Section 1 - Case Study (28 points)

Please read the case studies carefully and answer all the questions.
1.Case Study (16 Points)
“If anyone should be able to afford our regular rates, its seniors,” said Anita, the rooms’
manager at the 480-room Palace Resort. “You’re our Revenue Manager, don’t you follow
economic trends? People today have more money when they get older, not less. And with the
Baby Boomers starting to turn 60, they’re going to have even more to spend than previous
generations. All I’m saying is that I think a senior discount for this package just leaves money
on the table.” Anita was having coffee in the resort’s restaurant with Dan, the resort’s
Revenue Manager. They were discussing an idea Dan had presented at the last Strategic
Pricing and Revenue Management Advisory Committee. Essentially, Dan had worked with
the hotel’s Sales and Marketing Department to devise a “thru-the-week” package targeting
active senior travelers. Anita was not convinced it was a good idea. “I’m at the desk when
they check in,” continued Anita. “Those folks do have money.” “You’re right,” said Dan.
“Senior travelers are typically among the wealthiest of all the markets that we target.” “Then
why offer them special discounts?” asked Anita “Because we have empty rooms,” replied
Dan. “Seniors have money, but they have something even more important to us. They have
time.” “Time?” said Anita. “Time. They have worked all their lives and have had longer to
save, so they have more disposable income. That’s still true, even after the most recent
economic downturn. And lots of them love to travel. Of course, seniors also love discounts.
Every group does, and that includes those with plenty of money. But seniors are also in a
position to book with us at the last minute. They can vary their travel plans. They have no
kids to worry about taking out of school. No limit on when they can get off work, because
they already are off work. Permanently. And weekend travel is nice, but weekday travel is just
as nice for most of them. They have the freedom to choose. Let me ask you, when is our hotel
least used?” said Dan. “Weekdays,” replied Anita. “We’re booked solid most weekends. You
know that.” “O.K. When do we need flexible date travelers?” asked Dan. “Through the
week,” said Anita slowly. “Now I get it.”
1.1. Assume Dan is successful in “selling” the idea of a discounted thru-the-week package
for seniors to the rest of the revenue committee. What specific fences would you
recommend he construct to optimize the hotels’ revenues from this program? (4 Points)

1.2. Assume the hotel also hosts senior travellers currently paying full price for their visits.
Some visit on the weekend, but others visit during the week. What specific actions could
the hotel undertake to ensure these full-paying guests felt they also received excellent
value for each travel pound they spent at the Palace? (4 Points)

1.3. Assume you were Dan. What are specific price differentiation tactics you could
implement regarding this specific discount program? Explain why each tactic you selected
was chosen. (4 Points)

1.4. Prices strongly communicate to customers the value a company places on its own
products and service. In some cases, prices that are too low can cause some customer
perceptions of quality to decline. How can Dan ensure the customers he targets do not
 respond to his value proposition with the thought that his new package is “too cheap” to
truly represent a good value? (4 Points)

Case Study 2 (12 points)

“There’s a Rice Krispies Treat and a bottle of water near the TV in my room,” said Dan
Flood. He had just checked into the Best Western and had called down to the front desk,
where Sybil, the Manager on Duty had taken the call.
“Is there a problem?” asked Sybil.
“Well,” replied Flood, “I’m a Best Western Rewards member and usually my stays are
perfect.”
“That certainly is one reason why we are one of the world’s largest hotel brands with over
4,200 hotels in 80 countries,” replied Sybil.
“Right, I know that,” replied Flood. “That’s part of the reason why I joined your Rewards
program. I know about the airline miles, free rooms, and the gift cards, but what I’m telling
you is that somebody left a package of Rice Krispies Treats and a bottle of Aquafina on the
counter near my TV.”
“That would be us, sir,” replied Sybil. “Welcome to our hotel. Oh, and if you prefer, we do
have chocolate chip cookies.”

Questions
2.1. When two products are identically priced, but one seller offers a frequent customer
awards program, it makes the alternative seller’s product to be perceived as having a higher
price. Some individual hotel operators, like those who own Sybil’s hotel, do more than
their company or franchisor require. The result is often customers whose expectations are
exceeded.
What are some other no-cost or low-cost benefits any hotel could offer to its “Rewards-
type” members to provide even more value in their purchase? (2 points)

What are some no-cost or low-cost benefits any restaurant could offer to its “Rewards-
type” members to provide even more value in these customer’s purchases? (2 points)

2.2. How do you think Mr. Flood will feel about this specific branded hotel in the future? If
there were multiple Best Western franchised properties in the immediate vicinity, do you
think he would return to this one on a future visit to the area? (4 points)

2.3. It has been said that strategic pricing means providing the right price; to the right
customer; at the right time and for the right product. Rewards-type programs provide
incentives for guests to return, but also offer access to the names and addresses of previous
customers. How can RMs use that information in ways that help them advertise right-
priced special events and promotions to their best customers? (4 points)
 Section 2 – Calculations (30 points)
3.Karla is the RM at a 200-room select service hotel near a major highway. Last year, her
ADR was £149.99 and her property ran at 80 percent occupancy. Karla is considering the
impact on her property of implementing programs that would increase her ADR by 5 percent
and 10 percent. If she increases ADR by 5 percent, she anticipates a 77.5 percent occupancy
next year. If prices are increased by 10 percent she forecasts her occupancy will decline to 70
percent. Finish the calculations she needs to complete the revenue analysis form below, and
then answer the questions that follow. (18 points)
200 Room Property Last Year 5% ADR 10 % ADR Increase
Pricing Increase
Actual/ Forecasted Occupancy % 80.00% 77.50% 70.00%
Rooms sold
ADR $
149.99
Rev
RevPAR
RevPAR change N/A
Controllable operating costs @
$45.00 per room
Gross operating profit
GOPPAR
GOPPAR change

3.1. What was Karla`s RevPAR last year? (3 points)

3.2. What would be the % change in Karla`s RevPAR with a 5 percent increase in ADR? (3
points)
3.3. What would be the % change in Karla`s RevPAR with a 10 percent increase in ADR? (3
points)
3.4. What was Karla`s GOPPAR last year? (3 points)
3.5. What would you advise Karla to do? Explain your answer. (6 points)
4. Graham prepares a daily Rooms Forecast Report that is shared with the Housekeeping,
F&B, and Front Office Managers of the 350-room Dream Hotel. Today is Monday. Help
Graham complete Tuesday`s Rooms Forecast Report using the following information he has
compiled from historical records, current PMS data, and his own insight into rooms sales
related events likely to occur today. There are 85 rooms reserved; 105 stay-overs; 10
overstays; 10% of the reservations are expected to be no-show and there are 5 early
departures. Answer the questions that follow. (Please note there is no table provided for this.)
(12 Points)
4.1. How many rooms does Graham forecast will be occupied on Tuesday night? (3 Points)
4.2. What is Graham`s occupancy % forecast for Tuesday night? (3 Points)
4.3. Assume Graham`s forecasted ADR for the night is £175.00. What would be his estimated
total room revenue for this date? (3 Points)
4.4. Given his forecasted ADR, what would be forecasted RevPAR for this date? (3 Points)