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Revenue Management Final Exam Questions
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What is the industry term used to describe the sum of prices paid by a business's customers? - ✔✔Total Revenues Historically, what concept have hospitality managers chiefly used to calculate their selling prices? - ✔✔Costs What is an algebraic equivalent of the formula: Sales = Costs + Profit? - ✔✔Profit = Sales - Costs What is the name for the net value achieved by both parties in a business transaction? - ✔✔Profit What element is not present in a barter economy? - ✔✔Money
What is the formula used to calculate an owner's ROI? - ✔✔Owner's Investment Return / Owner's Original Investment = Owner's Return on Investment Sandy has 100 hotel rooms to sell. This Saturday night has enough customers to sell 125 rooms so she will be refusing 25 requests for rooms. What is this an example of? - ✔✔Constrained Supply Which industry was the first to use Yield Management principles? - ✔✔Airline What is the industry term used to describe the selling of rooms which are not actually available for sale? - ✔✔Overbooking What is the formula used to calculate Average Daily Rate? - ✔✔Total Room's Revenue / Total Rooms Sold = Average Daily Rate
What is rack rate? - ✔✔The price of rooms when no discounts of any type are offered What is: Total period revenue (Number of available seats) x (hours of seat availability) - ✔✔The formula for RevPASH What is the term used to identify a management philosophy that places customer gain ahead of short-term revenue maximization in revenue management decision making? - ✔✔Customer-centric revenue management What is the term used to describe the potential customers to whom a business's marketing activities and messages are directed? - ✔✔The target market
What is the term used to describe efforts undertaken to encourage travel and tourism to a specific geographic area or attraction? - ✔✔Destination Marketing What is the name for the value given up by a buyer and a seller in a business transaction? - ✔✔Price Charging guests for watching a "Pay-Per-View" movie in their hotel guestroom is an example of what type of pricing? - ✔✔Two-tiered pricing What is the fundamental assumption upon which the concept of consumer rationality is based? - ✔✔Buyers act in ways that are of personal benefit to them What is the revenue management term used to describe the perceived benefit gained, minus the price paid, in a business transaction? - ✔✔Value
Assume an equilibrium price (P1) is in place for a product. What would the law of supply and demand predict as an outcome if demand for that product increased?
- ✔✔The new price (P2) would be lower than the previous price (P1) because supply would decrease What concept is displayed by the intersecting point on a supply and demand curve? - ✔✔An estimate of the amount of a product that would be purchased at a known price and point in time What must be true if a product producer is to continue creating and selling products? - ✔✔Revenues must exceed costs What is the specialized branch of accounting that focuses on recording and analyzing the expenses incurred by an organization? - ✔✔Cost Accounting
What is the industry term for the point at which an organization's revenues exactly equal its costs? - ✔✔Break-even point Which of the following foodservice costs is a variable cost? - ✔✔Food Which of the following lodging costs is a fixed cost? - ✔✔Mortgage payments In a hospitality industry break-even analysis graph the Total Revenues line starts at 0. Why does the Total Costs line always start farther up the y axis? - ✔✔Because fixed costs are incurred even if no guests are served or rooms are sold Which of the following statements about unit costs in the hospitality industry is true? - ✔✔Unit costs will vary based upon how high or low an item is priced
Penny Larson is traveling to San Francisco for a personal vacation. Which of economist Milton Friedman's buyer value formulas would apply to her purchase of the hotel rooms she will need during her trip? - ✔✔Spending her own money on herself Penny Larson is travelling to San Francisco on business. Her company will reimburse 100% of her travel expense. Which of economist Milton Friedman's buyer value formulas would apply to her purchase of the hotel rooms she will need during her trip? - ✔✔Spending someone else's money on herself Penny Larson is buying a $100.00 restaurant gift card as a present for her niece who is graduating from hospitality management school. Which of economist Milton Friedman's buyer value formulas would apply to her purchase? - ✔✔Spending her own money on someone else
Penny Larson is a travel agent arranging a one-week San Francisco vacation for Mr. and Mrs. Rafael Ochoa. Which of economist Milton Friedman's buyer value formulas would apply to her purchase of the hotel rooms the Ochoa's will need during their trip? - ✔✔Spending someone else's money on someone else What special challenge do buyers of hospitality products such as hotel guestrooms or restaurant meals face? - ✔✔Difficulty in quality evaluation prior to purchase If quantity and quality are held constant how will a reduction in price affect buyers' perceptions of value? - ✔✔Perceived value will increase If quantity and price are held constant how will reductions in product or service quality affect buyers' perceptions of value? - ✔✔Perceived value will decrease Which of the Four I's of service refers to the fact that the quality of service often depends upon the skill level of the individual who supplies it? - ✔✔Inconsistency
Randall is the revenue manager for a franchisee who owns a five unit quick service restaurant company. Which feature would be the easiest for Randall to change if he sought to increase the value his company provides its customers? - ✔✔The quality of service offered What is the most common guest complaint about hotel guest rooms? - ✔✔Service deficiencies What is the most common guest complaint in the food service industry? - ✔✔Service Quality Consider the formula: (A + B) - C = D Where: A = Perceived tangible product benefit B = Perceived intangible service benefit C = Price D = Value
If all other variables are held constant, which statement is also true? - ✔✔As C decreases, D increases Which two factors do successful revenue managers employ when they devise and implement strategic pricing plans? - ✔✔Data management and insight Which statement about revenue management in the hospitality industry is true? - ✔✔Quiz four Question one (??) What is value-based pricing? - ✔✔A pricing system based upon a buyer's view of product or service value All except one of the following pricing systems are marketing-based. Which one is not an example of marketing-based pricing? - ✔✔Return on Investment (ROI) pricing
Hottickets.com is a web-based business that buys popular concert tickets in bulk. It buys the tickets at a low price because it qualifies for group ticket discounts offered by concert promoters. Hotticket.com then marks up and immediately resells the tickets it has purchased to interested individuals who visit the Hotticket website. What is the name of the activity Hottickets.com is engaging in?
- ✔✔Arbitrage What is the purpose of a price fence or barrier? - ✔✔To identify who is and who is not eligible for a special pricing offer Which differential pricing strategy would in most cases be illegal or unethical if implemented? - ✔✔Pricing based on the ethnicity of the buyer The use of a formal customer rewards program is an example of what type of differential pricing strategy? - ✔✔Pricing based on consumer characteristic
The requirement that a buyer present a coupon at the time of purchase is an example of what type differential pricing strategy? - ✔✔Quiz four number 13 (??) The premium prices charged for dinner served at the restaurant Le Jules Vernes on the second level of the Eifel Tower in Paris, France can be attributed, in part, to which type of differential pricing strategy? - ✔✔Pricing based on location A business hotel's promotion targeting local area residence and designed to offer them significantly reduced room rates on Sunday nights is an example of which type of differential pricing strategy? - ✔✔Pricing based on time Which statement about high volume buyers in the hospitality industry is true? - ✔✔The per-unit cost of selling to them is less than the cost associated with low volume buyers
For revenue managers working in the lodging system the term "place" in the 4ps of the Marketing Mix refers to two items. One is the physical location of the hotel. What is the second? - ✔✔The property distribution channels What is the industry term used to describe all of a hotels unique or distinct forms of guestroom products available for sale? - ✔✔Rooms inventory What is a rate code? - ✔✔A property specific description used to identify a particular room product Which of the following is not typically used by revenue managers to designate specific room products sold in their hotels? - ✔✔Price What is the lodging term used to describe two independent data management systems that have been electronically connected? - ✔✔Interface
What would be the effect of an upon-arrival inventory management training program that resulted in a hotel significantly up selling a large percentage of its arriving guests? - ✔✔ADR and RevPar would increase and occupancy % would be unchanged What are two synonymous lodging industry terms used to identify the difference between purchases a group pledges to make and the purchases it actually makes?
- ✔✔Attrition and wash Tanika is the revenue manager at the Holiday House Hotel. Southeast airlines has requested that Tanika quote them a rate for the use of 20 rooms per night for a period of one year. If Southeast accepts Tanika's quote for both price and availability, what type of room rate will the hotel and airline agreed upon? - ✔✔Contract rate Expedia.com wants Jesse, the revenue manager at the Hilton, to agree to contract terms that would require Jessie's hotel to apply the agreed upon Expedia rate to
