Revenue Management Strategies and Tactics, Exams of Business Economics

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HM 441 Study Guide 91 Questions with Answers 2023

CHAPTER 1: What is Rev Management? - CORRECT ANSWER Identify which of these is not a positive of using revenue management strategies and tactics: - CORRECT ANSWER Motivate employees The Hurdle Rate is...? - CORRECT ANSWER The Lowest Rate for a Given Day A benefit of variable pricing within revenue management is the smoothing of demand. - CORRECT ANSWER True Revenue management can be defined as - CORRECT ANSWER A set of strategies and techniques used to sell the right product, to the right customer, at the right time and at the right prices. Revenue management is a set of revenue maximization strategies and tactics that: - CORRECT ANSWER can be used to improve the profitability of certain businesses. When the American Airlines CEO developed yield management, what type of information was crucial to its success? - CORRECT ANSWER forecasting Which of the following statements about hotel revenue management is FALSE? - CORRECT ANSWER Revenue management is new, as are all of the strategies that are employed to maximize profit. What is the main reason that travelers today have more clout than ever before? - CORRECT ANSWER They have information on virtually everything at their fingertips.

Which of the following is NOT a criterion needed for an industry to unlock the full potential of revenue management? - CORRECT ANSWER low fixed costs and high variable costs Revenue Management is a computer system and is price discounting. - CORRECT ANSWER False The goal of revenue management is to MAXIMIZE REVENUE per Available Time- Based Inventory Unit (or RevPATI). RevPATI formula applied to all industries translates into...? - CORRECT ANSWER Capacity Utilization x Average Revenue per Service Transaction Revenue Management is NOT necessarily about... - CORRECT ANSWER Achieving 100 % occupancy and a perfect science Revenue Management includes a multidisciplinary management techniques applied to several sub-sectors of the hospitality. Which of the following is NOT one discipline within Revenue Management? - CORRECT ANSWER Logistics Management To interpret measures of a hotel's performance, managers often compare those measures with: - CORRECT ANSWER all of the above. (the budget for the period, industry or sector averages, historical figures from comparable earlier periods at the hotel) Which of the following statements about competitive sets is FALSE? - CORRECT ANSWER Rev Management is new... CHAPTER 2: Measurement - CORRECT ANSWER If a 300-room hotel achieves 70 percent occupancy for April at an ADR of $153 per room, what will room revenue equal? - CORRECT ANSWER $963,900 (Room Rev = Room Nights Sold x ADR 300 (.70)(30)(153) Many market intelligence services and reports are available to study hotels comp sets. Which one NOT often used to monitor the progress of the marketplace? - CORRECT ANSWER Open Table

What are the profits for a room night at a property with the following costs: Occupancy $25.75, administrative $19.25 and fixed cost of $32.00 and a room rate of $89.00? - CORRECT ANSWER $12. In January, the 200-room SnowBound Inn ran a skiers special that resulted in them selling 5,735 rooms during the month. What was the occupancy percentage for the month? - CORRECT ANSWER 92.5% [5,735/(20031)] Which of the following statements about competitive sets is FALSE? - CORRECT ANSWER Most Internet searches are organic with results based solely on relevant search criteria. If a Hotel has a capacity share of 12.7% and a rooms night share of 11.8% that means that the hotel - CORRECT ANSWER Did not get their fair share of the room nights. To interpret measures of a hotel's performance, managers often compare those measures with: - CORRECT ANSWER all of the above (historical figures from comparable earlier periods at the hotel, industry or sector averages, the budget for the period) 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. (RevPAR = ADR x Occupancy %) 200(175/250) What is NOT part of the Revenue Management Key Performance Indicators (KPI) you can research to determine past performance? - CORRECT ANSWER Net Revenue Gross operating profit per available room equals the Gross operating profit for a period divided by the ___________________? - CORRECT ANSWER Available rooms during that period In a 1050-room competitive set, Hotel A has 300 rooms. Hotel B has 350 rooms, and Hotel C has 400 rooms. During a recent 30-day period in which the entire competitive set sold 25,400 rooms, Hotel A sold 8000 rooms. Which of the

following statements is indisputably TRUE? - CORRECT ANSWER Hotel A exceeded its fair share. (Remember that if a property's Capacity Market Share is LOWER than the property's Room Nights Share then the hotel DID GET their Fair Share.) Capacity Market Share = Hotel A Rooms Avail/Mkt Rooms Avail 300/1050 = 28.57% Room Night Share = Hotel A Rooms Sold/Mkt Rooms Sold 8000/25400 = 31.49% ...THEREFORE, Hotel A is selling more rooms than their fair share Which 100-Room Hotel would you rather manage? Hotel A: Average Rate=$ 240 ; Occupancy= 80% - CORRECT ANSWER You would you rather manage the hotel which has higher ADR and higher Occupancy because that would be the one generating the highest RevPAR and potentially the most profitable Doing business evaluation and choosing between different sales requests it's a complex process because of many reasons. Which of the following statements about competitive sets is FALSE? - CORRECT ANSWER Competitive sets incur into very different costs per room sold RESTAURANT REVENUE MANAGEMENT - CORRECT ANSWER A process flow diagram: - CORRECT ANSWER all of the above (helps to identify potential redundancies in a service system, traces how object move through a system, is useful when movement is a large part of system operations, helps to identify potential gaps in a service system) A diner has an average dining duration of 36 minutes at breakfast time. The standard deviation of dining duration is 5 minutes. Which of these RRM solutions would NOT help decrease the variation in duration? - CORRECT ANSWER issuing a coupon for a late breakfast special The steps of an RRM program include: - CORRECT ANSWER all of the above (implementing and monitoring solutions, analyzing information and developing appropriate solutions, collecting data, establishing the baseline)

Which is NOT a condition necessary for the successful application of RM to a service business: - CORRECT ANSWER low fixed and high variable costs If a 210-seat restaurant is open 360 days a year for 8 hours a day and has total annual revenue of $6,000,000. Its RevPASH is: - CORRECT ANSWER 6,000,000/ [210 (360 x 8)] = 6000000/604800 = $9. (RevPASH = Revenue for the desired time period ÷ Number of seats * number of hours in operation) - CORRECT ANSWER When RevPASH is low, RRM strategies to use include all of the following except: - CORRECT ANSWER Overbooking Time-variable demand means: - CORRECT ANSWER different market segments use a service at different times A 100-seat restaurant has a RevPASH of $5. If RevPASH increased by 2%, how much more money would the restaurant be making daily? Assume it is open for 10 hours a day. - CORRECT ANSWER $ Revenue management combines elements of: - CORRECT ANSWER supply and demand management If a restaurant had an overall average RevPASH of $14 and an overall seat occupancy of 66%, its average check would be: - CORRECT ANSWER $21. (RevPASH = Av.Check x Occ $14 ÷ 66% = $21.21) Much of the data required to perform an RRM analysis can be obtained through: - CORRECT ANSWER all of the above (POS, Observation, & Manual Collection) Throughput time measures: - CORRECT ANSWER the time a customer spends in the system from enter to exit High RevPATI solutions include all of the following, except for: - CORRECT ANSWER smooth demand from shoulder to peak periods CHAPTER 4: Strategic Revenue Management - CORRECT ANSWER

What type of Internet distribution channel models lets customers name the price they want to pay and books them into a property before revealing its name? - CORRECT ANSWER opaque model Which of the following strategic objectives of distribution channel management is NOT a valid one? - CORRECT ANSWER The most profitable (Correct: most cost effective, highest rev producers, most easily controlled) The ratio that expresses how a change in the price of a product or service affects unit demand for that product or service is called? - CORRECT ANSWER Elasticity Hotels are long-term capital investments. To support this sustainability, hotels market communications needs to analyze the hotel and its competitors to clearly communicate what? - CORRECT ANSWER Its competitive advantages What is a successful positioning strategy based on? - CORRECT ANSWER a set of competitive advantages What is the elasticity of a hotel that sees a 10 percent increase in occupancy when it lowers its room rate from $100 to $80? - CORRECT ANSWER 0.5 (Elasticity = % change in demand/ % change room rate 10/20 = 0.5) What type of traditional market segmentation is often identified by postal code? - CORRECT ANSWER geographic The Horntooth Ranch Hotel is run by a management company that operates several mid-range properties under many different corporate flags. What type of management Contract Company is it? - CORRECT ANSWER second-tier To maximize profitability by allocating sufficient inventory to the most important segments is the objective of what? - CORRECT ANSWER Market Mix Management Which of the following is NOT a question that any Customer Relationship Management (CRM) system helps to answer of interest to a revenue manager? - CORRECT ANSWER How do I forecast the best customers?

The major traditional market segmentation variables are geographic, demographic, psychographic, and behavioral traits and price-sensitivity. Which of these considers criteria such as social class, personality and lifestyle? - CORRECT ANSWER Psychographic In Strategic Revenue Management as in Strategic Marketing, not everyone is a potential customer. Why? Due to... - CORRECT ANSWER Hotels target markets Hotels location as a competitive advantage can change over time. What is NOT an appropriated example? - CORRECT ANSWER Hotels in the heart of Paris (France) We have studied various distribution methods or models. Which one is a combination of the merchant and agency models? - CORRECT ANSWER The Hybrid Model CHAPTER 5: RM's place in hotels & Ethics - CORRECT ANSWER Reference price should answer the following question or questions: - CORRECT ANSWER The price perceived by consumers to be the normal price for a product or a service? What technological advance has made it possible for all room sellers to access each inventory unit, including designated room blocks? - CORRECT ANSWER Single-image Inventory At what stage of the evolution of the revenue manager position were certification programs and specialized training introduced? - CORRECT ANSWER Intermediate The price perceived by consumers to be the normal price for a product or a service is called the - CORRECT ANSWER reference price From an ethics perspective, a well designed service recovery program is the correct strategy to reduce conflicts in case of ____________________. - CORRECT ANSWER overbooking

When the Director of Revenue Management (DORM) reports directly to the Hotel's general manager it's not only the most common case but it's what Forgacs call? - CORRECT ANSWER evolutionary stage Dual entitlement is the idea that consumers feel (1) They are entitled to a reasonable price, and (2) ____________________________________________________ - CORRECT ANSWER businesses are entitled to a reasonable profit. The hotel industry is plagued by the problem of "no-shows" - people who book rooms but do not show up to use them and then often refuse to pay for them. To compensate for "no shows" and "cancellations" hotels "overbook" their capacity. This trade-off cost for not running into empty rooms, often is perceived as - CORRECT ANSWER all of the above (out-of-pocket costs for the hotel, potentially loosing future revenue and generating bad will for the hotel, unfair practice, the hotel not honoring a customer's booking) Some hotels are known to make check calls to ascertain the availability of backup rooms at nearby properties and they adjust the aggressiveness of their overbooking accordingly. In essence, these hotels are only thinking _______________________________ and not consider the overall implications. - CORRECT ANSWER Short term What type of revenue management systems execute all of the rate and capacity allocation controls necessary to achieve revenue management goals? - CORRECT ANSWER decision support systems Which of the following statements about revenue managers is FALSE? - CORRECT ANSWER A revenue manager's job is usually restricted to crunching numbers and producing reports. Which of the following tasks is a core technical competency required of nearly all revenue managers? - CORRECT ANSWER analyzing financial statements and market data Which of the following statements about revenue managers is absolutely TRUE? - CORRECT ANSWER Since two customers booking the same type of room may be

paying different rates based on the time of their booking, the customer may feel they are getting a "fair price". CHAPTER 3: Tactical Revenue Management - CORRECT ANSWER The Hip-Hop Hotel is expecting the arrival of a major pop star and her entourage while she performs three concerts in a nearby venue. Her security team has been working with the property management team to ensure that she is able to check in while the lobby is receiving minimal use. They've also demanded a long list of other accommodations that will keep the entire staff busy on the day of she checks in. What type of stay control tactic might the Hip-Hop Hotel institute? - CORRECT ANSWER Close To Arrival (CTA) The DeLong Hotel has three different rate categories of rooms. Forecasts show midweek low-demand dates for the higher-priced executive floor rooms. Using principles of capacity management, the reservations manager should: - CORRECT ANSWER overbook rooms in lower-priced categories and, if necessary, upgrade arriving guests to higher-priced rooms. In a property forecasted high period of demand period, if the RM displacement analysis shows that by accepting a certain group the overall net revenue gain is positive (more revenues than the costs of displacement transient demand in the future), increasing profitability, than its Sales or Reservations departments should be inclined to: - CORRECT ANSWER Accept the group reservation Denial reports from reservations show us how much more business we could have captured if we had additional capacity or inventory. Since there was more demand than supply, we need to assess whether our rates were too low for that time period. A denial occurs when: - CORRECT ANSWER A facility is not able to accommodate a guest due to unavailability of product or service at that price. Why does Gabor Forgacs (your RM book's author) mentions in regards to displacement analysis that "the numeric results of the (displacement) analysis should not be the only criteria for the decision" p.57? - CORRECT ANSWER Because rather than a quick tactical interpretation of the numbers, one should consider other critical (and eventully strategic) information e.g. Existing competitor key account

Which approach to pricing takes a long-term view? - CORRECT ANSWER strategic approach What is the industry term for a customer group which can be readily identified by one or more common characteristics? - CORRECT ANSWER Market segment Experienced hotel managers know of several preventive measures to avoid walking guests. Which of the following is not a common practice? - CORRECT ANSWER Compensate the guest Peggy is the revenue manager at a 1500 room hotel. For next Friday Peggy's PMS shows 300 check-outs, 900 stayovers, 250 transient arrivals and a 200-room group block that begins a three-day stay on that day. What is Peggy's current rooms available for sale for next Friday? - CORRECT ANSWER 150 What is a guest called that decides to stay past than the scheduled check-out date? - CORRECT ANSWER overstay (or Late Check-out) Most hotel managers have practiced tactical revenue management before. By doing tactical revenue management was in fact how most revenue managers started their careers. From the following below, what is NOT included in this type of revenue management? - CORRECT ANSWER Packaging and Market Mix management A _____________ contains a breakdown of all revenue and expenses reasonably planned and expected for a particular period and is not likely to change unless unforeseen events force a revision. - CORRECT ANSWER Budget 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? - CORRECT ANSWER Constrained supply Unconstrained demand is: - CORRECT ANSWER The total level of demand that exists without the constraint of the capacity available to accommodate it.

What is the lodging industry term for the situation that occurs when a hotel is unable to accommodate a guest's reservation preference due to the unavailability of the room or service at the price, or on the date, originally requested by the guest? - CORRECT ANSWER Denied (reservation) What is true about a revenue manager's rooms demand forecast? - CORRECT ANSWER It is based on customer demand at an established price