REVENUE MANAGEMENT FINAL EXAM QUESTIONS AND VERIFIED ANSWERS

REVENUE MANAGEMENT FINAL EXAM QUESTIONS AND VERIFIED ANSWERS "What does a pace report track? - CORRECT ANSWER The OTB reservations against the forescasted reservations" "Who attends the weekly RM meetings? - CORRECT ANSWER -Revenue manager -General manager Sales manager -Rooms manager ***and sometimes -Food and Beverage management -Marketing -HR management" "Consumer reference prices: what is bigger, the increase in demand derived from reducing a rate by $100 or the decrease in demand resulting from augmenting a rate by $100? - CORRECT ANSWER the decrease in demand resulting from augmenting a rate by $100 -because it is more impactful" "What is more appealing to hotel guests: a discount of $10 in three supplementary products (total savings are $30), or a discount of $30 in just one supplementary product so that it becomes free? - CORRECT ANSWER a discount of $30 in just one supplementary product so that it becomes free -Discount in just one supplementary product so that it becomes free is more appealing to a guest" "Rate portfolio - CORRECT ANSWER The matrix of available rates by forecasted occupancy" "What airline ticket is less expensive (in general terms): the Thursday‐ Saturday or the Friday‐Sunday? - CORRECT ANSWER Friday‐Sunday -80% of the customers for airlines are businesspeople and they want to get that one-day home for weekend" "If there is a pattern / event, then we use larger or smaller n? - CORRECT ANSWER smaller n" "For nonstationary data, what method is employed? - CORRECT ANSWER Weighted Moving Average" "When doing the forecasting, do we match by day or by date? Are there any exceptions to this rule? - CORRECT ANSWER by day -Calendar Holidays - Jan 1, July 4, Dec 25" "Materialized Room Demand is defined as and formula - CORRECT ANSWER the number of customers that actually occupy the room = number of reservations - cancellations - no shows" "Materialization rate - CORRECT ANSWER = Materialized rooms (the number of rooms that actually have been occupied) / number of reservations" "What is a guaranteed reservation? - CORRECT ANSWER prepaid reservation, already paid, so you can't cancel it" "What is the anticipated wash? - CORRECT ANSWER is cancellation and no shows in the context of groups" "You can be more aggressive in terms of overbooking decisions if the city-wide demand is higher or lower? - CORRECT ANSWER lower" "In an overbooking situation, where can we more easily identify and, therefore, protect key customers, in the airline industry or in the hotel industry? Why? - CORRECT ANSWER 1. Airline, easily identify because everyone is right there" "What does RPASH stand for? - CORRECT ANSWER Revenue per Available Seat Hour" "What is a "dessert room"? - CORRECT ANSWER implicates that you will spend more money on dessert and alcohol, and creates higher turnover because you are making a new table available by moving them to a different room" "An example of a conflict between market segments? - CORRECT ANSWER skiing forbid snowboarding -because they didn't want the snowboarders to mess up the snow for the skiers they just want to ski and that snowboarders tend to be more aggressive" "Which two models can we find within the indirect distribution channels? - CORRECT ANSWER Agent model vs Merchant model" "What percentage of hotels in the US uses a revenue management system? And in Europe? - CORRECT ANSWER 10% in the US and 6% for Europe" "Name some of the actors that are disrupting today's online travel? - CORRECT ANSWER AirBnB, Google, Amazon (used to have a travel, but expected to come back)" 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." "Revenue Management is NOT necessarily about... - CORRECT ANSWER Achieving 100 % occupancy and a perfect science" "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. T/F - CORRECT ANSWER True" "Revenue management is a set of revenue maximization strategies and tactics that... - CORRECT ANSWER can be used to improve the profitability of certain businesses." "What information is needed to calculate a net room rate? - CORRECT ANSWER room rate, variable costs, and all costs and fees that apply to the booking" "An individual traveling, dining, attending a game or performance, or staying alone is usually referred to as a ______________. This type of guest may be also be defined as an individual hospitality customer. Think of a single person purchasing an airline seat, a meal, a ticket, or a hotel room; in RM we call this type of customer a: - CORRECT ANSWER Transient" "Displacement Analysis can determine the quantifiable benefits of different options. However it needs to have the right circumstances. When is it appropriated? - CORRECT ANSWER When a reliable forecast indicates that there's more demand than our capacity, it will be a period of high demand" "Displacement analysis is a RM decision making and comparative scenarios tool with four step process: (1.) ________________________________; (2.) Establish the net Food and Beverage revenue differential; (3.) Determine other revenue; (4.) Summarize. Following the computation of the Transients displaced costs and the group reservation revenues, what do we do in step 1.? - CORRECT ANSWER Establish net room revenue differential" "In Strategic Revenue Management as in Strategic Marketing, not everyone is a potential customer. Why? Due to... - CORRECT ANSWER Hotels target markets" "Market segments are: - CORRECT ANSWER groups that share commons needs and buying habits" "The basic purpose of packaging is to: - CORRECT ANSWER does not reveals the individual price of the different components so it create a perception of value." "A positive aspect of matching competitors' prices is which of the following? - CORRECT ANSWER it drives the choice to other differentiators or competitive advantages." "What is a potential drawback of competing solely based on offering the lowest price? - CORRECT ANSWER Price-driven guests are loyal to lowest prices, not the hotel offering them; Any competitor can beat a low price if it wants to; Other ways of generating demand are more profitable and sustainable..... All of the Above" "Restaurant Revenue Management primarily focuses on front-of-house operations. However, other aspects of running a restaurant are also tied to RRM. These are: - CORRECT ANSWER All of the above" "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 * 8 = $9.9206 $9.92" "A process flow diagram: - CORRECT ANSWER all of the above" "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 an late breakfast special" "For the this question, consider this table: Table Size (tops or NR of seats) 2 48Total Tables Available 614 2 Seats Available Seats Used 62515 46 Tables Used 382 13 Seat Occupancy Table Occupancy The overall seat occupancy and overall table occupancy for the restaurant are: - CORRECT ANSWER seat occupancy percentage = (Total Nr. of Seats Used ÷ Total Nr. of Seats Available) x 100 =46 ÷ [(6 tables x 2 seats)+(14 tables x 4 seats) + (8 tables x 2 seats)] = (46 ÷ 84) x 100 = 54.8% table occupancy percentage = (Total Nr. of Tables Used ÷ Total Nr. of Tables Available) x 100 = (13 ÷ 22) x 100 = 59.1% 54.8% and 59.1%" "Throughput time measures: - CORRECT ANSWER the time a customer spends in the system from enter to exit" "If a restaurant had an overall average RevPASH of $14 and an overall seat occupancy of 66%, its average check would be: - CORRECT ANSWER $21.21 RevPASH = Av.Check x Occ. So $14 ÷ 66% = $21.21" "The throughput rates for the three major processes that make up a service delivery system are provided below. ActivityTake OrderAssemble OrderDeliver OrderThroughput rate (customers/min)1.21.92.1 Which of the activities is the bottleneck and why? - CORRECT ANSWER Taking the order, because its throughput rate is lowest." "Time-variable demand means: - CORRECT ANSWER different market segments use a service at different times" ADR formula - CORRECT ANSWER Total Rooms Revenue / Total Rooms Sold" "Value proposition - CORRECT ANSWER 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" "Owners ROI formula - CORRECT ANSWER Owners Investment Return/ Owner's Original Investment" "Profit - CORRECT ANSWER net value achieved by both parties in a business transaction" "GOPAR formula - CORRECT ANSWER Total revenue - Management Controllable Expenses / Rooms Available to sell" "Destination marketing - CORRECT ANSWER used to describe efforts undertaken to encourage travel and tourism to a specific geographic area or attraction" "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" "What must be true if a product is to continue creating and selling products? - CORRECT ANSWER Revenue must exceed costs" "T/F: Unit costs will vary based upon how high or low an item is priced? - CORRECT ANSWER True" "Which two factors do successful revenue managers employ when they devise and implement strategic pricing plans? - CORRECT ANSWER Data management and insight" "Which formula represents a buyer's view of a sales transaction? - CORRECT ANSWER perceived value - selling price = personal profit" "What is value based pricing? - CORRECT ANSWER A pricing system based upon a buyer's view of product or service value" "What is true for franchised hotel operations in the United States? - CORRECT ANSWER Their prices are established by the hotel owners" "4 I's of service - CORRECT ANSWER intangibility, inconsistency, inseparability, inventory" "What is the relationship between differential pricing and consumer surplus? - CORRECT ANSWER Differential pricing is a strategy used to minimize consumer surplus" "What is the most common guest complaints about hotel guest rooms? - CORRECT ANSWER Service deficiencies" "What is the most likely result of a revenue manager's decision to reduce rack room rates during periods of reduced demand? - CORRECT ANSWER Competitors rates will also be reduced" "In a limited service hotel, what is the incremental expense incurred in selling one guest room? - CORRECT ANSWER CPOR" "Which group of employees is most responsible for implementing the revenue optimization strategies and tactics developed by a revenue management team? - CORRECT ANSWER Line-level employees" "T/F: Discounts are viewed less favorably than surcharges - CORRECT ANSWER false" "When is a guest considered an over-stay? - CORRECT ANSWER When the guest checks out of the hotel after his or her original check out date" "What is the result of raising room rates during high demand? - CORRECT ANSWER RevPAR will increase" "Rooms manager - CORRECT ANSWER responsible for the housekeeping and front office areas" "Clayton Antitrust Act - CORRECT ANSWER US legislation that prohibits legal discrimination in pricing" "Sherman Anti-trust Act - CORRECT ANSWER US legislation that outlawed all contracts and conspiracies that unreasonably restrain interstate trade" "What vehicle do effective revenue managers use to best develop and evaluate their organizations pricing and revenue management strategies and tactics? - CORRECT ANSWER Regular strategy meetings" ""According to the most recent Hospitality Sales & Marketing Association International (HSMAI) survey, to whom do the largest percentage of hotel revenue managers report?" - CORRECT ANSWER hotel GM" "What is true about proprietary websites administered by a hotel s franchisor? - CORRECT ANSWER Content changes must be implemented by the brands managers" "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 rooms expense portion" "What are two synonymous lodging industry terms used to identify the difference between the purchases a group pledges to make and the purchases it actually makes? - CORRECT ANSWER Attrition and Wash" "What two things does Place refer to in hotels - CORRECT ANSWER location and distribution channel" "" To optimize revenues while enhancing property operations, which strategy pair should revenue managers seek to implement?" - CORRECT ANSWER Maximization of room codes and minimization of rate codes" "Fade rate - CORRECT ANSWER lower rate that is offered when a potential rooms buyer exhibits intial price resistance" "What is true about discounts offered on the selling price of hotel rooms? - CORRECT ANSWER They should be easily explainable and defensible" "How are most CVBs in the United States funded? - CORRECT ANSWER By a combination of hotel occupancy taxes and membership dues" "What strategy should be put into action when revenue managers implement special event rates? - CORRECT ANSWER Enhance guest value by providing products/services enhancement" "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 hotels name and a single rack room rate" "room code - CORRECT ANSWER A property-specific, shortened description used to identify a specific room product" "Which is most often true about room sales made by a hotel s group sales department? - CORRECT ANSWER ADRs are higher than average, and Net ADR yield is lower than average" "For which distribution channel type do hotels typically employ a shopper s service? - CORRECT ANSWER Sales made via the telephone" "What was the original purpose of THISCO? - CORRECT ANSWER To develop a single GDS connection for major hotel companies" "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 guest? - CORRECT ANSWER ADR and RevPAR would increase, and occupancy would be unchanged" "Contract rate example - CORRECT ANSWER Southeast Airlines has requested that Tanika quote them a rate for the use of 20 rooms per night for a period of one year" "Interface - CORRECT ANSWER two independent data management systems that have been electronically connected" "Which common IDS room sales model is most dependent on selling price for its revenue generation? - CORRECT ANSWER Opaque mode" "Example of a room related occupancy cost - CORRECT ANSWER complimentary breakfast costs" "RevPOR Formula - CORRECT ANSWER Total revenue / total occupied rooms" ""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 items cost" "T/F: hotels industry pricing methods are different than restaurant industry pricing methods - CORRECT ANSWER true" "Why should revenue managers monitor their competitor's prices? - CORRECT ANSWER to keep their own prices on the higher end of their competitor's prices" ""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 the products" "What is true about rooms that are sold at prices below a hotels variable operating costs? - CORRECT ANSWER They will cause an increase in RevPAR" "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" "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)" "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" "What foodservice value-related factor is most affected when a revenue manager successfully implements a price blending strategy? - CORRECT ANSWER menu mix" "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" "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" "Which tasks would be of most importance to revenue managers with multi-unit revenue generating responsibilities? - CORRECT ANSWER Revenue manager training and motivating" "Who are the customers of a hotel or restaurant franchisor? - CORRECT ANSWER Franchisees" "Brand equity - CORRECT ANSWER the accumulated value of a brands image or identity by consumers" "Which factor has historically provided the basis for a foodservice manager s assessment of revenue generation efficiency? - CORRECT ANSWER menu items sold" "What would be the typical impact on RevPASH of an increase in guest duration? - CORRECT ANSWER RevPASH would decrease if check average did not change" "In the hospitality industry what is the financial basis used for calculating the franchise fees or royalties that are paid to franchisors? - CORRECT ANSWER An operations total revenue" "Selling season tickets to sporting events such as professional baseball or basketball games at a price per game that is lower than the cost of individual tickets to all of the games is an example of what revenue optimization activity? - CORRECT ANSWER Product versioning" "RevPASH formula - CORRECT ANSWER seat utilizationns % X Check average" "Larissa is the corporate revenue manager for Sandstone hotels. She oversees 10 of her company s franchised properties. Which of the following is an example of Larissa s internal customers? - CORRECT ANSWER Sandstone company controller" "What is the CVB structure - CORRECT ANSWER A quasi governmental agency" "Probabilistic modeling - CORRECT ANSWER The application of statistical formulas to past events for the purpose of predicting the likelihood of future events." ""What is the role of a revenue manager within a franchise organization if that manager is assigned the task of assisting others within the same company in the their implementation of revenue management-related strategies, tactics and tasks?" - CORRECT ANSWER Internal brand support" "It is Saturday night at 7:30 p.m. and Alexander s restaurant is slower than expected. Only 50% of its seats are filled. Gene, the manager, wants to increase revenue by offering a two-for-one special between 8:00 p.m. and 9:00 p.m. this same night. What will be Gene s greatest challenge in implementing this revenue optimization strategy? - CORRECT ANSWER Ability to communicate efforts" "Brand consolidation - CORRECT ANSWER shrinking number of alternative franchisors offering increasing numbers of franchise alternatives" "In the US what is the dominate vehicle used by governmental authorities to fund local area destination marketing efforts? - CORRECT ANSWER A special tax on the sale of hotel rooms" "Which of the following revenue management activities would not be included in the typical job description of a revenue manager employed by a CVB? - CORRECT ANSWER Product pricing" "Arbitrage - CORRECT ANSWER the nearly simultaneous purchase of a product at a low price and reselling of it at a higher price with the intention of keeping the difference in price" "Lisa is the revenue manager of a 500 room hotel property. Next week-end demand for her rooms will exceed the number of rooms she has available for sale. Which high demand pricing strategy will optimize revenue for her property? - CORRECT ANSWER Implement a differential pricing strategy and allocate the limited supply to those who value the rooms most highly" "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" "What is true about a revenue manager s rooms demand forecast? - CORRECT ANSWER It is based on customer demand at an established price" "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 are hotels" "Net ADR yield Formula - CORRECT ANSWER Net Room Rate / Standard ADR" "Net room rate formula - CORRECT ANSWER Standard ADR - Distribution Channel Costs" "Last available - CORRECT ANSWER A contract stipulation that requires a hotel to apply its contractually agreed on rate to any room type available at the time a contracted guest makes their reservation" "Which is most often true about room sales made by a hotels group sales department? - CORRECT ANSWER ADRs are higher than average, and net ADR yield is lower than average" "CTA - CORRECT ANSWER "Closed to arrival" hotel declines reservations for guests attempting to arrive on this specific date" "prime cost - CORRECT ANSWER product and labor costs" "Which menu pricing system would utilize an operation s prime costs when calculating its selling prices? - CORRECT ANSWER Product cost: plus" "28-day accounting period - CORRECT ANSWER name for the accounting device used by foodservice operators to divide their operating year into 13 equal time periods" "Occupancy % Formula - CORRECT ANSWER Total rooms sold/ total rooms available for sale" "RevPAR formulas - CORRECT ANSWER 1. ADR X Occupanxy % or 2. Total revenue/total rooms available for sale" "Net ADR Yield - CORRECT ANSWER Net Room Rate / Standard ADR" “What is bigger in the tourism industry, fixed costs or variable costs? - CORRECT ANSWER fixed costs are bigger -Think of an airplane: staffing, airport fees (fixed) - huge amount of the costs for airplanes come from fixed costs; food, fuel (variable) - not as easy to determine the variable costs" "We can reduce prices (even below total cost per room), as long as the reduced price covers, fixed cost per room or variable cost per room? - CORRECT ANSWER We can reduce prices as long as the reduced price covers the variable cost per room -because we are going to have the fixed costs not matter if we have the person in the room or not" "High Value Customers tend to book early or last? - CORRECT ANSWER last" "Do we sell "time blocks" or "physical products"? - CORRECT ANSWER time blocks" "What implication do time blocks have? - CORRECT ANSWER we cannot store it for tomorrow, it is gone once it is not sold for that day" ""I want my hotel to be the first to sell out in the market": Correct or incorrect? - CORRECT ANSWER incorrect" "RM can be organized with different levels regarding the people involved. How many? Which ones? - CORRECT ANSWER Property Level - Corporate Level - 3rd Party Services" "What does a booking curve represent? - CORRECT ANSWER the expected number of bookings for each day until the arrival date -forecasted bookings" "How many internal performance indicators do we have? - CORRECT ANSWER 6: OR, ADR, RevPar, and the percent changes of each of them" "How many external performance indicators do we have? - CORRECT ANSWER 6: OR index, ADR index, RevPar index, and the percent changes of each of them" "What is the minimum number of hotels in a comp set? - CORRECT ANSWER 4" "What is the threshold in the OR, ADR and RevPar indexes that determines the point we are outperforming the comp set? - CORRECT ANSWER 100" "Price from a marketing standpoint includes both monetary and ________________costs - CORRECT ANSWER non‐monetary" "price - CORRECT ANSWER The amount of money charged for a good or service." "BAR and BRG - CORRECT ANSWER The hotel makes a promise that the room prices found on their website are the best rates compared to any other sites." "Example of BAR guarantee? - CORRECT ANSWER If you found a better rate then you will get that rate plus some additional discount (within 24 hours of making the reservation) in PA" "Who requires whom to sign a rate parity agreement? - CORRECT ANSWER OTA" "In what type of rates are the "Last Room Available Agreements" signed? - CORRECT ANSWER Corporate" "What type of strategy allows you to: i) create more effective pricing strategies; ii) create demand forecasts with more accuracy; and iii) optimize the hotel's market mix? - CORRECT ANSWER Market segmentation" ""Values and lifestyles" is a criterion used to segment the market according to - CORRECT ANSWER psychography" "The big three market segments proposed by the AHLA and its Uniform System of Accounts for the Lodging Industry are: - CORRECT ANSWER transient, group and contract" "Do we use constrained demand to forecast unconstrained demand, or do we use unconstrained demand to forecast constrained demand? - CORRECT ANSWER We use constrained demand (which is what we have from last year) to forecast the unconstrained demand" "Insights, past, current and future data are the four components of forecasting. In which one do human beings outperform machines? - CORRECT ANSWER insights" "Stationary vs nonstationary: in which type of series there is an upward or downward trend over time - CORRECT ANSWER nonstationary -Stationary tends to go to an average value, central point that all the data points are around, can make a line out of it" "The greater the variance, the more complex the forecast or the simpler the forecast? - CORRECT ANSWER more complex the forecast" "In a "random walk" (naïve forecasting), the forecasted value for the next period t+1 equals to...? - CORRECT ANSWER the value of the current value t" "For stationary data, what method is employed? - CORRECT ANSWER Moving Average Methods" "Larger n is used when there is a lot or little variance in past data? - CORRECT ANSWER used when there a lot of variance in past data" "If your retail rate allocation is 540 and your materialization rate is 87%, how would you calculate the "reservations to accept"? - CORRECT ANSWER Reservations to accept you would divide 540 / 0.87 = 621 (materialization rate is always dividing since it is the only way to get a bigger number than 540 since you know that only 87% of 621 will show up) materialization = divide" "reservations forecast to date = - CORRECT ANSWER reservations forecast x value in the booking curve present = multiple" "Reservations forecast for Oct 31st is 100 Today is Oct 16th and the corresponding value in the booking curve is 0.60 In practical terms, what does it mean that the value in the booking curve is 0.60? - CORRECT ANSWER We are forecasting 100 rooms for Oct 31st, so today on Oct 16th we should have 60 reservations" "Reservations forecast for Oct 31st is 100 Today is Oct 16th and the corresponding value in the booking curve is 0.60The hotel has 30 OTB reservations How many reservations should the hotel expect to receive on the arrival day Oct 31st? - CORRECT ANSWER We should expect to receive 30 OTB reservations / 0.60 = 50 reservations by Oct 31" "new overall reservation forecast = - CORRECT ANSWER OTB reservations / value in the booking curve future = divide" "In condo hotels, is the disparity in quality of rooms higher or lower than in non-condo hotels? - CORRECT ANSWER higher -because of the owner of the room is an individual" "upselling - CORRECT ANSWER higher quality product at additional price -Additional products at additional price (room quality and supplementary products)" "upgrading - CORRECT ANSWER higher quality product at the same price, allocated on a space available basis -The value of the "feeling valued" / "pleasant surprise"" "cross selling - CORRECT ANSWER selling additional products or services to an existing customer -when you add in breakfast, dinner, etc" "In what stage can upselling actions be implemented? At booking? A few days before arrival? At arrival? - CORRECT ANSWER Traditionally at arrival, but now can do more in advance" "In what sense have the groups been regarded as a "filler" market? - CORRECT ANSWER Groups as a filler market during hotels down time to use it as a filler which is a traditionally view. Now, hotels implemented the group displacement analysis because they realize that groups may not spend as much so they want to see if they should accept them or not -Reason why we do the group displacement analysis" "Who books first, groups or transient? - CORRECT ANSWER Groups book first, can be up to two years in advance" "In a group displacement analysis, what do you compare? - CORRECT ANSWER The total value of the transient business that would be displaced if the group business were accepted." "Extensions of Revenue Management - CORRECT ANSWER Catering Restaurants Entertainment Attractions" "what is the difference between Agent model vs Merchant model? - CORRECT ANSWER Commission vs margin -Agent model there is the price of the room and there is a 10% commission -Merchant model is the one that buys the room and then sells it for an added margin" "According to the Phocuswright Report (2018), more than half (52%) of all U.S. travel was booked online or offline? - CORRECT ANSWER offline" "In what types of tourism products is the offline system predominant? - CORRECT ANSWER Packages and Cruises" "What's the proportion of offline business in these two types of tourism products? - CORRECT ANSWER Two thirds" "On average, what is the comission OTAs charge to branded and independent hotels? - CORRECT ANSWER From 10% (branded hotels) to 30% (independent hotels)" "Marriott strongly depends on OTAs: 88% of its bookings come through OTAs. True or False? - CORRECT ANSWER False: it is the other way around." "Which industry is more fragmented and atomized: the airline or the hotel industry? - CORRECT ANSWER Hotel industry - have 10% of the market share, meaning that the OTAs call the shot because 90% goes to them -whereas airlines have a lot of companies and there is not a dominant one (80% of the market share)" "Why the tourism distribution system is sometimes called a duopoly? - CORRECT ANSWER Expedia and Priceline" "What's the new name of Priceline? - CORRECT ANSWER Bookings Holding" "What are the essential knowledges and skills of the future Revenue Manager? - CORRECT ANSWER The strategic view of revenue management. Obviously, it will depend on the type of hotel: from basic calculations in Excel to interpretation with sophisticated software" "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 Occupancy % = Room nights sold in a period / Room nights available in that period Answer: 5,735 / (200x31) = 5,735 / 6,200 = 92.5%" "When the American Airlines CEO developed yield management, what type of information was crucial to its success? - CORRECT ANSWER forecasting" "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" "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" "To interpret measures of a hotel's performance, managers often compare those measures with: - CORRECT ANSWER industry or sector averages, the budget for the period, and historical figures from comparable earlier periods at the hotel." "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." "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" "Identify which of these is not a positive of using revenue management strategies and tactics: - CORRECT ANSWER Motivate employees" "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" "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." "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." "When might a revenue manager choose without questions to accept a less profitable group booking over more profitable transient business? - CORRECT ANSWER The group is a regular customer of the hotel or a key account group from your comp set." "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" "A displacement analysis should be conducted: - CORRECT ANSWER when accepting a group booking will mean turning other business away." "Which of the following is a step in the displacement analysis process? - CORRECT ANSWER Establish net room revenue differential" "In displacement analysis, if a possible group reservation will bring $3,850 in rooms revenue but, according to your accurate forecast, you would expect to impact your future availability by displacing 33 transient demand rooms sold at $100 room/night, would you be inclined to accept or to deny this group reservation? - CORRECT ANSWER Based only on these numbers and taking into consideration nothing more, I would accept this current group booking request." "Which of the following hotels would be most likely to need and benefit from displacement analysis? - CORRECT ANSWER an urban hotel during its busy season" "When might a revenue manager choose without questions to accept a less profitable group booking over more profitable transient business? - CORRECT ANSWER The group is a regular customer of the hotel or a key account group from your comp set." "Displacement Analysis can determine the quantifiable benefits of different options. However it needs to have the right circumstances. When is it appropriated? - CORRECT ANSWER When a reliable forecast indicates that there's more demand than our capacity, it will be a period of high demand" "What information is needed to calculate a net room rate? - CORRECT ANSWER room rate, variable costs, and all costs and fees that apply to the booking" "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" "When might a revenue manager choose without questions to accept a less profitable group booking over more profitable transient business? - CORRECT ANSWER The group is a regular customer of the hotel or a key account group from your comp set." "What type of traditional market segmentation is often identified by postal code? - CORRECT ANSWER geographic" "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 10 ÷ 20 = 0.5 .5" "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 statements is FALSE? - CORRECT ANSWER Repositioning is a common alternative to rebranding." "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)" "Which of the following statements is FALSE? - CORRECT ANSWER Repositioning is a common alternative to rebranding." "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?" "What is a successful positioning strategy based on? - CORRECT ANSWER a set of competitive advantages" "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" "What is a successful positioning strategy based on? - CORRECT ANSWER a set of competitive advantages" "Which of the following traits are considered to be part of psychographic segmentation? - CORRECT ANSWER Lifestyle and personality" "Which of the following is considered a non-physical rate fence? - CORRECT ANSWER booking channel" "What is the goal of rate parity? - CORRECT ANSWER To charge the same price for the same room regardless of booking channel." "What revenue stream in a hotel - excluding casino hotels - typically has the highest contribution margin? - CORRECT ANSWER Rooms" "Which of the following is not one example of an internal packaging component? - CORRECT ANSWER Theatre Tickets" "What's not part of a Hotel Package Development Information? - CORRECT ANSWER None of the above" "What is the goal of rate parity? - CORRECT ANSWER To charge the same price for the same room regardless of booking channel." "Which is not a key category of Rate Fence? - CORRECT ANSWER Non-physical fence related to buyer racial profile e.g. Asian versus Caucasian" "Sandy has 100 hotels 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 an algebraic equivalent of the formula: Sales = Costs + Profit? - CORRECT ANSWER Profit = Sales - Costs" "Price - CORRECT ANSWER Value given up by a buyer and seller in a business transaction" "Cost Accounting - CORRECT ANSWER the specialized branch of accounting that focuses on recording and analyzing the expenses incurred by an organization" "Rack rate - CORRECT ANSWER the price of rooms when no discounts of any type are offered" "RevPOR definition - CORRECT ANSWER average revenue generated by each occupied guests room during a period of time" "Costs - CORRECT ANSWER What hospitality managers used to calculate their selling price" "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 will be purchased at a known price and point in time" "What element is not present in a barter economy? - CORRECT ANSWER Money" "Total revenues - CORRECT ANSWER used to describe the sum of prices paid by a business's customers" "Value - CORRECT ANSWER perceived benefit - price" "Market segment - CORRECT ANSWER term used to describe a customer group which can be readily identified by one or more common characteristics" "Consumer surplus - CORRECT ANSWER the price - the price the consumer is willing to pay" "What special challenge do buyers of hospitality products such as hotel guestrooms or restaurant meals face? - CORRECT ANSWER difficulty in price determination prior to purchase" "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" "T/F: Revenue management seeks to maximize income while revenue optimization seeks to maximize long-term profits - CORRECT ANSWER true" "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 one is not an example of marketing-based pricing? - CORRECT ANSWER ROI pricing" "Net ADR yield - CORRECT ANSWER Net Room Rate / Standard ADR" "If quantity and quality are held constant how will a reduction in price affect buyers' perceptions of value? - CORRECT ANSWER perceived value will increase" "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" "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 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" "cartel - CORRECT ANSWER used to describe a consortium of independent organizations formed to limit competition by controlling the production, distribution and pricing of a product or service" "What two factors establish a restaurants weekly customer capacity? - CORRECT ANSWER # of seats and # of hours open per week" "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" "What is the primary reasoning for forecasting future room demand? - CORRECT ANSWER to make prices" "Reference price - CORRECT ANSWER The price perceived by consumers to be the normal price for a product or a service" "Controller - CORRECT ANSWER Hospitality management position responsible for the accounting functions in a hotel" "Pace report - CORRECT ANSWER 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 groups are currently being sold" "What is one consistent characteristic of desirable rooms revenue? - CORRECT ANSWER It leads to higher GOPAR"