Why do you believe Amanda is concerned about the elimination of discount rates during the period of this convention?

1 Mark Allocation Problem 1 = 70 points Problem 2 = 30 points Total = 100 points Good luck for the exam J FALL 2019- FINAL EXAM – Code A Designed By PhongNT Approved By Course Name: REVENUE MANAGEMENT Students are allowed to use: Textbooks &Notes Calculator Paper-based Dictionary Cell phone & other electronic devices Others (please specify): …………………………………………… Student’s Name ............................................................................... Student’s ID ..................................................................................... Score Instructor’s signature 2 PROBLEM 1: (70 pts) CASE STUDY: “Let me make sure I understand this. You want to set the rates for the third week in October at full rack, close out all discounts, and immediately block any inventory we are not contractually obligated to provide our discount intermediaries,” said Amanda, the front office manager at the Barcena Resort. “That’s right,” said Pam, the resort’s DOSM. “We really have to. The bid I just submitted to the International Association of Academic Authors for their annual meeting in October was at full rack rate for all our currently available rooms.” “That event will sell out our entire area,” said Damario. “We certainly don’t want to offer transient rates lower than our group rates for that week.” Amanda and Pam were members of the Barcena Resort’s Strategic Pricing and Revenue Management Advisory Committee, which was headed by Damario. They were finishing the last agenda item for the week’s meeting. It concerned a group rooms bid submitted by Pam’s department as part of an area-wide effort coordinated by the local Tourism Development Bureau. The Bureau was the entity charged with the task of generating sales leads, primarily for group and meetings business, for all of the hotels in the area. Pam had submitted her bid through the Bureau and had appealed to Damario not to let the hotel advertise low room rates during the period of the projected convention. “If we do,” said Pam, “the academics will book outside the group block and we’ll never hit the occupancy targets we can make if the group accepts our bid. “Do you feel you have a good chance to get it?” Damario had asked. “We have an excellent change. I would say 90 percent or more,” Pam had replied. “When will we know?” Damario asked. “The group will be making its decision in the next 90 days,” Pam had replied. Based on Pam’s confidence about the bid, Damario supported the approach that, for the next 90 days, the hotel would eliminate all discounted rates for the time period of the Author’s convention and remove all rooms from sale. Amanda was not happy with the decision. “Well, I do hope we get the bid,” said Amanda, “because if we close all our discount rates for 90 days, shut down all our room sales, and then we don’t get the bid, this hotel will be empty the third week in October. That’s all I have to say!” For Your Consideration : 1. Why do you believe Amanda is concerned about the elimination of discount rates during the period of this convention? 2. Assume the tactic proposed by Damario is implemented. What will be the likely outcome if Pam’s bid is accepted by the Author’s group? 3. Assume the tactic proposed by Damario is implemented. What will be the likely outcome if Pam’s bid is rejected by the Author’s group? 3 4. What are the dangers to the future success of this revenue management team if Amanda is not brought “on board” with the decision made by Damario and Pam? Whose job is it to see that Amanda and her entire front office team actively support the final decision? Problem 2: (30 pts) Sherri Lamar is the RM at the 200-room Kingston Harbor Inn. The Inn has five different room types, each with a rack rate that reflects its guests’ view of each room type’s value. Sherri knows she cannot upsell guests who stay in her highest rated rooms; however, she feels there is good potential to impact her hotel’s revenue performance via upsells to guests who originally reserved one of the four lower-priced room types. Sherri created and implemented a comprehensive upsell training program for her hotel’s front desk. The cost of providing the upsell training to the Inn’s eight desk staff was $100.00 per employee. At the end of the first week of the program’s implementation, Sherri found that her clerks were successful at upselling approximately one of every ten guests arriving at the hotel. A summary of the Inn’s guest reservation/actual stay records is displayed here. Complete the summary for her and then provide Sherri with answers she needs for the questions that follow. Based on Sherri’s first week data: A. What would the Inn’s ADR have been if all arriving guests had been assigned to their originally reserved rooms? B. What was the ADR actually achieved by the Inn as the result of the upsell program? C. What would the Inn’s revenue have been if all arriving guests had been assigned to their originally reserved rooms? D. What was the revenue actually achieved by the Inn as the result of the upsell program? E. What was the amount of the increased revenue that resulted from Sherri’s upsell program? 4 F. What was the percent increase (rounded to one decimal place) in revenue achieved by the Inn as a result of the program? G. Assume this first week represents the typical week for the upsell program. What would the hotel’s 52-week revenue increase be as the result of implementing it? *** END ***