REVENUE MANAGEMENT ACITIVITIES (IM No.

1)
Learning Activities (Answers only)
- For me, according to the situation about the Red Lobster’s problem which I
understand regards to their profits, marketing and their services of promotion. As
I can figure out to this matter is that the Red Lobster chief executive tried to boost
profits into a high pricey plates and fixings of crabs, during the promotion that ran
for a month, and of course the management miscalculated of how many
customers that they can consume to eat crab. But, the parent company says that
this wasn’t the reason or cause why the chief executive of Red Lobsters was
ousted, it’s because this is wasn’t the first, second, or third, but fourth that hurt as
the partner company has been said. In addition, the chief executive who ousted
doesn’t think or come up about other interests and needs of customers.
Evaluation: Identification (Answers Only)
1. Overbook
2. Occupancy percentage
3. Destination marketing
4. Rack room rates
5. Revenue source
ILLUSTRATION: (Answers only)
1. REVPASH-Revenue Per Available Seat Hour REVPASH as a revenue
management tool for food and beverage outlets in a hotel (similar to RevPar for
Rooms). This calculation is useful to measure the usage and revenue of a seat
per hour and it allows a better understanding and planning for the food and
beverage manager.
2. GOPPAR- is the total revenue of the hotel less expenses incurred earning that
revenue, divided by the available rooms. GOPPAR does not take into
consideration the revenue mix of the hotel, so while it does not allow an accurate
evaluation of the room revenue generated it demonstrates the profitability and
value of the property as a whole.
3. REVPOR- A tool used to appraise the performance of businesses in the hotel
and lodging industry. RevPOR is calculated by adding all income generated from
an occupied room, including room cost and room services (food, drink, laundry),
and dividing it by the number of occupied rooms.
4. REVPAR- Revenue per available room (RevPAR) is a metric used in the
hospitality industry to measure hotel performance. The measurement
iscalculated by multiplying a hotel's average daily room rate (ADR) by its
occupancy rate. RevPAR is also calculated by dividing a hotel's total room
revenue by the total number of available rooms in the period being measured.
 5. ADR- is a metric widely used in the hospitality industry to indicate the average
revenue earned for an occupied room on a given day. The average daily rate is
one of the key performance indicators (KPI) of the industry.
Firm Up: Case Study (Answers Only)
1. To assess the Branchwater’s revenue management performance, there are
things or process to be done or to be apply. Let say, the ADR viewed as the
Average Daily Rate that correspond to the regular rate of every room in the hotel
that has been sold in particular date. However, applying the process will support
to find out on what method or what way will the hotel be successful in its working
effectiveness as compared to another hotel in competition set or matter. For that
reason, in assuming the ADR of the competitive set has been increased into 7
percent last month, as a result the hotel face a weak performance.
2. As to this situation, if we assume the ADR of the competitive set decreased very
significantly last month for more than 10 percent, this would result that the hotel
has the strong performance as compared to other competitive set.
3. For me, if I were be the Hotel’s General Manager, I need to be alert ,and
determine to make a good performance in generating revenue and controlling
expenses, thus as a GM we need to learn how to cleverly increased the prices of
our services to unsuspecting customers and also maximize our own company
profits, and this will result the purpose of a successful hospitality business to
provide good profits to our beloved customers.
 REVENUE MANAGEMENT ACITIVITIES (IM No. 2)
Learning Activities:
Activity 1. Problem Solving (Answers only)
1. For me it’s a yes, because based from the calculations of these two partners
(Connie &Chad), that from $2.55 to $3.55 per delivery service this would mean
that the there is been an increase of $1.00 for where the students will discover
that there is been value added.
2. Yes. In some ways such as the value students will no longer walk in buying pizza
that will not cost for their transportation, thus the value students will only buy it on
their campus or in their rooms and less cost. However, this would be associated
with the “To Your Dorm Room” program of the business partners (Connie &
Chad)
3. Well I think the factors that may affect student perceptions value provided by the
delivery service is been a costly and pricey.
4. The advice that I will suggest to Connie and Chad if they wish to learn more
about the importance of those factors, since this is a business they should know
a bit more about Revenue Management and to learn how to put price for the
services.
Activity 2. Problem Solving (Answers Only)
All managers face issues every day that need decisions; decisions about managing
employees, resources and setting plans and strategies. And to do that, there are two
ways to make a decision, Intuitive way and rational decision making way. Thus, rational
decision making is a multi-step and linear process, designed for problem-solving start
from problem identification through solution, for making logically sound decisions.
However, If you want to make a good decision which helps you to achieve your goals;
you should depend on the available facts to make a careful analysis to make a decision

EVALUATION/IDENTIFICATIONS (Answers Only)

1. Value
2. Marketing
3. Real estate transaction/Price
4. Supply
5. Alfred Marshall
6. Equilibrium price
7. Price list
8. Demand
9. Breakeven point
10. Rocco Forte
ASSIGNMENT/FIRM UP (Answers Only)
1. F&B product cost percentages is fine, but Variable Cost is increases as sales
volume increases and decreases as sales volume decreases. However, the
following is the different scenarios in Barcena Resort:
• Break-even point: Revenue = Expenses
• Food and Service quality is outstanding
• Labor cost is very high Fixed Cost and eats up all the profits, but it does not
change with the increase or the decrease in volume.
Based on the information given for the costs at the Barcena Resort, we could say
that they have too many employees in F&B Department. Obviously, the problem
is coming from the fixed costs, because the variable cost percentage is good as
F&B product cost percentage is fine. We first pay the variable expenses, then
with the rest we should cover our fixed costs and still earn revenue. However,
when the fixed costs are too high, we do not generate revenues and there we
have a problem. The case states that service quality is outstanding, which
confirms the fact that most probably there are too many employees, doing the
same job, so that it seem like it is perfectly done.
The goal is to have the work done with the minimum number of labor hours. It is
not necessary that the hotel keeps all its employees, but they should keep the
productive ones and implement a strategy with rewards either monetary or
nonmonetary.
Moreover, if the prices are too high and there are not a lot of customers, but too
main employees, we would end up in the same situation of not earning enough,
because costs exceed the revenues, or they generate just enough to break even
as it is mention in the case.

2. Firstly, I would remove some of the amenities offered in the rooms. I would either
find cheaper ones or if this do not work, then I might remove them completely.
This would most probably have negative impact on the guests’ view, but it is a
possible solution.

Secondly, reduction on the energy consumption might have positive effect on the
financial performance of the property. Applying 10 percent reduction in energy
consumption would have the same financial effect as increasing the average
daily room rate in limited service hotels. This could be achieved, by switching
lights off, switch TVs off while guests are not in their rooms, unplugging guests’
chargers while they are not using them and are not in the room, using not so
 frequently cleaning machines that consume a lot of energy. This measure, should
be applied carefully and do not affect negatively the level of cleanliness, because
this will be crucial for the level of quests’ satisfaction. If we apply this carefully, it
would be most probably accepted well by our guests.

Last, but not least, cross training of the employees might help in the situation.
There is days of the week when housekeeping is not so busy, so if it is possible
for the employees to do something else at these days, I might need less staff.
However, if I achieve good results with the first two strategies, I would not go for
cross training it would lower the quality of the service and the guests will be
unhappy.

3. Assuming Sofia is an experienced and talented General Manager, for her the
current economic situation, every penny counts. A small increase in revenue and
reduction in expenses can have a significant impact on profitability. Expenses in
the hotel industry start from when a person thinks to start a hotel. From an
owner’s perspective, the costs stack up from the purchase of land, local
clearances, obtaining debt for the project, hiring the key consultants with proper
due diligence and preparing a preliminary cost sheet & cash flow chart till project
commissioning. A small percentage saving in all these areas can have a
significant impact on overall cost of the project. Proper planning will not only
control costs at the initial stage of the project but also after the commencement of
hotel operations.

However, staying connected with existing customers requires you, as a General

Manager, to have your strategy in place. Building customer loyalty is directly
related to exceeding customer expectations. Knowing how to satisfy a guest in
the hospitality industry helps hoteliers accelerate growth. There are many
customer loyalty strategies you can use to turn new customers into repeat guests
and retain your current list of guests as well.

4. Well I think that Sofia will gain from the work of Damario and the revenue
management task force, it would be an income, profit and well revenue for the
Barcena Resort.
 REVENUE MANAGEMENT ACITIVITIES (IM No. 3)
Learning Activities:
Activity 1. Problem Solving (Answers only)
1. As a hospitality professional, the difference between a USDA Choice New York
Steak and a Certified Angus Beef New York Strip Steak. However, based from
the scenario both of this steak will be print out for making menus, but there are
more to serve of Certified Angus Beef instead of the USDA Choice. Thus, the
customers will be happy to pay for it, because they will get better quality. And
also Certified Angus Beef is equivalent to high grade choice, but most of them is
equivalent to USDA choice, thus the customers will accept paying more for
Certified Angus Beef Steak.
2. It would be very important to know if the enhancement from USDA Choice to
Certified Angus Beef would be accepted by the customers before they fully
implement it. I think they should do a “trial” run unless they know their customer
base really well. The quality and the value the customer gets is important to the
success of having returning customers and the revenue manager needs to make
a smart and educated decision on what the customers will perceive as a good
value.
3. The revenue managers face many difficulties because the so-called specialists
do not know the demographics of the area/restaurant and they would cause
difficulties in the quality, value, and price of the food offered. If the guests notice
a big change in the price and not the value then they are not going to be a
returning customer. The RM on staff needs to be the one in charge of making the
decisions and a specialist should not be able to just come along and alter it.

EVALUATION/ IDENTIFICATION (answers only)

1. Strategic pricing
2. Cost based pricing
3. Minimum Sales point
4. Fixed (Cost)
5. Variable (Cost)
6. Break-even Point
7. Cost
FIRM UP
Case Study (Answers Only)
1. Mark being the controller would obviously be worried about the increasing cost
for a resort to operate. Mark would point out to figures such as CPOR, every day
running costs, fixed costs as well as variable cost and he would try to convince
me as Damario, that lowering price might bring more number of customers but at
the same time, all the variable costs will increase, the most significant of that
being CPOR. He would argue that the end goal of the business is to return profit
to its owners and if we go with Pam’s idea, we would fail at the very first objective
of running a business. I as Damario would cross check and analyze the data that
Mark would present to me.
However, when Mark was presenting his arguments, he was really clear in terms
of what he was representing and that was his duties as a controller but I being
the RM, I have to analyze Mark’s inputs keeping in mind all the different
departments and areas of the resort including sales and marketing which Pam
represents. I could argue that we might not cover costs if we were to decrease
price but if Pam’s inputs of highly competitive market are right, we would not
have customers in the resorts at all if we keep a higher price.
This way, we would definitely be burdened away with fixed costs and less
revenue. For me as Damario, I would tell Mark that his inputs are appreciated,
and I value his hard work.

2. Then the react of Pam would argue back, because according to his data and
computer set pricing strategies, decrease in price is highly critical. Pam would
say “Barcena needs a steady flow of revenue in order to stay profitable. If we
increase the price, we would lose a lot of price sensitive clientele. Me and my
team has worked really hard to target them, we as a company have already
spent a fortune in order to identify and reach to those clientele, it would be a
fool’s act to let it slip away by increasing price. All the “freebies” as Mark refers
them, they are essential to form and maintain relationships with clients who have
not only given much business in past but might give in future. Mark would simply
look at them as costs in his accounts books as their effect is intangible but you
and I we both know how significant these “freebies” really are.”
Thus, on an individual note, I think lowering prices just to the right amount can be
good in this situation as it will help the company drive up occupancy and while
this may result in increased costs, guests will spend a lot in other departments
such as restaurants, spa, IRD (provided Barcena is not one of those all inclusive
resorts, no information is given regarding it in case). Besides that if Barcena has
 any monetary tie ups with taxi agencies, restaurants , tour agencies, rentals all of
these would help too.

3. Controller and DOSM might take decisions based on the numbers, but Front
office and housekeeping should be included as they have insights into guest
experience and operational issues of a decision. F&B should have been included
as well because they are a major source of revenue. As I mentioned in the
answer of question 2, even though we are running tight on costs with rooms, we
can make money on higher occupancies. Banquets and events should be
included too.

4. When we question’s costs and prices, and talking agreement is never a good
strategy. A brand has to be clear in terms of what their value proposition really is.
If they make change to it often enough, it will send a bad signal to the consumer
and their ability to assess our value. A better thing to do from Sofia’s perspective
would be to advertise and coordinate in the way of solving conflict. Where both
Pam and Mark find what is best for the firm.