REVENUE MANAGEMENT FINAL EXAM QUESTIONS AND CORRECT ANSWERS

REVENUE MANAGEMENT FINAL EXAM QUESTIONS AND CORRECT ANSWERS "Which industry was the first to use Yield Management principles? - CORRECT ANSWER Airline" "What is the industry term used to describe the selling of rooms which are not actually available for sale? - CORRECT ANSWER Overbooking" "What is the formula used to calculate Average Daily Rate? - CORRECT 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? - CORRECT 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? - CORRECT ANSWER $140.00" "Charging guests for watching a "Pay-Per-View" movie in their hotel guestroom is an example of what type of pricing? - CORRECT ANSWER Two-tiered pricing" "What is the fundamental assumption upon which the concept of consumer rationality is based? - CORRECT 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? - CORRECT ANSWER Value" "Which of the following foodservice costs is a variable cost? - CORRECT ANSWER Food" "Which of the following lodging costs is a fixed cost? - CORRECT ANSWER Mortgage payments" "Which of the Four I's of service refers to the tendency of consumers to equate the quality of service provided with the attitude of the person who actually provides the service? - CORRECT ANSWER Inseperability" "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? - CORRECT 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? - CORRECT ANSWER The quality of service offered" "What is the most common guest complaint about hotel guest rooms? - CORRECT ANSWER Service deficiencies" "What is the most common guest complaint in the food service industry? - CORRECT 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? - CORRECT ANSWER As C decreases, D increases" "Which two factors do successful revenue managers employ when they devise and implement strategic pricing plans? - CORRECT ANSWER Data management and insight" "Which statement about revenue management in the hospitality industry is true? - CORRECT ANSWER Quiz four Question one (??)" "What is value-based pricing? - CORRECT 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? - CORRECT 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? - CORRECT ANSWER Fixed pricing" "What is true for franchised hotel operations in the United States? - CORRECT ANSWER 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? - CORRECT ANSWER Consumer surplus" "What is the relationship between differential pricing and consumer surplus? - CORRECT ANSWER Differential pricing is a strategy used by sellers to minimize consumer surplus" "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" "Ray sold 100 rooms on Monday at an ADR of $150.00. He sold 150 rooms on Tuesday at an ADR of $200.00. What was his ADR for the combined days of Monday and Tuesday? - CORRECT ANSWER $180.00" "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 the lodging industry term for a revenue management strategy that instructs reservationists to decline any room reservation request that does not equal or exceed the pre-determined minimum number of nights allowed? - CORRECT ANSWER MLOS" "Amanda is the revenue manager of a hotel. When she opened her e-mail last Friday she found a message from the Executive Director of the state dental association asking Amanda for a formal price quote on rooms and meeting space needed by the association for their annual conference. What would Amanda call this inquiry? - CORRECT ANSWER RFP" "What is the name for the rooms-related report that would identify the number of group rooms currently on the books as well as the rate or speed at which group rooms are currently being sold? - CORRECT ANSWER Pace report" "What is the formula revenue managers use to calculate the percentage change in sales which has occurred from the last accounting period to the present period? - CORRECT ANSWER (Total Sales This Period - Total Sales Last Period ) / Total Sales Last Period = % Change in Sales" "What is the primary reason for forecasting future room demand? - CORRECT ANSWER To make pricing-related decisions" "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" "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" "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" "In the lodging industry what factors would be overinflated to produce an unrealistically high RevPAR forecast? - CORRECT 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? - CORRECT ANSWER Eliminate Discounts" "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" "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" "What is true about a future room reservation booked for a guest whose original reservation was booked through 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" "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" "For which distribution channel type do hotels typically employ a shopper's service? - CORRECT ANSWER Sales made via the telephone" "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" "How are most CVBs in the United States funded? - CORRECT ANSWER By a combination of hotel occupancy taxes and membership dues" "Which statement does not accurately describe a non-electric distribution channel? - CORRECT ANSWER CRS is a non-electric distribution channel" "Which of the following rooms marketing strategies would contribute to the commoditization of hotel rooms? - CORRECT ANSWER 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? - CORRECT ANSWER CRS" "Which components of the hotel industry's current reservation system currently offers its users the ability to simultaneously see comparative hotel rate information? - CORRECT ANSWER 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? - CORRECT ANSWER The rooms expense portion" "Which common IDS room sales model is most dependent on selling price for its revenue generation? - CORRECT ANSWER Opaque Model" "What is true about proprietary web sites administered by a hotel's franchisor? - CORRECT ANSWER 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? - CORRECT ANSWER $269.99" "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%" "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" "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%" "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%" "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" "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 results are included in the Year-To-Date data? - CORRECT ANSWER It will be less than 110%" "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" "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" "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%" "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%" "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" "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" "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" "What foodservice value-related factor is most affected when a revenue manager successfully implements a price blending strategy? - CORRECT ANSWER Menu Mix" "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" This formula represents a buyers view of a sales transaction? - CORRECT ANSWER Perceived Value-Selling Price=Personal Profit" "Effective revenue managers use this to best develop and evaluate their organizations pricing and revenue management strategies and tactics. - CORRECT ANSWER Regular Strategy meetings" "A pricing system based upon a buyers view of product or service value - CORRECT ANSWER Value-based pricing" "Included in the Place portion of a hotel's markieting mix - CORRECT ANSWER Distribution channels" "Tasha's hotel sold 175 rooms last night at an ADR of 200.00. Her hotel has 250 rooms. What was the RevPAR? - CORRECT ANSWER 140.00" "The term used to describe efforts undertaken to encourage travel and tourism to a specific geographic area or attraction - CORRECT ANSWER Destination marketing." "An appropriate selling price for a product or service must dictate its allowable costs. - CORRECT ANSWER TRUE" "(A + B) - C = D - CORRECT ANSWER As C decreases, D increases" "The name for the net value achieved by both parties in a business transaction - CORRECT ANSWER Profit" "STR - CORRECT ANSWER A company that specializes in helping hospitality managers evaluate their effectiveness." "The requirement that a buyer present a coupon at the time of purhcase is an example of what differential pricing - CORRECT ANSWER pricing based on customer chracteristics." "What special challeges do buyers of hospitality products such as hotel guestrooms or restuarant meals face - CORRECT ANSWER Difficulty in quality evaluation prior to purchase" "What is the fundemental 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" "100 hotel rooms to sell. Saturday night has enough customers to sell 125 rooms so she will be refusing 25 requests for rooms` - CORRECT ANSWER Constrained supply" "GOPpar - CORRECT ANSWER =Total(rooms + non Rooms)revenue/Total occupied rooms" "Donna is a hotel revenue manager preparing next year's rooms forecast. donna knows that in Nov. 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 primarily be using to make her decision? - CORRECT ANSWER Future Data" "For revenue managers working in the lodging industry the term "Place" in the 4ps of marketing mix refers to items. One is the physical location of the hotel. What is the second? - CORRECT ANSWER The property's distribution channel" "A Front Desk Agent is NOT a hotel intermediary. - CORRECT ANSWER TRUE" "One consistant characteristic of desirable room revenue is - CORRECT ANSWER It leads to Higher GOPPAR levels" "What strategy should be put into action when revenue managers implement special events rates/ - CORRECT ANSWER Enhance guest value by providing product and/or service enhancements." "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 expensive channels? - CORRECT ANSWER Increased Net ADR yield, increased GOPPAR" "It is near the end of the month and Tamika is a revenue manager considering the impact of selling 200 room nights, for use this month, but at a room rate far below her hotels average room rate. what would be the impact on her hotel's operating statistics if she make this sale" - CORRECT ANSWER Increased RevPAR and reduced flow-thru %" "Price - CORRECT ANSWER is not typically used by revenue managers to designate specific room products sold in their hotels." "Last month Carls 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%" "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 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" "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" "In the lodging industry what factors would be overinflated to produce an unrealistically high RevPAR forecast? - CORRECT ANSWER ADR and/or Occupancy %" "Hanna is the revenue manager at the Waterford Hotel. For a Saturday in the future she has determined her hotel will accept reservations only for those guests seeking to stay for two or more days. She is using what type of revenue management control(restrictions)strategies? - CORRECT ANSWER MLOS" "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? - CORRECT ANSWER 20%(formula=Available rooms subject hotel/Available rooms comp set + subject hotel rooms)or 500/(2000 +500)=supply share %" "The most often true about room sales made by a hotel's group sales department is - CORRECT ANSWER ADRs are lower than average and Net ADR Yield is higher than average." "What is the formula revenue managers use to calculate the percentage change in sales which has occurred from the last accounting period to the present period? - CORRECT ANSWER Ttl Sales this period - Ttl Sales Last Period / Ttl Sales Last Period = % of Change in Sales" "Amanda is the revenue manager of a hotel. When she opened her email last friday she found a message from the Exec. Director of the state dental assoc. asking Amanda for a formal price quote on rooms and meeting space needed by the assoc. for their annual onference. What would Amanda call this inquiry? - CORRECT ANSWER RFP" "Laras 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. Laras hotel typically pays 10% travel agency fee. What would be Laras per room night net non-commercial bid for these rooms if she does not lower her rack rate? - CORRECT ANSWER 269.99 (formula=(299.99 * .10=(30.00)) - 299.99 = 269.99" "Which components of the hotel industry's current reservaation system currently offers its users the ability to simultaneously see comparative hotel rate information? - CORRECT ANSWER The GDS and IDS" "Las 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%" "This YTD, 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" "In the lodging industry, what is rack rate? - CORRECT ANSWER A rooms selling price when no discounts of any type are offered." "Angelina is the RM at the 1000 room Bay hotel. Tonight she forecasts 600 stay-overs and 400 arrivals. Assume Angelina is accurate in forecasting a 5% no show rate. How many additional reservations could angelina accept before she would be required to walk an arriving guests? - CORRECT ANSWER 21 FORMULA= (400 * .05 = 20) - 1000 = 980 on the 21 reservation the guest would have to be walked." "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 40.00 / 1.00 - (15 +.05= .20)= 50.00 or 40/.20 = 50.00" "What is the name for the value given up by a buyer and a seller in a business transaction - CORRECT ANSWER PRICE" "What is the formula used to calculate an owners ROI - CORRECT ANSWER Owners Investment Return/Owners original investment=ROI" "Which of the FOur I's of service refers to the tendency of consumers to equate the quality of service provided with the attitude of the person who actually provides the service? - CORRECT ANSWER inseparability" "Tashia hotel sold 175 rooms last night at an ADR of 200. Her hotel has 250 rooms. What was Tashias occupancy % last night. - CORRECT ANSWER 70 %" "What is the industry term for a customer group which can be readily identified by one or more commom characteristic. - CORRECT ANSWER Market segment" What is the industry term used to describe the sum of prices paid by a business's customers? - CORRECT ANSWER Total Revenues" "Historically, what concept have hospitality managers chiefly used to calculate their selling prices? - CORRECT ANSWER Costs" "What is an algebraic equivalent of the formula: Sales = Costs + Profit? - CORRECT ANSWER Profit = Sales - Costs" "What is the name for the net value achieved by both parties in a business transaction? - CORRECT ANSWER Profit" "What element is not present in a barter economy? - CORRECT ANSWER Money" "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" "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" "What is the industry term for the average revenue generated by each occupied guestroom during a defined period of time? - CORRECT ANSWER RevPOR" "What is the formula used to calculate GOPPAR? - CORRECT 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? - CORRECT ANSWER Market Segment" "What is rack rate? - CORRECT 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) - CORRECT ANSWER 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? - CORRECT 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? - CORRECT ANSWER The target market" "What is the term used to describe efforts undertaken to encourage travel and tourism to a specific geographic area or attraction? - CORRECT ANSWER Destination Marketing" "What is the name for the value given up by a buyer and a seller in a business transaction? - CORRECT ANSWER Price" "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? - CORRECT ANSWER A value proposition" "Which one of the following terms is not one of the 4 Ps of the Marketing Mix? - CORRECT ANSWER Proposition" "Which of the following terms would be included in the Place portion of a hotel's marketing mix? - CORRECT ANSWER Distribution Channels" "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" "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" "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" "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" "What must be true if a product producer is to continue creating and selling products? - CORRECT ANSWER Revenues must exceed costs" "What is the specialized branch of accounting that focuses on recording and analyzing the expenses incurred by an organization? - CORRECT ANSWER Cost Accounting" "What is the industry term for the point at which an organization's revenues exactly equal its costs? - CORRECT ANSWER Break-even point" "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" "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" "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" "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" "Which formula represents a buyer's view of a sales transaction? - CORRECT ANSWER Perceived Value - Selling Price = Personal Profit" "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" "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" "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" "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" "Penny Larson is buying a $100.00 restaurant gift card as a present for her niece who is graduating from hospitality management school. Which of economist Milton Friedman's buyer value formulas would apply to her purchase? - CORRECT ANSWER Spending her own money on someone else" "Penny Larson is a travel agent arranging a one-week San Francisco vacation for Mr. and Mrs. Rafael Ochoa. Which of economist Milton Friedman's buyer value formulas would apply to her purchase of the hotel rooms the Ochoa's will need during their trip? - CORRECT ANSWER Spending someone else's money on someone else" "What special challenge do buyers of hospitality products such as hotel guestrooms or restaurant meals face? - CORRECT ANSWER Difficulty in quality evaluation prior to purchase" "If quantity and quality are held constant how will a reduction in price affect buyers' perceptions of value? - CORRECT ANSWER Perceived value will increase" "If quantity and price are held constant how will reductions in product or service quality affect buyers' perceptions of value? - CORRECT ANSWER Perceived value will decrease" "Which of the Four I's of service refers to the fact that the quality of service often depends upon the skill level of the individual who supplies it? - CORRECT ANSWER Inconsistency" "Which of the Four I's of service refers to the fact that services most often cannot be held, touched, or even seen before they are purchased? - CORRECT ANSWER Intangibility" "Ahmed is the sole waitperson on duty at the Athenian restaurant during the very slow 2:00 p.m. to 4:00 p.m. time period. Which of the Four I's of service refers to the fact that employees such as Ahmed must be scheduled to work anytime a service business is open and regardless of low volume levels? - CORRECT ANSWER Inventory" "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" "H 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. H 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 H is engaging in? - CORRECT ANSWER Arbitrage" "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" "Which differential pricing strategy would in most cases be illegal or unethical if implemented? - CORRECT 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? - CORRECT ANSWER 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? - CORRECT ANSWER 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? - CORRECT 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? - CORRECT ANSWER Pricing based on time" "Which statement about high volume buyers in the hospitality industry is true? - CORRECT 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? - CORRECT ANSWER Pricing based on distribution channel" "What is the formula revenue managers use to calculate Net ADR Yield? - CORRECT ANSWER 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? - CORRECT ANSWER Pricing based on bundling" "Which statement about revenue management and revenue optimization is true? - CORRECT ANSWER 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? - CORRECT 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? - CORRECT ANSWER Rooms inventory" "What is a rate code? - CORRECT 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? - CORRECT ANSWER Price" "What is the lodging term used to describe two independent data management systems that have been electronically connected? - CORRECT 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? - CORRECT 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? - CORRECT ANSWER Attrition and wash" "E 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 E's contract request? - CORRECT 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? - CORRECT ANSWER 90" "What is true about a revenue manager's rooms demand forecast? - CORRECT 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? - CORRECT ANSWER Hotel owners or their designees" "In the lodging industry, what is a rack rate? - CORRECT ANSWER A room's selling price when no discounts of any type are offered" "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" "What is true about discounts offered on the selling price of hotel rooms? - CORRECT ANSWER They should be easily explainable and defensible" "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" "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? - CORRECT 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? - CORRECT ANSWER CTA" "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" "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" "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" "Donna is a hotel revenue manager. Donna knows that for tonight she has sold 175 of her 200 available rooms. As a result, is eliminating room discounts on her remaining 25 rooms. In doing so, what data type is she primarily using to make her decision? - CORRECT ANSWER Current Data" "In a limited service hotel, what is the incremental expense incurred in selling one guest room? - CORRECT ANSWER CPOR" "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 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" "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" "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" "What is one consistent characteristic of desirable rooms revenue? - CORRECT ANSWER It leads to higher GOPPAR levels" "Which of the following is not a hotel intermediary? - CORRECT ANSWER Front desk agent" "Which travel industry-related business group developed the Global Distribution System? - CORRECT ANSWER The airline industry" "What was the original purpose of THISCO? - CORRECT 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 - CORRECT ANSWER Standard ADR (-) Distribution Channel Costs (=) Net Room Rate" "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? - CORRECT ANSWER Increased Net ADR Yield, increased GOPPOR" "What is true about rooms that are sold at prices below a hotel's variable operating costs? - CORRECT ANSWER 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? - CORRECT ANSWER RevPOR" "Which is considered a room-related occupancy cost? - CORRECT ANSWER 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? - CORRECT ANSWER $50.00" "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)" "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%" "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? - CORRECT 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? - CORRECT 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? - CORRECT 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? - CORRECT ANSWER Increased RevPAR and reduced flow-thru %" "1. Which of the following statements about restaurant pricing methods is true? - CORRECT ANSWER Restaurant industry pricing methods are very different from hotel industry pricing methods" "Shaniqua's restaurant utilizes a product cost percentage pricing system. What should be the selling price for a steak dinner she sells if her total plate cost for the dinner is $7.00 and her desired product cost is 25%? - CORRECT ANSWER $28.00" "Shaniqua's restaurant utilizes a product cost percentage pricing system. She would like to apply pricing factors to make pricing her menus easier. What would be the pricing factor she would use when her desired product cost percentage for an item is 40%? - CORRECT ANSWER 2.5" "Which menu pricing system would utilize an operation's prime costs when calculating its selling prices? - CORRECT ANSWER Product Cost: Plus" "In which menu pricing approach would Menu Engineering as proposed by Kasavana and Smith be utilized? - CORRECT ANSWER Contribution Margin Pricing" "What is the common feature in the Product Cost: Plus Pricing, the Contribution Margin Pricing and the Product Cost Percentage Pricing systems? - CORRECT ANSWER The amount paid for products" "For revenue managers seeking to optimize revenues in their foodservice operations, which statement about menu prices is true? - CORRECT ANSWER An appropriate menu price should dictate an item's cost" "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" "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" "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" "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" "Arthur's restaurant is extremely busy on Friday and Saturday. The manager of the operation offers reduced prices on quick-to-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" "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" "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" "Why should revenue managers monitor their competitors' prices? - CORRECT ANSWER To keep their own prices on the higher end of their competitors' price ranges." "What differential pricing strategy would in most cases be illegal or unethical if implemented? - CORRECT ANSWER Pricing based on the ethnicity of the buyer." "50 rooms per week for the next 52 weeks, each room rented two days at a time. How many room nights - CORRECT ANSWER 5,200" "Next week-end demand for her rooms(500)will exceed the number of rooms available for sales. Which high demand pricing strategy will optimize revenue for her property? - CORRECT ANSWER Implement a differential pricing strategy and allocate the limited supply to those market segments who value the room most highly" "Revenue management seeks to maximize income while revenue optimization seeks to maximize long-term profits. - CORRECT ANSWER TRUE" "Intangibility - CORRECT ANSWER Refers to the fact that service most often cannot be held, touched, or even seen before they are purchased." "Break Even point - CORRECT ANSWER Term for the point at which an organization's revenue is exactly equal its costs." "GOPPAR FORMULA - CORRECT ANSWER Total Revenue-Management Controllable Expense/Rooms available to sell" "Charging guests for watching a PAYPERVIEW movie in their hotel is an example of - CORRECT ANSWER Two-tiered pricing" "What two factors do successful revenue managers employ when they devise and implement strategic pricing plans - CORRECT ANSWER Data management and insight" "What is the relationship between differential pricing and consumer surplus: - CORRECT ANSWER differential pricing is a strategy used by sellers to minimize consumer surplus." "The name for the price perceived by consumers to be the normal or standard price for a product or a service - CORRECT ANSWER Reference Price"