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Revenue Management Final exam practice Questions
with 100% Correct Answers | Verified | Latest Update
What is bigger in the tourism industry, fixed costs or variable costs? - ✔✔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? - ✔✔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? - ✔✔last
Do we sell "time blocks" or "physical products"? - ✔✔time blocks What implication do time blocks have? - ✔✔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? - ✔✔incorrect RM can be organized with different levels regarding the people involved. How many? Which ones? - ✔✔Property Level - Corporate Level - 3rd Party Services What does a booking curve represent? - ✔✔the expected number of bookings for each day until the arrival date
How many external performance indicators do we have? - ✔✔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? - ✔✔ 4 What is the threshold in the OR, ADR and RevPar indexes that determines the point we are outperforming the comp set? - ✔✔ 100 Price from a marketing standpoint includes both monetary and costs - ✔✔non‐monetary price - ✔✔The amount of money charged for a good or service. BAR and BRG - ✔✔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? - ✔✔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? - ✔✔OTA In what type of rates are the "Last Room Available Agreements" signed? - ✔✔Corporate 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? - ✔✔the decrease in demand resulting from augmenting a rate by $
- because it is more impactful
"Values and lifestyles" is a criterion used to segment the market according to - ✔✔psychography The big three market segments proposed by the AHLA and its Uniform System of Accounts for the Lodging Industry are: - ✔✔transient, group and contract Do we use constrained demand to forecast unconstrained demand, or do we use unconstrained demand to forecast constrained demand? - ✔✔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? - ✔✔insights
Stationary vs nonstationary: in which type of series there is an upward or downward trend over time - ✔✔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? - ✔✔more complex the forecast In a "random walk" (naï ve forecasting), the forecasted value for the next period t+1 equals to...? - ✔✔the value of the current value t For stationary data, what method is employed? - ✔✔Moving Average Methods Larger n is used when there is a lot or little variance in past data? - ✔✔used when there a lot of variance in past data
What is a guaranteed reservation? - ✔✔prepaid reservation, already paid, so you can't cancel it What is the anticipated wash? - ✔✔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? - ✔✔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? - ✔✔1. Airline, easily identify because everyone is right there If your retail rate allocation is 540 and your materialization rate is 87%, how would you calculate the "reservations to accept"? - ✔✔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 = - ✔✔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. In practical terms, what does it mean that the value in the booking curve is 0.60? - ✔✔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
- Additional products at additional price (room quality and supplementary products) upgrading - ✔✔higher quality product at the same price, allocated on a space available basis
- The value of the "feeling valued" / "pleasant surprise" cross selling - ✔✔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? - ✔✔Traditionally at arrival, but now can do more in advance In what sense have the groups been regarded as a "filler" market? - ✔✔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? - ✔✔Groups book first, can be up to two years in advance In a group displacement analysis, what do you compare? - ✔✔The total value of the transient business that would be displaced if the group business were accepted. Extensions of Revenue Management - ✔✔Catering Restaurants Entertainment Attractions
what is the difference between Agent model vs Merchant model? - ✔✔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? - ✔✔offline In what types of tourism products is the offline system predominant? - ✔✔Packages and Cruises What's the proportion of offline business in these two types of tourism products?
- ✔✔Two thirds On average, what is the comission OTAs charge to branded and independent
hotels? - ✔✔From 10% (branded hotels) to 30% (independent hotels) Marriott strongly depends on OTAs: 88% of its bookings come through OTAs. True or False? - ✔✔False: it is the other way around. Which industry is more fragmented and atomized: the airline or the hotel industry? - ✔✔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? - ✔✔Expedia and Priceline What's the new name of Priceline? - ✔✔Bookings Holding
