Name: ......

Instructions

* Terminologies/abbreviations in the case are a part of the exam. No additional explanation will be given…
* All necessary information is included in the case. If the information is not given, there is NO mistake. You are expected to use other given data in the case to make the calculation(s) in order to derive the needed information.
* Round up to two decimals at the end of your calculation. (eg 42.287=42.29)
* For convenience, all currency values are in Euro.
* Points per question are stated at the end of each question. Total points: 40
* Keep your answers to the point. Long & vague answers will not earn you any point.
* If you really have no clue, leave the question blank.
* Correct method of calculation but with the wrong result earns no point.
* Use the blank space below each question or the back side of your exam paper to do the calculations.
* Answer all questions in English. Write in “readable” letters. Anything cannot be read will not be given credit, regardless of the actual content.

*MAKE SURE THAT YOUR NAME IS WRITTEN ON THE TOP OF THIS PAGE.

Question 1
Not all industries meet the criteria for application of Revenue Management (RM).
  1. Give 3 required criteria.
  2. Explain each criterium briefly.
/ /6

ONLY 3 OUT OF 7 POSSIBLE ANSWERS BELOW ARE REQUIRED.

1.FIXED CAPACITY: a fixed number of rooms is available every day.

2.PERISHABLE INVENTORY: We only have 1 chance to sell our rooms for tonight, we can’t sell yesterday’s available rooms anymore.

3.LOW MARGINAL SERVICING COSTS: the cost of selling an extra room is small.

4.DIFFERENT PRICES: the product (a room) can be sold at multiple price points at the same time.

5.ADVANCE RESERVATIONS POSSIBLE: we can rooms for a date (range) in advance.

6.DEMAND TIME FIXED: we can sell rooms for exact time frames, e.g. 1 night, 1 week.

7.SEGMENTABLE MARKETS: Demand is segmented in business and leisure markets with different prices depending on e.g. price sensitivity.

Question 2
“RM is a culture and a philosophy that has to be implemented in the entire hotel, not on management level only”.
Give 2 practical examples why this is important. / /2

1.Management, Sales and Reservation teams must follow the same strategy and targets. E.g. if Reservations wants to push rate and Sales wants to push volume, you cannot implement a coherent RM Strategy.

2.A bartender should be trained to ask the right questions if he hears about a new project being developed in the area…

Question 3
Hotels that apply RM in a correct way use an indicator called Unconstrained Demand [UC]’.
Explain how this tool is used. / /4

Unconstrained demand of a hotel is the total demand for a particular date irrespective of your capacity.

Hotels should identify when UC is higher than than the capacity of the hotel.

On such dates the hotel should regret low paying business and only accept higher rates.

Stay controls may be implemented to maximize revenues.

Question 4
Key Performance Indicators (KPI’s) such as Occupancy, ADR, RevPASH, GOPPAR,…. are used to measure the results of your hotel revenue management strategy.
  1. Which KPI is used best to measure the ’Performance’ of your hotel?
  2. How do you calculate this KPI?
/ /2

1.RevPAR or Revenue per Available Room.

2.Room Revenue / Total available rooms or ADR x Occ.%.

Question 5
A hotel with 150 rooms has sold as follows:
Monday: 130 rooms sold | Revenue 8.712 eur
Saturday: 100rooms sold | Average Daily Rate (ADR)87,09 eur
  1. Calculate the following KPI’s:
Occupancy % (Occ.%) | ADR | RevPAR
  1. What is the best day for this hotel, and why?
/ /8
1. / Rooms Sold / Occ.% / ADR / RevPAR
Monday / 130 / 86,67 % / €67,02 / €58,08
Saturday / 100 / 66,67% / €87,09 / €58,06

2.Saturday is the best day: we’re almost achieving the same RevPAR as on the Monday but with much less rooms sold, therefore resulting in less variable costs and higher profit.

Question 6
Hotels can use a few approaches to set prices.
1.Which one(s) are best suited for RM?
2.Explain why / /2
/3

1.

X Competitive pricing

O Single-rate pricing

O Cost-based pricing

O GOPPAR-based pricing

X Demand-based pricing

O RevPOR-based pricing

2.Best is to use a combination of demand-based pricing where the hotel closes out discounted rates during peak periods. However, a hotel should also price in line with the compset of the hotel. The hotel should not price itself out of the market. (e.g. a 3* hotel charging more than a 5* hotel will get in trouble as guests view this hotel as to expensive)

Question7
Many factors influence the pricing decisions you make, including the rates your competitors charge. One of the approaches to set your rates relative to the competition is called ‘Penetration’.
  1. Explain how this approach works and when you could use it.
  2. Give 1 advantage.
  3. Give 1 problem that might arise from not using this approach correctly .
/ /3

1.Penetration means that you offer distinctively lower Rates than the competition.

2.By doing this you will attract much more customers and that way they can try your (new?) product.

3.If you leave your rates too long at a low level, guests will learn to expect this level as the reference price for your hotel and it will be very difficult to raise rates.

Question8
A Rate Fence is some condition that someone has to meet in order to get a particular rate.(e.g.: a common Rate Fence is based on Product-line. A practical example in a hotel is to work with standard rooms and upgrade room types)
Give for each of the following Rate Fence types a practical implementation in a hotel context. / /3

Physical: Room view, extra’s e.g. minibar, bathroom amenities

......

Consumer: Loyalty members, employees of a specific organisation

......

Transaction: non-refundable Rates, online reservations, promotions,

......

Question9
Creating good Rate Fences and using them effectively is not easy.
Which mistake is being made in the following examples ? / /3

1. A hotel near the airport doubles their rack rate after they hear that all flights got just cancelled due to a snow storm.

Mistake: Unfair

2. A hotel posts the following message on their Facebook page: “Use the discount code on our website and you will get 25% discount on all stays in January.”

Mistake: Not effective (to easy to qualify)

3. A 4* hotel in Brussels City Center offers the following 3 room types:

-Economy: 99 eur

-Deluxe: 102 eur

-Suite: 105 eur

Mistake: Insufficient price differentials (prices are not seen as different)

Question10
Below is a screenshot of a Benchmark Report for a 3* Ghent hotel for the period of January-October 2012
1. Is the PERFORMANCE of this hotel in 2012 higher or lower than the same period in 2011?
2. What figure proves this?
3. Is this change (positive or negative) the result of a better occupancy, or is it due to changes in the average room rate?
4.From what figures can you deduct this? / /4

1.Higher

2.RGI 2012 = 107,97 which is higher than the RGI for 2011 (100,1)

3.Mostly Occupancy (Product)

4.MPI 2012= 107,81

Theo Verkoyen, spring 2013