Download REVENUE MANAGEMENT FINAL EXAM 2024-2025 q and more Exams Management Accounting in PDF only on Docsity! REVENUE MANAGEMENT FINAL EXAM 2024- 2025 q What is the industry term used to describe the sum of prices paid by a business's customers? - ANSWER>>total revenues Historically, what concept have hospitality managers chiefly used to calculate their selling prices? - ANSWER>>costs What is an algebraic equivalent of the formula: Sales = Costs + Profit? - ANSWER>>profit=sales-costs What is the name for the net value achieved by both parties in a business transaction? - ANSWER>>profit What element is not present in a barter economy? - ANSWER>>money What is the formula used to calculate an owner's ROI? - ANSWER>>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? - ANSWER>>constrained supply Which industry was the first to use Yield Management principles? - ANSWER>>airline What is the industry term used to describe the selling of rooms which are not actually available for sale? - ANSWER>>overbooking What is the formula used to calculate Average Daily Rate? - ANSWER>>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? - ANSWER>>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? - ANSWER>>$140 What is the industry term for the average revenue generated by each occupied guestroom during a defined period of time? - ANSWER>>RevPOR What is the formula used to calculate GOPPAR? - ANSWER>>(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? - ANSWER>>market segment What is a rack rate? - ANSWER>>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) - ANSWER>>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? - ANSWER>>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? - ANSWER>>target market What is the term used to describe efforts undertaken to encourage travel and tourism to a specific geographic area or attraction? - ANSWER>>destination marketing What is the name for the value given up by a buyer and a seller in a business transaction? - ANSWER>>price Charging guests for watching a "Pay-Per-View" movie in their hotel guestroom is an example of what type of pricing? - ANSWER>>two-tiered pricing What is the fundamental assumption upon which the concept of consumer rationality is based? - ANSWER>>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? - ANSWER>>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? - ANSWER>>value proposition Which of the following terms would be included in the Place portion of a hotel's marketing mix? - ANSWER>>distribution channels What is the fundamental assumption upon which the Law of Supply is based? - ANSWER>>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? - ANSWER>>The demand for the product would exceed its supply 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? - ANSWER>>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? - ANSWER>>quality of service offered What is the most common guest complaint about hotel guest rooms? - ANSWER>>service deficiencies What is the most common guest complaint in the food service industry? - ANSWER>>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? - ANSWER>>as C decreases, D increases Which two factors do successful revenue managers employ when they devise and implement strategic pricing plans? - ANSWER>>data management and insight Which statement about revenue management in the hospitality industry is true? - ANSWER>>It is best understood by experienced hospitality managers What is value-based pricing? - ANSWER>>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? - ANSWER>>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? - ANSWER>>fixed pricing What is true for franchised hotel operations in the United States? - ANSWER>>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? - ANSWER>>consumer surplus What is the relationship between differential pricing and consumer surplus? - ANSWER>>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? - ANSWER>>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? - ANSWER>>arbitrage What is the purpose of a price fence or barrier? - ANSWER>>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? - ANSWER>>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? - ANSWER>>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? - ANSWER>>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? - ANSWER>>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? - ANSWER>>pricing based on location Which statement about high volume buyers in the hospitality industry is true? - ANSWER>>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? - ANSWER>>Pricing based on distribution channel What is the formula revenue managers use to calculate Net ADR Yield? - ANSWER>>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? - ANSWER>>pricing based on bundling Which statement about revenue management and revenue optimization is true? - ANSWER>>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? - ANSWER>>5200 Hotel revenue managers face hard supply constraints. In which industry below are hard constraints also likely to be encountered? - ANSWER>>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? - ANSWER>>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? - ANSWER>>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? - ANSWER>>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? - ANSWER>>cartel What is the name of the US legislation that outlawed all contracts and conspiracies that unreasonably restrain interstate trade? - ANSWER>>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? - ANSWER>>sherman antitrust act What is the name of the US legislation that prohibits illegal discrimination in pricing? - ANSWER>>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? - ANSWER>>civil rights act When might a revenue manager at a lodging facility be pressured to establish a long- term forecast that is unrealistically low? - ANSWER>>When a significant financial incentive exists for exceeding the forecast In the lodging industry what factors would be overinflated to produce an unrealistically high RevPAR forecast? - ANSWER>>ADR and/or occupancy % What is the most customer-centric strategy for revenue managers to employ if they seek to optimize ADR and RevPAR in periods of temporarily heightened demand? - ANSWER>>eliminate discounts What is the most likely result of a revenue manager's decision to reduce rack room rates during periods of reduced demand? - ANSWER>>competitor's rates will also be reduced What is the most likely result of a revenue manager's decision to raise room rates during periods of very high demand? - ANSWER>>RevPAR will also be increased What is the most likely result of a revenue manager's decision to raise room rates during periods of moderate to low demand? - ANSWER>>number of potential buyers will decline What is one consistent characteristic of desirable rooms revenue? - ANSWER>>leads to higher GOPPAR values For revenue managers working in the lodging system the term "place" in the 4ps of the Marketing Mix refers to two items. One is the physical location of the hotel. What is the second? - ANSWER>>the property distribution channels What is the industry term used to describe all of a hotels unique or distinct forms of guestroom products available for sale? - ANSWER>>rooms inventory What is a rate code? - ANSWER>>A property specific description used to identify a particular room product Which of the following is not typically used by revenue managers to designate specific room products sold in their hotels? - ANSWER>>price What is the lodging term used to describe two independent data management systems that have been electronically connected? - ANSWER>>interface what would be the effect of an upon-arrival inventory management training program that resulted in a hotel significantly up selling a large percentage of its arriving guests? - ANSWER>>ADR and RevPar would increase and occupancy % would be unchanged What are two synonymous lodging industry terms used to identify the difference between purchases a group pledges to make and the purchases it actually makes? - ANSWER>>attrition and wash Tanika is the revenue manager at the Holiday House Hotel. Southeast airlines has requested that Tanika quote them a rate for the use of 20 rooms per night for a period of one year. If Southeast accepts Tanika's quote for both price and availability, what type of room rate will the hotel and airline agreed upon? - ANSWER>>contract rate Expedia.com wants Jesse, the revenue manager at the Hilton, to agree to contract terms that would require Jessie's hotel to apply the agreed upon Expedia rate to any room type (except suites) available at the time one of Expedia's customers wants to make a reservation. What is the industry term for Expedia.com's contract request? - ANSWER>>last room availability Francisco is the revenue manager at the 1500 room BayShore hotel. Tonight he forecasts 750 stay-overs and 750 arrivals. Assume he is accurate in forecasting a 6% no-show rate. How many additional reservations could Angelina accept before she would be required to walk an arriving guest? - ANSWER>>90 What is true about a revenue manager's rooms demand forecast? - ANSWER>>It is based on customer demand at an established price In the airline industry, airline companies establish ticket prices. In the lodging industry, who is responsible for establishing room selling prices for hotels that are part of a lodging company? - ANSWER>>hotel owners or their designees in the lodging industry, what is a rack rate? - ANSWER>>A room's selling price when no discounts of any type are offered What is true about discounts offered on the selling price of hotel rooms? - ANSWER>>they should be easily explainable and defensable In which situation would a customer-centric revenue manager likely implement a special event rate? - ANSWER>>During a local festival that would fill all of the area hotels Hanna is the revenue manger at the Waterford hotel. For a Saturday in the future she has determined her hotel will accept reservation only for those guests seeking to stay for three or more days. Which of the following revenue management control (restriction) strategies is she using? - ANSWER>>MLOS Bob is the revenue manger at the Waterfront hotel. For the third week in December next year he has determined the hotel will accept reservations for guests seeking to arrive on Dec 21st. Dec 22nd. or Dec 23rd; but not on Dec 24th or Dec 25th. Which of the following revenue management control (restriction) strategies is she using? - ANSWER>>CTA Which of the following is not a strategy typically used by revenue managers to optimize revenue during periods of high demand? - ANSWER>>Implement rack rate discounts to maximize occupancy To optimize revenues while enhancing property operations, which strategy pair should revenue managers seek to implement? - ANSWER>>Maximization of room codes, minimization of rate codes What strategy should be put into action when revenue managers implement special event rates and expect a sell out? - ANSWER>>Enhance guest value by providing product and/or service enhancements Which of the following is not a hotel intermediary? - ANSWER>>front desk agents Which travel industry-related business group developed the Global Distribution System? - ANSWER>>airline industry What was the original purpose of THISCO? - ANSWER>>To develop a single GDS connection for major hotel companies What is true about the calculations required to calculate the following Net ADR Yield formula? Net Room Rate Standard ADR = Net ADR Yield - ANSWER>>Standard ADR (-) Distribution Channel Costs (=) Net Room Rate Lani is the revenue manager at the Aloha Inn. In which situation would Lani optimize the Inn's gross rooms revenues? - ANSWER>>High Standard ADR, high Net ADR Yield What is the industry term for a lower room rate that is offered when a potential rooms buyer exhibits initial price resistance? - ANSWER>>fade rate Harold tracks his hotel guest check outs and the number of new reservations made at check out. Last week a total of 640 guests checked out of his hotel. In that same period, his front desk staff booked reservations for 32 future rooms nights from this group of check out guests. What is true at Harold's hotel? - ANSWER>>The reservation nights booked per check out for last week was .05 For which distribution channel type do hotels typically employ a shopper's service? - ANSWER>>Sales made via the telephone Which is most often true about room sales made by a hotel's group sales department? - ANSWER>>ADRs are lower than average and Net ADR Yield is higher than average Last month Carl's hotel had a RevPAR index of 133.0%. Based on that information alone; what does Carl know for sure about his hotel's performance last month? - ANSWER>>His ADR or occupancy index will exceed 100% Last month Carl's 500-room hotel had a comp. set that included five additional hotels offering a total of 2000 rooms. What was Carl's supply share % last month? - ANSWER>>20% Last month Carl's hotel supplied 10.8% of the rooms in his comp set. It attracted 11.6% of all the rooms sold (demand) and generated 9.1% of the total revenue achieved by the comp set. What is true about Carl's hotel? - ANSWER>>Its rates are low relative to the comp. set's and the hotel has an occupancy index above 100%. What metrics are best used to assess the relative merits of a specific lodging industry distribution channel's contribution to a single hotel? - ANSWER>>Rooms sold and Net ADR Yield It is near the end of the month and Tamrika is a revenue manager considering the impact of selling 200 room nights, for use this month, but at a room rate far below her hotel's average room rate. What would be the impact on her hotel's operating statistics if she makes this sale? - ANSWER>>Increased RevPAR and reduced flow-thru % An income statement is also commonly referred to as a(n) - ANSWER>>P&L An operation's year-end income statement shows before tax profits of $210,000. Revenues for the year were $1,850,000. What were this operation's expenses for the year? - ANSWER>>$1,640,000 An operation's income statement shows total expenses of $45,500 for a specific month. Before tax - ANSWER>>$48,750 Why are a business's vendors interested in information contained in that business's income statement? - ANSWER>>So they can make decisions about payment terms that should be offered A manager's total revenue for an accounting period is $150,000. Revenue from one of the operation's three revenue sources is $30,000. What was the sales percentage of that revenue source? - ANSWER>>20% What is an example of a controllable cost? - ANSWER>>marketing What is an example of a fixed cost? - ANSWER>>licenses and permits What is the formula for prime cost? - ANSWER>>Total cost of sales + Total labor = Prime cost A manager's operation had an income before income taxes of $2,000 in a month. Total expenses were $18,000 in that month. What was the operation's total sales amount in that month? - ANSWER>>$20,000 A manager compares the revenue results for a 28-day P&L period to the results of the 28-day P&L report from the previous 28-day period. What source of information is the manager using to analyze the revenue portion of the current P&L statement? - ANSWER>>historical performance What business segment best describes a company that is engaged primarily in the sale of intangible goods? - ANSWER>>service Tammy owns a tanning salon. Her salon has five tanning beds; thus she faces supply constraints based on capacity. In her business what additional factor acts to constrain supply? - ANSWER>>time Revenue optimization strategies can make the most impact on inventory management in industries with which kind of cost structures? - ANSWER>>low variable costs and high fixed costs Selling season tickets to sporting events such as professional baseball or basketball games at a price per game that is lower than the cost of individual tickets to all of the games is an example of what revenue optimization activity? - ANSWER>>product versioning Which of the following would not be considered highly perishable inventory? - ANSWER>>french champagne What is the business term used to describe the application of statistical formulas to past events for the purpose of predicting future events? - ANSWER>>probabilistic modeling It is Saturday night at 7:30 p.m. and Alexander's restaurant is slower than expected. Only 50% of its seats are filled. Gene, the manager, wants to increase revenue by offering a two-for-one special between 8:00 p.m. and 9:00 p.m. this same night. What will be Gene's greatest challenge in implementing this revenue optimization strategy? - ANSWER>>ability to communicate efforts In the past 20 years what has been the trend regarding the number of hospitality- related business owners choosing to affiliate with franchisors? - ANSWER>>their numbers are increasing Larissa is the corporate revenue manager for Sandstone hotels. She oversees 10 of her company's franchised properties. Which of the following is an example of Larissa's internal customers? - ANSWER>>sandstone's company controller Raymond is a revenue manager working for a franchisor. Raymond is assigned to brand partner support. What would be Raymond's role in this company? - ANSWER>>Working with business entities chosen by his company to achieve the goals of its brands Which of the following revenue management activities would not be included in the typical job description of a revenue manager employed by a CVB? - ANSWER>>product pricing