should be clear and fair

B. When the customer’s value of a product meets or exceeds the price, the customer will buy it.

E. Reasons for discounts should be clear and fair.

What are the main advantages of contracting a group for a hotel? Select all that apply

A. Guarantees availability of a certain number of rooms

B. Simplifies inventory management and forecasting

C. Reduces the number of rooms needed to sell to transient guests

D. Ensures higher room rates for all guests

B. Simplifies inventory management and forecasting

C. Reduces the number of rooms needed to sell to transient guests

What is the purpose of a cut-off date in a group contract? Select all that apply

A. To release unsold rooms in the block

B. To finalize the group's itinerary

C. To allow the hotel to sell rooms to other guests at a higher rate

D. To ensure the group is financially responsible for all contracted rooms

A. To release unsold rooms in the block

C. To allow the hotel to sell rooms to other guests at a higher rate

Which clauses are typically included in a group contract related to guestrooms and revenue? Select all that apply

A. Cancellation

B. Reservation Method

C. Concessions

D. Guest Room Block

A. Cancellation

B. Reservation Method

C. Concessions

D. Guest Room Block

What are the potential impacts of concessions on group revenue and ADR? Select all that apply

A. Increase in overall group revenue

B. Reduction in group ADR

C. Increase in the number of rooms sold

D. Reduction in the overall value of the group

B. Reduction in group ADR

D. Reduction in the overall value of the group

What are the different statuses a group can have during the booking process? Select all that apply

A. Confirmed

B. Tentative

C. Definite

D. Inquiry/Prospect

B. Tentative

C. Definite

D. Inquiry/Prospect

What is attrition in the context of group contracts? Select all that apply

A. A clause that allows the hotel to release rooms to other guests

B. A penalty for not using all contracted rooms

C. The difference between the number of contracted rooms and the number of room nights the group is responsible for utilizing

D. A method to increase group revenue

B. A penalty for not using all contracted rooms.

C. The difference between the number of contracted rooms and the number of room nights the group is responsible for utilizing.

What is the primary purpose of price points in hotel pricing strategies?

A. To match customer willingness to pay based on demand

B. To avoid price transparency for competitors

C. To eliminate low-paying customers during high demand

D. To set a flat rate regardless of market conditions

E. To maximize occupancy only during the off-season

A. To match customer willingness to pay based on demand

Which of the following describes a measure of price sensitivity?

A. Revenue optimization

B. Elastic demand

C. Price gouging

D. Market segmentation

E. Value pricing

B. Elastic demand

Which pricing method ensures that rooms are sold at different rates based on customer segmentation?

A. Differential pricing

B. Cost-plus pricing

C. Flat-rate pricing

D. Wholesale pricing

E. Collusion pricing

A. Differential pricing

Which of the following statements are true? (Select all that apply)

A. Price sensitivity is the maximum amount an individual is willing to sacrifice to purchase a product.

B. When the customer’s value of a product meets or exceeds the price, the customer will buy it.

C. Surcharges are viewed more favorably than discounts.

D. Collusion occurs when excessively high prices are charges for goods or services.

E. Reasons for discounts should be clear and fair.

B. When the customer’s value of a product meets or exceeds the price, the customer will buy it.

E. Reasons for discounts should be clear and fair.

What is the primary purpose of a hotel budget? (Select all that apply)

A. To determine how much guests are willing to pay for rooms

B. To estimate how much money the hotel will spend on marketing

C. To provide a financial plan based on estimated income and expenses

D. To predict staffing needs for operational departments

C. To provide a financial plan based on estimated income and expenses

Which of the following statements are true? (Select all that apply)

An operational forecast helps hotels to adjust their employee performance reviews

A financial forecast is the only type of forecast required by hotel brands

 A demand forecast helps determine room demand and influences pricing and inventory strategies

 The sales manager typically develops the demand forecast

 A demand forecast helps determine room demand and influences pricing and inventory strategies

What are some of the challenges that revenue managers face when forecasting? (Select all that apply)

Difficulty balancing historical data with future market changes

The inability to influence future revenue outcomes

Uncertainty about what information should be used

Lack of confidence in forecasting abilities

Difficulty balancing historical data with future market changes

Uncertainty about what information should be used

Lack of confidence in forecasting abilities

Which of the following statements about group forecasting are true? (Select all that apply)

Group forecasting must account for wash/slip

Groups always use the exact number of rooms they contract

The group ADR is always the same as the contracted rate

Groups tend to book further in advance than transient guests

Group forecasting must account for wash/slip

Groups tend to book further in advance than transient guests

Which factors should be considered when forecasting transient demand? (Select all that apply)

The group forecast

Current business on the books

The percentage of guests who check in early

Booking pace compared to past years

The group forecast

Current business on the books

Booking pace compared to past years

If a hotel has 200 rooms and an unconstrained demand of 250 rooms, what is the constrained demand assuming full occupancy? 

200

What is the wash percentage if a group contracts 50 rooms for an event and the forecast anticipates that only 40 rooms will be used?

20

Is the following statement True or False?

Discounting increases a customer's reference price.

False

When using discounting strategically, businesses should not:

Ignore loyal customers

Negotiate corporate rates

Take group reservations

Qualify discounts with rate fence

Ignore loyal customers