Great Gorge Amusement Park is a 40-acre fun park full of rides, shows, and shops. Great George' marketing department segments its customer base into two parts: local patrons and tourists. Great Gorge assumes local patrons are more price sensitive than out-of-town tourists. Yearly demand and marginal revenue relations for overnight lodging services, Q, are as follows: Locals PL = $40 - $0.0008QL MRL = D TRL/DQL = $40 - $0.0016QL Tourists PT = $50 - $0.0005QT MRT = DTRT/DQT = $50 - $0.001QT Average variable costs for labor and materials are constant at $40 per unit. A. Assuming the company can discriminate in pricing between locals and tourist customers through coupons distributed to locals via local shops, calculate the profit-maximizing price, output, and total profit contribution levels. B. C. Calculate point price elasticities of demand for each customer class at the activity levels identified in part A. Are the differences in these elasticities consistent with your recommended price differential? Explain If you are not able to segment the market and instead charge one uniform price, to all consumers, what price should you charge and what are your profits? Does market segmentation increase your profits?
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Great Gorge Amusement Park is a 40-acre fun park full of rides, shows, and shops. Great George' marketing department segments its customer base into two parts: local patrons and tourists. Great Gorge assumes local patrons are more price sensitive than out-of-town tourists. Yearly demand and marginal revenue relations for overnight lodging services, Q, are as follows:
Average variable costs for labor and materials are constant at $40 per unit.
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D. How can Lodging Services at Great Gorge improve their profitability through modern revenue management (RM) techniques? Outline what this system would look like. How will you segment the market further and establish room rates that will maximize revenues? Based on the Kimes Paradigm will this business be likely to increase profits through RM techniques? Explain your reasoning carefully.
E. Now that you have set up a RM system for Lodging Services, how can you incorporate the Amusement Park rides, shows and shops into a more comprehensive Customer Relations Management (CRM) system? How will this impact your optimal room rate pricing system? Explain how this will increase the profitability of Great Gorge’s operations as a whole.
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