Revenue Management Final Exam
What is the industry term used to describe the sum of prices paid by a business's
customers? - ANS- Total Revenues
Historically, what concept have hospitality managers chiefly used to calculate their
selling prices? - ANS- Costs
What is an algebraic equivalent of the formula: Sales = Costs + Profit? - ANS- Profit =
Sales - Costs
What is the name for the net value achieved by both parties in a business transaction? -
ANS- Profit
What element is not present in a barter economy? - ANS- Money
What is the formula used to calculate an owner's ROI? - ANS- 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? -
ANS- Constrained Supply
Which industry was the first to use Yield Management principles? - ANS- Airline
What is the industry term used to describe the selling of rooms which are not actually
available for sale? - ANS- Overbooking
What is the formula used to calculate Average Daily Rate? - ANS- Total Room's
Revenue / Total Rooms Sold = Average Daily Rate
Tashia's hotel sold 175 rooms last night at an ADR of $200.00. Her hotel has 250
rooms. What was Tashia's occupancy % last night? - ANS- 70%
Tashia's hotel sold 175 rooms last night at an ADR of $200.00. Her hotel has 250
rooms. What was Tashia's RevPAR last night? - ANS- $140.00
,What is the industry term for the average revenue generated by each occupied
guestroom during a defined period of time? - ANS- RevPOR
What is the formula used to calculate GOPPAR? - ANS- (Total Revenue - Management
Controllable Expenses) / Rooms Available to Sell = GOPPAR
What is the industry term for a customer group which can be readily identified by one or
more common characteristics? - ANS- Market Segment
What is rack rate? - ANS- 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) - ANS- 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? -
ANS- 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? - ANS- The target market
What is the term used to describe efforts undertaken to encourage travel and tourism to
a specific geographic area or attraction? - ANS- Destination Marketing
What is the name for the value given up by a buyer and a seller in a business
transaction? - ANS- Price
Charging guests for watching a "Pay-Per-View" movie in their hotel guestroom is an
example of what type of pricing? - ANS- Two-tiered pricing
What is the fundamental assumption upon which the concept of consumer rationality is
based? - ANS- 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? - ANS- Value
What is created when a seller communicates to a buyer a description of a product to be
sold and the price at which that product will be sold? - ANS- A value proposition
,Which one of the following terms is not one of the 4 Ps of the Marketing Mix? - ANS-
Proposition
Which of the following terms would be included in the Place portion of a hotel's
marketing mix? - ANS- Distribution Channels
What is the fundamental assumption upon which the Law of Supply is based? - ANS-
The higher the demand for a product the more of it will be produced by sellers
According to Alfred Marshall's work, if the price of a product is lower than the natural, or
equilibrium price, what will happen? - ANS- The demand fort he product would exceed
its supply
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? - ANS- 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? -
ANS- 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? -
ANS- Revenues must exceed costs
What is the specialized branch of accounting that focuses on recording and analyzing
the expenses incurred by an organization? - ANS- Cost Accounting
What is the industry term for the point at which an organization's revenues exactly equal
its costs? - ANS- Break-even point
Which of the following foodservice costs is a variable cost? - ANS- Food
Which of the following lodging costs is a fixed cost? - ANS- 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? - ANS- 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? -
ANS- Unit costs will vary based upon how high or low an item is priced
Which of the following statements about the relationship between costs and pricing is
true? - ANS- An appropriate selling price for a product or service must dictate its
allowable costs
If a Revenue Manager implements an organization's strategic pricing plan what
personal characteristic of that Revenue Manager will be most important for ensuring the
plan's success? - ANS- An understanding of an organization's customers
Which formula represents a buyer's view of a sales transaction? - ANS- Perceived
Value - Selling Price = Personal Profit
What type of benefit is lacking in material qualities and is not able to be touched or seen
but nonetheless can still be perceived? - ANS- Intangible
What will be the typical case in an auction when the initial price bid for the item being
sold is very low? - ANS- The number of potential bidders will be high
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? - ANS- 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? -
ANS- 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? - ANS- 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? -
ANS- Spending someone else's money on someone else
,What special challenge do buyers of hospitality products such as hotel guestrooms or
restaurant meals face? - ANS- 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? - ANS- Perceived value will increase
If quantity and price are held constant how will reductions in product or service quality
affect buyers' perceptions of value? - ANS- 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? - ANS- Inconsistency
Which of the Four I's of service refers to the fact that services most often cannot be
held, touched, or even seen before they are purchased? - ANS- Intangibility
Ahmed is the sole waitperson on duty at the Athenian restaurant during the very slow
2:00 p.m. to 4:00 p.m. time period. Which of the Four I's of service refers to the fact that
employees such as Ahmed must be scheduled to work anytime a service business is
open and regardless of low volume levels? - ANS- Inventory
Which of the Four I's of service refers to the tendency of consumers to equate the
quality of service provided with the attitude of the person who actually provides the
service? - ANS- Inseperability
Which of the Four I's of service addresses the fact that a hotel room that goes unsold on
a specific night cannot be discounted and offered for sale the next day? - ANS-
Inventory
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? - ANS- The quality of
service offered
What is the most common guest complaint about hotel guest rooms? - ANS- Service
deficiencies
What is the most common guest complaint in the food service industry? - ANS- 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? - ANS- As C
decreases, D increases
Which two factors do successful revenue managers employ when they devise and
implement strategic pricing plans? - ANS- Data management and insight
Which statement about revenue management in the hospitality industry is true? - ANS-
Quiz four Question one (??)
What is value-based pricing? - ANS- 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? - ANS- Return on Investment (ROI) pricing
What is the term used to describe a pricing system in which all customers are charged
the same price at all times? - ANS- Fixed pricing
What is true for franchised hotel operations in the United States? - ANS- Their prices
are established by their franchisors
What is the economic term used to describe the difference between what a consumer is
charged for a product or service and the price that consumer would willingly pay for it? -
ANS- Consumer surplus
What is the relationship between differential pricing and consumer surplus? - ANS-
Differential pricing is a strategy used by sellers to minimize consumer surplus
Which course of action would be most beneficial to the profit generating ability of a
revenue manager's business? - ANS- The majority of any consumer surplus is captured
by the business
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
What is the industry term used to describe the sum of prices paid by a business's
customers? - ANS- Total Revenues
Historically, what concept have hospitality managers chiefly used to calculate their
selling prices? - ANS- Costs
What is an algebraic equivalent of the formula: Sales = Costs + Profit? - ANS- Profit =
Sales - Costs
What is the name for the net value achieved by both parties in a business transaction? -
ANS- Profit
What element is not present in a barter economy? - ANS- Money
What is the formula used to calculate an owner's ROI? - ANS- 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? -
ANS- Constrained Supply
Which industry was the first to use Yield Management principles? - ANS- Airline
What is the industry term used to describe the selling of rooms which are not actually
available for sale? - ANS- Overbooking
What is the formula used to calculate Average Daily Rate? - ANS- Total Room's
Revenue / Total Rooms Sold = Average Daily Rate
Tashia's hotel sold 175 rooms last night at an ADR of $200.00. Her hotel has 250
rooms. What was Tashia's occupancy % last night? - ANS- 70%
Tashia's hotel sold 175 rooms last night at an ADR of $200.00. Her hotel has 250
rooms. What was Tashia's RevPAR last night? - ANS- $140.00
,What is the industry term for the average revenue generated by each occupied
guestroom during a defined period of time? - ANS- RevPOR
What is the formula used to calculate GOPPAR? - ANS- (Total Revenue - Management
Controllable Expenses) / Rooms Available to Sell = GOPPAR
What is the industry term for a customer group which can be readily identified by one or
more common characteristics? - ANS- Market Segment
What is rack rate? - ANS- 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) - ANS- 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? -
ANS- 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? - ANS- The target market
What is the term used to describe efforts undertaken to encourage travel and tourism to
a specific geographic area or attraction? - ANS- Destination Marketing
What is the name for the value given up by a buyer and a seller in a business
transaction? - ANS- Price
Charging guests for watching a "Pay-Per-View" movie in their hotel guestroom is an
example of what type of pricing? - ANS- Two-tiered pricing
What is the fundamental assumption upon which the concept of consumer rationality is
based? - ANS- 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? - ANS- Value
What is created when a seller communicates to a buyer a description of a product to be
sold and the price at which that product will be sold? - ANS- A value proposition
,Which one of the following terms is not one of the 4 Ps of the Marketing Mix? - ANS-
Proposition
Which of the following terms would be included in the Place portion of a hotel's
marketing mix? - ANS- Distribution Channels
What is the fundamental assumption upon which the Law of Supply is based? - ANS-
The higher the demand for a product the more of it will be produced by sellers
According to Alfred Marshall's work, if the price of a product is lower than the natural, or
equilibrium price, what will happen? - ANS- The demand fort he product would exceed
its supply
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? - ANS- 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? -
ANS- 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? -
ANS- Revenues must exceed costs
What is the specialized branch of accounting that focuses on recording and analyzing
the expenses incurred by an organization? - ANS- Cost Accounting
What is the industry term for the point at which an organization's revenues exactly equal
its costs? - ANS- Break-even point
Which of the following foodservice costs is a variable cost? - ANS- Food
Which of the following lodging costs is a fixed cost? - ANS- 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? - ANS- 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? -
ANS- Unit costs will vary based upon how high or low an item is priced
Which of the following statements about the relationship between costs and pricing is
true? - ANS- An appropriate selling price for a product or service must dictate its
allowable costs
If a Revenue Manager implements an organization's strategic pricing plan what
personal characteristic of that Revenue Manager will be most important for ensuring the
plan's success? - ANS- An understanding of an organization's customers
Which formula represents a buyer's view of a sales transaction? - ANS- Perceived
Value - Selling Price = Personal Profit
What type of benefit is lacking in material qualities and is not able to be touched or seen
but nonetheless can still be perceived? - ANS- Intangible
What will be the typical case in an auction when the initial price bid for the item being
sold is very low? - ANS- The number of potential bidders will be high
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? - ANS- 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? -
ANS- 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? - ANS- 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? -
ANS- Spending someone else's money on someone else
,What special challenge do buyers of hospitality products such as hotel guestrooms or
restaurant meals face? - ANS- 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? - ANS- Perceived value will increase
If quantity and price are held constant how will reductions in product or service quality
affect buyers' perceptions of value? - ANS- 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? - ANS- Inconsistency
Which of the Four I's of service refers to the fact that services most often cannot be
held, touched, or even seen before they are purchased? - ANS- Intangibility
Ahmed is the sole waitperson on duty at the Athenian restaurant during the very slow
2:00 p.m. to 4:00 p.m. time period. Which of the Four I's of service refers to the fact that
employees such as Ahmed must be scheduled to work anytime a service business is
open and regardless of low volume levels? - ANS- Inventory
Which of the Four I's of service refers to the tendency of consumers to equate the
quality of service provided with the attitude of the person who actually provides the
service? - ANS- Inseperability
Which of the Four I's of service addresses the fact that a hotel room that goes unsold on
a specific night cannot be discounted and offered for sale the next day? - ANS-
Inventory
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? - ANS- The quality of
service offered
What is the most common guest complaint about hotel guest rooms? - ANS- Service
deficiencies
What is the most common guest complaint in the food service industry? - ANS- 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? - ANS- As C
decreases, D increases
Which two factors do successful revenue managers employ when they devise and
implement strategic pricing plans? - ANS- Data management and insight
Which statement about revenue management in the hospitality industry is true? - ANS-
Quiz four Question one (??)
What is value-based pricing? - ANS- 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? - ANS- Return on Investment (ROI) pricing
What is the term used to describe a pricing system in which all customers are charged
the same price at all times? - ANS- Fixed pricing
What is true for franchised hotel operations in the United States? - ANS- Their prices
are established by their franchisors
What is the economic term used to describe the difference between what a consumer is
charged for a product or service and the price that consumer would willingly pay for it? -
ANS- Consumer surplus
What is the relationship between differential pricing and consumer surplus? - ANS-
Differential pricing is a strategy used by sellers to minimize consumer surplus
Which course of action would be most beneficial to the profit generating ability of a
revenue manager's business? - ANS- The majority of any consumer surplus is captured
by the business
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
