Htm 4250 Midterm Flashcards
7 characteristics of industries where RM is applicable
- Versioning Opportunity
- Variable Demand
- Fixed Capacity
- Perishable Service
- Low Variable Costs
- High Fixed Costs
- Advance
ADR is not a measure of
Profitability or variability
When RevPAR is increasing, price and capacity tools are
Being used well
When RevPAR is decreasing, price and capacity tools are
Not working so well
Total RevPAR
Average total room generated by each available, but not necessarily occupied room
RevPOR is based on
Based on occupied rooms, not rooms available
CPOR
Room related costs incurred directly as a result of selling a guest room, variable cost per room
GOP
Total revenue less management-controllable operating expenses
Flow Through
Measure of change in profit due to change in revenue
Occupancy strength and weakness
S: Easy to compute
W: Does not consider ADR
ADR strength and weakness
S: Easy to compute
W: Does not consider occupancy
RevPAR strength and weakness
S: Easy to compute
W: Does not consider nonroom revenue or profitability
RevPOR strength and weakness
S: Considers all hotel revenue generated
W: Does not consider the number of rooms sold or profitability
Total RevPAR strength and weakness
S: Considers all hotel revenue generated
W: Does not consider profitability
GOPPAR strength and weakness
S: Assess profitability of room sales effort
W: Results depended on non-RM efforts
Flow through strength and weakness
S: Assesses profitability of incremental revenues
W: Results dependent on non-RM efforts; data may bot be readily accessible
Accurate forecasts are important for:
- Scheduling workers
- Purchasing supplies
- Managing cash flow
- Modifying the price
Three types of data to forecast with:
- Historical
- Current
- Future
Fixed average
The average within a specific and unchanged time period
Rolling average
The average amount of sales revenue, rooms sold, or other data over the changing time period
Average ADR does not =
Classic average formula because rooms sold are different
Trailing Period
A data collection method that discards the oldest piece of data when the newest data is added
Rms pricing strategies
- Reduction in average rate
- Increase in average rate in response to high demand
- Increase in average rate in times of average or low demand
Two-tiered price
A pricing strategy in which the buyer must pay a price for the ability to make additional purchases
Value =
Perceived benefit - Price
Cost-based pricing
A pricing philosophy that involves summing product (or service) costs incurred, with a desired profit, to arrive at an item’s selling price
The four I’s of service
- Intangibility
- Inconsistency
- Inseparability
- Inventory
Value-based pricing
The practice of establishing prices for a firm’s products and services based primarily on the buyer’s perceived value of those products and services
Differential Pricing
The practice of seller charging different prices to different buyers for the same product or slightly different versions of the same product
Inventory Management
The process of allocating and modifying the number of products available for sale at various prices and through various distribution channels
Consumer Surplus
The difference between the amount a buyer would be willing to pay for a product or service and the amount they are charged
Value-Based Pricing
The practice of establishing prices for a firm’s products and services based primarily on the buyer’s perceived value of those products and services
Cannibalization
The practice of taking advantage of discounted rates where ‘high willingness buyers’ masquerade as ‘low willingness buyers’ to avoid paying higher prices
Arbitrage
The nearly simultaneous purchase of a product at a low price and reselling at a higher price to make a profit
Displacement Analysis Process
- Establish the net room revenue differential
- Establish the net food and beverage revenue differential
- Determine other net revenue
- Summarize the determine the net differential
Market Segmentation (2)
- Price Sensitive
- Price Insensitive
Forecasting (2)
- Demand
- No shows/cancellations
Optimization (3)
- Selling price
- Inventory allocation
- Revenue
Versioning opportunity
Clear differentiation between market segments, so multiple versions of the product can be offered
Variable demand
Peaks in valleys in demand, and can be predicted, but not with a high degree of certainty
Fixed capacity
Expensive or impractical to add or subtract supply in the short run, but some ability to temporarily shift it
Perishable service
There is a time dimension to the provision of the service. Once that time has passed, the inventory loses all value
Low variable cost
The cost of selling an additional unit of the existing capacity is low relative to the price of the service
High fixed costs
There is a high amount of cost associated with each unit of sale that must be paid regardless of sales
