Revenue Management in the Hospitality Industry, Exams of Business Economics

Download Revenue Management in the Hospitality Industry and more Exams Business Economics in PDF only on Docsity! Revenue Management Final Exam Question and Answers Latest Update 2024 1) What is the industry term used to describe the sum of prices paid by a business's customers? - Correct answer Total Revenues 2) Historically, what concept have hospitality managers chiefly used to calculate their selling prices? - Correct answer Costs 3) What is an algebraic equivalent of the formula: Sales = Costs + Profit? - Correct answer Profit = Sales - Costs 4) What is the name for the net value achieved by both parties in a business transaction? - Correct answer Profit 5) What element is not present in a barter economy? - Correct answer Money 6) What is the formula used to calculate an owner's ROI? - Correct answer Owner's Investment Return / Owner's Original Investment = Owner's Return on Investment 7) 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 Page 1 of 32 rooms. What is this an example of? - Correct answer Constrained Supply 8) Which industry was the first to use Yield Management principles? - Correct answer Airline 9) What is the industry term used to describe the selling of rooms which are not actually available for sale? - Correct answer Overbooking 10) What is the formula used to calculate Average Daily Rate? - Correct answer Total Room's Revenue / Total Rooms Sold = Average Daily Rate 11) 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? - Correct answer 70% 12) 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? - Correct answer $140.00 13) What is the industry term for the average revenue generated by each occupied guestroom during a defined period of time? - Correct answer RevPOR Page 2 of 32 29) Which of the following terms would be included in the Place portion of a hotel's marketing mix? - Correct answer Distribution Channels 30) What is the fundamental assumption upon which the Law of Supply is based? - Correct answer The higher the demand for a product the more of it will be produced by sellers 31) According to Alfred Marshall's work, if the price of a product is lower than the natural, or equilibrium price, what will happen? - Correct answer The demand fort he product would exceed its supply 32) 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? - Correct answer The new price (P2) would be lower than the previous price (P1) because supply would decrease 33) What concept is displayed by the intersecting point on a supply and demand curve? - Correct answer An estimate of the amount of a product that would be purchased at a known price and point in time 34) What must be true if a product producer is to continue creating and selling products? - Correct answer Revenues must exceed costs Page 5 of 32 35) What is the specialized branch of accounting that focuses on recording and analyzing the expenses incurred by an organization? - Correct answer Cost Accounting 36) What is the industry term for the point at which an organization's revenues exactly equal its costs? - Correct answer Break-even point 37) Which of the following foodservice costs is a variable cost? - Correct answer Food 38) Which of the following lodging costs is a fixed cost? - Correct answer Mortgage payments 39) 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? - Correct answer Because fixed costs are incurred even if no guests are served or rooms are sold 40) Which of the following statements about unit costs in the hospitality industry is true? - Correct answer Unit costs will vary based upon how high or low an item is priced 41) Which of the following statements about the relationship between costs and pricing is true? - Correct answer An appropriate selling price for a product or service must dictate its allowable costs Page 6 of 32 42) 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? - Correct answer An understanding of an organization's customers 43) Which formula represents a buyer's view of a sales transaction? - Correct answer Perceived Value - Selling Price = Personal Profit 44) What type of benefit is lacking in material qualities and is not able to be touched or seen but nonetheless can still be perceived? - Correct answer Intangible 45) What will be the typical case in an auction when the initial price bid for the item being sold is very low? - Correct answer The number of potential bidders will be high 46) Penny Larson is traveling 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? - Correct answer Spending her own money on herself 47) 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? - Correct answer Spending someone else's money on herself Page 7 of 32 59) What is the most common guest complaint about hotel guest rooms? - Correct answer Service deficiencies 60) What is the most common guest complaint in the food service industry? - Correct answer Service Quality 61) Consider the formula: (A + B) - C = D 62) Where: A = Perceived tangible product benefit 63) B = Perceived intangible service benefit 64) C = Price 65) D = Value 66) If all other variables are held constant, which statement is also true? - Correct answer As C decreases, D increases 67) Which two factors do successful revenue managers employ when they devise and implement strategic pricing plans? - Correct answer Data management and insight 68) Which statement about revenue management in the hospitality industry is true? - Correct answer Quiz four Question one (??) 69) What is value-based pricing? - Correct answer A pricing system based upon a buyer's view of product or service value 70) All except one of the following pricing systems are marketing- based. Which one is not an example of marketing-based pricing? - Correct answer Return on Investment (ROI) pricing Page 10 of 32 71) What is the term used to describe a pricing system in which all customers are charged the same price at all times? - Correct answer Fixed pricing 72) What is true for franchised hotel operations in the United States? - Correct answer Their prices are established by their franchisors 73) 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? - Correct answer Consumer surplus 74) What is the relationship between differential pricing and consumer surplus? - Correct answer Differential pricing is a strategy used by sellers to minimize consumer surplus 75) Which course of action would be most beneficial to the profit generating ability of a revenue manager's business? - Correct answer The majority of any consumer surplus is captured by the business 76) 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 Page 11 of 32 purchased to interested individuals who visit the Hotticket website. What is the name of the activity Hottickets.com is engaging in? - Correct answer Arbitrage 77) What is the purpose of a price fence or barrier? - Correct answer To identify who is and who is not eligible for a special pricing offer 78) Which differential pricing strategy would in most cases be illegal or unethical if implemented? - Correct answer Pricing based on the ethnicity of the buyer 79) The use of a formal customer rewards program is an example of what type of differential pricing strategy? - Correct answer Pricing based on consumer characteristic 80) The requirement that a buyer present a coupon at the time of purchase is an example of what type differential pricing strategy? - Correct answer Quiz four number 13 (??) 81) 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? - Correct answer Pricing based on location 82) A business hotel's promotion targeting local area residence and designed to offer them significantly reduced room rates on Sunday Page 12 of 32 95) 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? - Correct answer Attrition and wash 96) 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? - Correct answer Contract rate 97) 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? - Correct answer Last room availability 98) 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? - Correct answer 90 Page 15 of 32 99) What is true about a revenue manager's rooms demand forecast? - Correct answer It is based on customer demand at an established price 100) 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? - Correct answer Hotel owners or their designees 101) In the lodging industry, what is a rack rate? - Correct answer A room's selling price when no discounts of any type are offered 102) Which of the following is not a strategy typically used by revenue managers to optimize revenue during periods of high demand? - Correct answer Implement rack rate discounts to maximize occupancy 103) What is true about discounts offered on the selling price of hotel rooms? - Correct answer They should be easily explainable and defensible 104) In which situation would a customer-centric revenue manager likely implement a special event rate? - Correct answer During a local festival that would fill all of the area hotels 105) Hanna is the revenue manger at the Waterford hotel. For a Saturday in the future she has determined her hotel will accept Page 16 of 32 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? - Correct answer MLOS 106) 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? - Correct answer CTA 107) To optimize revenues while enhancing property operations, which strategy pair should revenue managers seek to implement? - Correct answer Maximization of room codes, minimization of rate codes 108) What strategy should be put into action when revenue managers implement special event rates and expect a sell out? - Correct answer Enhance guest value by providing product and/or service enhancements 109) 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? - Correct answer Future Data Page 17 of 32 120) Scott is a revenue manger in a 600 room hotel. For tomorrow he forecasts that 10 rooms will be OOO and that there will be 80 stayovers with 300 arrivals. He also forecasts 30 no-shows, 10 early departures and 20 over-stays. What is Scott's forecast for the number of rooms occupied tomorrow? - Correct answer 360 121) In the lodging industry, when is a guest considered to be an over-stay? - Correct answer When the guest checks out of the hotel after his or her originally scheduled check-out date 122) When might a revenue manager at a lodging facility be pressured to establish a long-term forecast that is unrealistically low? - Correct answer When a significant financial incentive exists for exceeding the forecast 123) In the lodging industry what factors would be overinflated to produce an unrealistically high RevPAR forecast? - Correct answer ADR and/or Occupancy % 124) 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? - Correct answer Eliminate Discounts 125) What is the most likely result of a revenue manager's decision to reduce rack room rates during periods of reduced demand? - Correct answer Competitor's rates will also be reduced Page 20 of 32 126) What is the most likely result of a revenue manager's decision to raise room rates during periods of very high demand? - Correct answer RevPAR will be increased 127) What is the most likely result of a revenue manager's decision to raise room rates during periods of moderate to low demand? - Correct answer The number of potential buyers will decline 128) What is one consistent characteristic of desirable rooms revenue? - Correct answer It leads to higher GOPPAR levels 129) Which of the following is not a hotel intermediary? - Correct answer Front desk agent 130) Which travel industry-related business group developed the Global Distribution System? - Correct answer The airline industry 131) What was the original purpose of THISCO? - Correct answer To develop a single GDS connection for major hotel companies 132) What is true about the calculations required to calculate the following Net ADR Yield formula? 133) Net Room Rate/Standard ADR = Net ADR Yield - Correct answer Standard ADR (-) Distribution Channel Costs (=) Net Room Rate Page 21 of 32 134) Lani is the revenue manager at the Aloha Inn. In which situation would Lani optimize the Inn's gross rooms revenues? - Correct answer High Standard ADR, high Net ADR Yield 135) What is the industry term for a lower room rate that is offered when a potential rooms buyer exhibits initial price resistance? - Correct answer Fade rate 136) What is true about a future room reservation booked for a guest whose original reservation was booked through expedia.com and who is presently checking out of the hotel? - Correct answer No IDS fees will be paid on the revenue the new reservation will generate 137) 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? - Correct answer The reservation nights booked per check out for last week was .05 138) For which distribution channel type do hotels typically employ a shopper's service? - Correct answer Sales made via the telephone 139) Which is most often true about room sales made by a hotel's group sales department? - Correct answer ADRs are lower than average and Net ADR Yield is higher than average Page 22 of 32 151) Scott is a revenue manager who calculates the following for his hotel: 152) Total (rooms + non-rooms) revenue 153) Total occupied rooms 154) What is the result of Scott's calculation? - Correct answer RevPOR 155) Which is considered a room-related occupancy cost? - Correct answer Complimentary breakfast costs 156) At Rachel's hotel the CPOR is $40.00. Her Net ADR Yield averages 85% and her franchise fees average 5%. What is Rachel's average minimum ADR sales point? - Correct answer $50.00 157) What is the formula used to calculate flow-through for an accounting period? - Correct answer (GOP This Period - GOP Last Period) / (Total Revenues This Period - Total Revenues Last Period) 158) Last month Carl's hotel ran a 55% occupancy. His comp. set had 50,000 room nights available for sale and sold 25,000 rooms. What was Carl's occupancy index last month? - Correct answer 110% Page 25 of 32 159) Last month Carl's hotel had an ADR of $150.00. The ADR of his comp. set was $200.00. What was Carl's ADR index last month? - Correct answer 75% 160) Last year Carl's hotel had an occupancy index of 120%. From that information, what can be said about Carl's hotel? - Correct answer It achieved a higher average occupancy % than its comp. set 161) Last month Carl's hotel had an ADR index of 125%. In the same month his RevPAR index was 100%. What can be said about Carl's hotel? - Correct answer HIs occupancy index is less than 100% 162) Last month Carl's hotel had 10,000 available room nights and sold 6,000 room nights. Last month his comp set had an average occupancy of 80%. What was Carl's occupancy index last month? - Correct answer 75% 163) Last month Carl's hotel had an ADR index of 105%. What is true about his hotel's ADR last month? - Correct answer It was somewhat higher than the ADR of his competitive set 164) Last month Carl's hotel had an ADR of $200.00. The ADR for his comp. set for the same month was $225.00. Prior to last month, Carl's Year-To-Date ADR index was 110%. What will always be true about his Year-To-Date ADR index when last month's operating Page 26 of 32 results are included in the Year-To-Date data? - Correct answer It will be less than 110% 165) This Year-To-Date, Carl's hotel is averaging an ADR of $125.00. The ADR of his comp. set for the same period is $125.00. Assume Carl's comp. set is an appropriate one. What would you recommend Carl do if his occupancy index for the same period is 140%? - Correct answer Carefully increase rack rates to optimize GOPPAR 166) Last month Carl's hotel had a RevPAR index of 100. His occupancy index was 132.5 and his ADR index was 75.5. What is true about his hotel's performance last month? - Correct answer His GOPPAR is not optimized because it is low relative to the RevPAR index 167) Last month Carl's hotel had an ADR index of 80.0% and an occupancy index of 120%. What was Carl's RevPAR index for last month? - Correct answer 96.0% 168) 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? - Correct answer His ADR or occupancy index will exceed 100% Page 27 of 32 179) Shaniqua's restaurant utilizes a product cost percentage pricing system. She would like to sell an item for $19.95. Her targeted product cost is 40%. With a 40% product cost, what is the amount her kitchen staff can spend on product cost when making this item? - Correct answer $7.98 180) Shaniqua's restaurant utilizes a contribution margin pricing system. She would like the selling price of a new menu item she is introducing to be $10.00. Her required contribution margin is $4.00. Her labor costs are 30%. What is the amount her kitchen staff can spend on product cost when making the item? - Correct answer $6.00 181) Why can foodservice operators sell a 20 year Scotch at a price higher than a one year old Scotch? - Correct answer The quality of a 20 year old Scotch is higher than a one year old Scotch 182) Assume a food and beverage operator offers guests a 20-year old Scotch at a price five times the amount charged for one-year old Scotch. Assume also that the operator's customers very rarely purchase the more expensive Scotch. Which statement would explain why the 20 year old Scotch does not sell well? - Correct answer Customers do not accept this seller's price-value proposition 183) Arthur's restaurant is extremely busy on Friday and Saturday. The manager of the operation offers reduced prices on quick-to- Page 30 of 32 prepare and quick-to-serve menu items on those two nights. What revenue related factor is this restaurant manager seeking to positively influence? - Correct answer Capacity 184) Poco Miller's restaurant has 130 seats. Last night Poco served 295 guests. What was is the formula Poco would use to calculate her table turns? - Correct answer 295/130 = Table turns 185) Texas Roadhouse restaurants do not accept reservations. Guests who call ahead, however, can have their names added to the wait list prior to arriving at the restaurant. What revenue-related factor is this strategy designed to optimize? - Correct answer Capacity 186) Why should revenue managers monitor their competitors' prices? - Correct answer To keep their own prices on the higher end of their competitors' price ranges. 187) Which value-related factor does a revenue manager seek to impact if prices for carry-out menu items in a restaurant are 10% less than the price of the same items when they are consumed in that restaurant's dining room? - Correct answer Service Level 188) Offering the same menu item in a variety of portion sizes is an example of what type of differential pricing strategy? - Correct answer Product versioning Page 31 of 32 189) Last night Lara's restaurant served 225 guests and achieved total revenue of $4,500. What was Lara's check average last night? - Correct answer $20.00 190) What foodservice value-related factor is most affected when a revenue manager successfully implements a price blending strategy? - Correct answer Menu Mix 191) At Lauren's restaurant the check average is always higher on Saturday night than on any other night. What is the most likely cause of the check average variance she experiences? - Correct answer The sales mix Page 32 of 32