HMG 6466 Revenue Management Midterm

docx

School

Florida International University *

*We aren’t endorsed by this school

Course

6466

Subject

Business

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by mandalysha

HMG 6466 Revenue Management Midterm Assessment 1. Discuss the relationship between value and fair price. Consider the following questions in your discussion. What is meant by a fair price? How is a fair price determined? When is a price unfair? When is a price too high? Discuss why a customer might find a price too high? The value of a good is perceived by a customer and what they are willing to pay for it. Fair price and fair pricing are the practice of knowing what a customer is willing to pay and adjusting your pricing strategy to meet the expectations of the customer. These two concepts have a relationship that is focused on the customer. As a revenue manager one must take into consideration the market, the competition, and what others are paying for the products that you are selling. A fair price means to price your product according to what it is worth without taking advantage of your customer base. Fair pricing is determined by the needs of the potential customer rather than the economics of the product. Determining when a price is unfair is based on the product you are selling and if it benefits you more than the customer. If a hotel or restaurant is charging outrageous numbers just so they can see a profit rather than gaining a customer base, then this would be deemed unfair. A price is too high when the product a customer is receiving is not worth the price being charged. A customer may find a price too high if the value of the product does not match what they are given.

2. Discuss the topic of pricing. In your discussion address how revenue managers should price their products? Should increased costs automatically justify an increase in selling price? Explain why or why not. For revenue managers, pricing is a major component in successfully running a business. To gain regular and loyal customers, a business must sell their product at a fair price for their customers. When pricing an item there are two ways to do so and one of those will make sure you are continuing business: 1) Have a high-priced item and hope to sell it; 2) Have a moderately priced item and sell multiple units. Going with the second choice is the best option because you want to maintain selling multiple units rather than just one at a higher price, you may make a lot of revenue at one time, but it is not a guarantee that the product will be sold. If you have a product that is moderately priced, there is a chance that you will sell multiple and have ongoing revenue from it. I do not believe that increased costs justify an increase in selling price. If your business continues to sell your product at the same price while others are increasing theirs, and you have a loyal customer base, then business should remain the same and possibly increase, providing more revenue for the business and offsetting those increase costs. Gaddis, P. (2023, July 24). Justification for a price increase: Positioning for Success . Integrity Solutions. https://www.integritysolutions.com/blog/justification-for-price-increase/

3. What is differential pricing? Why is it an effective strategy to use in optimizing revenue? Discuss factors revenue managers can use to differentiate prices in a hotel. Differential pricing is the practice of a seller charging different prices to different buyers for the same product or slightly different versions of the same product. The purpose is to streamline your business operations and increase revenues based on customers’ demands for the product. Price differentiation also provides the rationale to practice inventory management, which is a critical task to performing revenue management successfully. Factors that revenue managers can use to differentiate prices in a hotel are using historical data like occupancy rate and average guest spend, market trends like personalization and sustainability, and special events to predict demand. Different rate types can be used to optimize revenue during peak season by offering higher rates. Using analytics and performance of the competition can help predict customer’s behavior.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Mayfield, N. (2023, December 8). 17 important hotel pricing strategies for 2024 - hotel tech report . HotelTechReport. https://hoteltechreport.com/news/hotel-pricing-strategies 4. Why are measures such as ADR and occupancy rate not appropriate as standalone measures of a revenue manager’s performance? Explain. If these are not appropriate what is/are better measures of a hotels performance? ADR and occupancy rate are not appropriate as standalone measures of a revenue manager’s performance because they provide a limited view of a company’s performance. The average daily rate (ADR) does not consider revenues from other sources and expenses. ADR does not consider the occupancy of rooms, and occupancy alone does not include factors such as discounted rates, and services provided. A better way to measure a hotel’s performance is to use RevPAR (Revenue Per Available Room) because it takes both the average daily rate and the occupancy of rooms into consideration giving a more overall measure of performance.

5. The discipline of revenue management has undergone dramatic change. Historically, the role was that of “inventory management.” Today it is dramatically different. What is the future role of the revenue manager? Discuss changes in the discipline of professional revenue management. With industry changes and advancements in technology the role of the revenue manager has had many changes in the discipline. The future of professional revenue management will see the roles requiring knowledge in Artificial Intelligence, blockchain transactions, and virtual and augmented reality. The shift in customers being eco conscious and making sustainability a factor when choosing where to stay and having a new generation of younger generations wanting tech forward experiences, will create a new customer base that will have different needs met and new ways to make revenue. The revenue manager of the future will have to be tech-savvy, will need to understand global market dynamics, and will have to balance revenue with sustainability (Geraldo). Geraldo, V. C. (2023b, October 25). Chapter 7: The Future of Revenue Management - Vision 2030 . LinkedIn. https://www.linkedin.com/pulse/chapter-7-future-revenue-management-vision-2030- vinicius-c-geraldo-vrb2f/ Landman, P. (2018, February 7). The changing role and future of Revenue Management in the hotel industry in 5 steps: By Patrick Landman . Hospitality Net. https://www.hospitalitynet.org/opinion/4086813.html

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

6. Coca-Cola has developed dynamic pricing technology that will allow automated pricing of its beverages based on daily weather conditions. For example, the normal price of a coke product on campus is $1.50 per 20-ounce bottle. This technology monitors ambient temperatures so that on a hot and humid day when consumers have a higher desire for cold beverages from a vending machine the price can increase to, let’s say, $2.50. Is this fair? Why or why not? Do similar examples of dynamic pricing exist? Dynamic pricing is product pricing based on various external factors. Fairness in pricing is ethical in nature and a revenue manager must decide whether they will be charging customers to just make a dollar or to fairly earn profits. In this situation, Coca-Cola is not acting ethically and is using the circumstance of hot weather and the desire for cold beverages to increase their product price to make extra profits. Similar examples of dynamic pricing occur in the airline industry. In the season for travel during the holidays, or in better weather conditions, we see an influx in flight prices. This also goes for hotel stays, Air BnB, and other rental stays. We also see dynamic pricing in the rideshare apps like Uber and Lyft, taking advantage of special events and peak times, and increasing their ride costs. These companies know their market is in demand during these times and create higher costs for their services to make more profits.

HMG 6466 Revenue Management Midterm

Related Documents