REVENUE MANAGEMENT FINAL EXAM, Exams of Business Economics

Download REVENUE MANAGEMENT FINAL EXAM and more Exams Business Economics in PDF only on Docsity! REVENUE MANAGEMENT FINAL EXAM What is the industry term used to describe the sum of prices paid by a business's customers? - Answers -Total Revenues Historically, what concept have hospitality managers chiefly used to calculate their selling prices? - Answers -Costs What is an algebraic equivalent of the formula: Sales = Costs + Profit? - Answers -Profit = Sales - Costs What is the name for the net value achieved by both parties in a business transaction? - Answers -Profit What element is not present in a barter economy? - Answers -Money What is the formula used to calculate an owner's ROI? - Answers -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? - Answers -Constrained Supply Which industry was the first to use Yield Management principles? - Answers -Airline What is the industry term used to describe the selling of rooms which are not actually available for sale? - Answers -Overbooking What is the formula used to calculate Average Daily Rate? - Answers -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? - Answers -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? - Answers -$140.00 What is the industry term for the average revenue generated by each occupied guestroom during a defined period of time? - Answers -RevPOR What is the formula used to calculate GOPPAR? - Answers -(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? - Answers -Market Segment What is rack rate? - Answers -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) - Answers -The formula for RevPASH 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? - Answers -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? - Answers -The target market What is the term used to describe efforts undertaken to encourage travel and tourism to a specific geographic area or attraction? - Answers -Destination Marketing What is the name for the value given up by a buyer and a seller in a business transaction? - Answers -Price Charging guests for watching a "Pay-Per-View" movie in their hotel guestroom is an example of what type of pricing? - Answers -Two-tiered pricing What is the fundamental assumption upon which the concept of consumer rationality is based? - Answers -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? - Answers -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? - Answers -A value proposition Which one of the following terms is not one of the 4 Ps of the Marketing Mix? - Answers -Proposition Which of the following terms would be included in the Place portion of a hotel's marketing mix? - Answers -Distribution Channels Which of the following statements about the relationship between costs and pricing is true? - Answers -An appropriate selling price for a product or service must dictate its allowable costs What is the term used to describe a pricing system in which all customers are charged the same price at all times? - Answers -Fixed pricing What is true for franchised hotel operations in the United States? - Answers -Their prices are established by their franchisors 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? - Answers -Consumer surplus What is the relationship between differential pricing and consumer surplus? - Answers - 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? - Answers -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? - Answers -Arbitrage What is the purpose of a price fence or barrier? - Answers -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? - Answers -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? - Answers -Pricing based on consumer characteristic The requirement that a buyer present a coupon at the time of purchase is an example of what type differential pricing strategy? - Answers -Quiz four number 13 (??) 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? - Answers -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? - Answers -Pricing based on time Which statement about high volume buyers in the hospitality industry is true? - Answers -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? - Answers -Pricing based on distribution channel What is the formula revenue managers use to calculate Net ADR Yield? - Answers -a. 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? - Answers -Pricing based on bundling Which statement about revenue management and revenue optimization is true? - Answers -Revenue management seeks to maximize income while revenue optimization seeks to maximize long-term profits 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? - Answers -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? - Answers -Rooms inventory What is a rate code? - Answers -A property specific description used to identify a particular room product What is the fundamental assumption upon which the Law of Supply is based? - Answers -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? - Answers -The demand fort he product would exceed its supply 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? - Answers - The new price (P2) would be lower than the previous price (P1) because supply would decrease What concept is displayed by the intersecting point on a supply and demand curve? - Answers -An estimate of the amount of a product that would be purchased at a known price and point in time What must be true if a product producer is to continue creating and selling products? - Answers -Revenues must exceed costs What is the specialized branch of accounting that focuses on recording and analyzing the expenses incurred by an organization? - Answers -Cost Accounting What is the industry term for the point at which an organization's revenues exactly equal its costs? - Answers -Break-even point Which of the following foodservice costs is a variable cost? - Answers -Food Which of the following lodging costs is a fixed cost? - Answers -Mortgage payments 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? - Answers -Because fixed costs are incurred even if no guests are served or rooms are sold Which of the following statements about unit costs in the hospitality industry is true? - Answers -Unit costs will vary based upon how high or low an item is priced Which of the following is not typically used by revenue managers to designate specific room products sold in their hotels? - Answers -Price What is the lodging term used to describe two independent data management systems that have been electronically connected? - Answers -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? - Answers -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? - Answers -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? - Answers -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? - Answers -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? - Answers -90 forecasts 30 no-shows, 10 early departures and 20 over-stays. What is Scott's forecast for the number of rooms occupied tomorrow? - Answers -360 In the lodging industry, when is a guest considered to be an over-stay? - Answers - When the guest checks out of the hotel after his or her originally scheduled check-out date When might a revenue manager at a lodging facility be pressured to establish a long- term forecast that is unrealistically low? - Answers -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? - Answers -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? - Answers -Eliminate Discounts What is the most likely result of a revenue manager's decision to reduce rack room rates during periods of reduced demand? - Answers -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? - Answers -RevPAR will 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? - Answers -The number of potential buyers will decline What is one consistent characteristic of desirable rooms revenue? - Answers -It leads to higher GOPPAR levels Which of the following is not a hotel intermediary? - Answers -Front desk agent Which travel industry-related business group developed the Global Distribution System? - Answers -The airline industry What was the original purpose of THISCO? - Answers -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 - Answers -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? - Answers -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? - Answers -Fade rate 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? - Answers -No IDS fees will be paid on the revenue the new reservation will generate 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? - Answers -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? - Answers -Sales made via the telephone Which is most often true about room sales made by a hotel's group sales department? - Answers -ADRs are lower than average and Net ADR Yield is higher than average How are most CVBs in the United States funded? - Answers -By a combination of hotel occupancy taxes and membership dues Which statement does not accurately describe a non-electric distribution channel? - Answers -CRS is a non-electric distribution channel Which of the following rooms marketing strategies would contribute to the commoditization of hotel rooms? - Answers -Participation on a web site that lists only a hotel's name and a single rack room rate Into which hotel industry distribution channel component would a brand's call center worker enter room reservations he or she has made? - Answers -CRS Which components of the hotel industry's current reservation system currently offers its users the ability to simultaneously see comparative hotel rate information? - Answers - The GDS and IDS Where on a hotel's statement of income and expense (income statement) does the 10th Edition of the Uniform System of Accounts for Lodging Industry (USALI) recommend travel agency commissions be recorded? - Answers -The rooms expense portion Which common IDS room sales model is most dependent on selling price for its revenue generation? - Answers -Opaque Model What is true about proprietary web sites administered by a hotel's franchisor? - Answers -Content changes must be implemented by the brand's managers Lara's rack rate is $299.99. She has been asked to bid on 200 rooms nights needed by a travel agent seeking housing for a group of seniors touring the area by bus. The travel agency has requested Lara provide her a net (non-commissionable) rate. Lara's hotel typically pays a 10% travel agency fee. What would be Lara's per room night net non- commissionable bid for these rooms if she does not lower her rack rate? - Answers - $269.99 What would be the result of a revenue manager's successful implementation of aggressive strategies designed to shift guests' future bookings from more expensive distribution channels to lesser expense channels? - Answers -Increased Net ADR Yield, increased GOPPOR What is true about rooms that are sold at prices below a hotel's variable operating costs? - Answers -They will cause an increase in RevPAR Scott is a revenue manager who calculates the following for his hotel: Total (rooms + non-rooms) revenue Total occupied rooms What is the result of Scott's calculation? - Answers -RevPOR Which is considered a room-related occupancy cost? - Answers -Complimentary breakfast costs 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? - Answers -$50.00 What is the formula used to calculate flow-through for an accounting period? - Answers -(GOP This Period - GOP Last Period) / (Total Revenues This Period - Total Revenues Last Period) 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? - Answers -110% 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? - Answers -75%