Exam 1
What is the formula for Occupancy Rate
# of occupied rooms/ # of rooms available x 100
To calculate average check you need to know what
# of seats, # of turn over, # of days open
Your revenue goal for January is $40,000, and you have booked $31,000 thru January 25. What average nightly revenue do you need for the remainder of January? a)$600 b)$1,000 c)$1,200 d)$1,500
$1500
Your hotel sells four types of rooms: double queen beds for $140/night; king bed for $160/night; junior suite for $220, and full business suites for $285. If there are 200, 150, 100, and 50 of each, respectively, what is your average price per room? a)$165 b)$176.50 c)$201 d)$220.25
$176.50
A guest walks in and needs a room for the night. The rack rate for rooms is 15% higher than the average rate of $165 per night. What rate will the walk-in guest pay for the night? a)$169.75 b)$179.75 c)$189.75 d)$199.75
$189.75
It is football season and there is a home game this coming weekend in your city. Your current room rate is $188/night. You will increase your nightly rates by 38% for this weekend but you will offer a 10% discount on the weekend per night if you book both Saturday and Sunday. If you book both nights, how much will you pay? a)$51.88 b)$188 c)$418.88 d)$467
$467
You are budgeting for front desk staffing. Each front desk associate is paid $16/hr, and you need daily shifts consisting of 2 associates, 4 associates, and 1 associate to cover each day of the week. Assume each shift is 8 hours long. What is your weekly payroll? a)$6,250 b)$896 c)$6,272 d)$784
$6,272
You need to determine your weekly budget for staffing the front desk. Each shift is 6 hours long and each staffer is paid $18 per hour, except for the night manager who works the 4th shift. She is paid $20 per hour. Staffers for the first 3 shifts are: 2, 4, 2 with the 1 night manager on 4th shift. What is your weekly budget for payroll? a)$5,288 b)$6,888 c)$7,658 d)$11,123
$6,888
You are checking in a guest that booked a room for $285 a night for three nights. You discover that as a government employee he should receive a 20% discount. What is new cost for his stay? a)$285 b)$570 c)$596 d)$684
$684
What is a luxury 1,200 room hotel's nightly sales revenues with a room price of $850 and 925 rooms rented? a)$92,500 b)$104,623 c)$120,225 d)$786,250
$786,250
Your normal room rate is $120 per night. You offer a 25% discount. What is the discounted room rate? a)$25 b)$80 c)$90 d)$120
$90
What is the formula for Average Check by Meal Period
(Meal period % of total revenue x total revenue) / (Seats x meal period turnover x days open)
During the slow season, a hotel is most likely to: a)Keep rates high because rate changes confuse guests b)Discount rates to fill more rooms
discount rates to fill more rooms
True or False: Although hotels let third-party sites sell inventory for them, they do not need to pay those third-party sites a fee.
false
What is the Competitive Method also known as
follow-the-leader method
Rate curves are useful for: a)Maintaining consistency b)Recording staff demands c)Forecasting future demand d)Checking RM accuracy
forecasting future demand
The running account of what a guest is charged during their stay can be found in/on:
guest folio
Weather and local events are key drivers of: a)Hotel demand b)Rooms supply c)Overhead costs
hotel demand
When is the Competitive Method useful
in the short-run
Your Stars are what type of menu item
items that are the most popular and provides high contribution (profit) margin (should be located in the most favorable position on the menu)
Menu engineering is what type of method
menu analysis and menu pricing
In a hotel, the person at the front desk overnight who closes out the day's accounting records is called the:
night auditor
A percentage computed by dividing the number of occupied rooms by the number of available rooms times 100 is a formula used to determine: a)Occupancy rate b)Revenue c)Room Rate d)Room Discounts
occupancy rate
Menu engineering considers what
popularity and profitability
In the hotel industry, the set of strategies and tactics for maximizing revenues and profits is called: a)Profit algorithms b)Revenue management c)Business optimization
revenue management
Your competitor's hotel is located in a safer area and is more attractive than your hotel. Everything else being equal, what is the best pricing strategy? a)Set price above competitor hotel b)Set price the same as the competitor hotel c)Set price lower than competitor hotel
set price lower then competitor hotel
In the field of revenue management, restriction criteria refer to: a)Keeping guests out of employee-only areas b)Setting minimum or maximum lengths of stay c)Helping guests with limited mobility
setting minimum or maximum lengths of stay
What is markup?
the difference between the cost of an item and its selling price
A Clearly Thought Out Strategy will stem form what
the financial objective or objectives of the business
Setting the best rates for a hotel is the job of: a)The Front Desk b)The Revenue Manager c)The CEO d)Hotel Staff
the revenue manager
Why are Front Desk Staff so important
they are the Central nervous center of the hotel property
Most ideal location to catch eyes from customers
upper right corner
How should Pricing Decisions be set up
with the operation's long-term financial decisions
A presentation room in your hotel is circular with a 14-foot radius. A professional group requires 500 square feet of space for their annual conference. Can you accommodate them? a)Yes b)No
yes
Last week, you sold 1,000 rooms at an average rate of $200 per night. Your revenue manager estimates that cutting the price of rooms to $180 will let you sell 1,200 rooms. Should you do it? a)Yes b)No
yes
Your hundred room hotel has 80% occupancy on Saturday night and 20% occupancy on Sunday night. By setting a minimum two night stay on Saturdays, your occupancy goes to 60% and 55% for Saturday and Sunday, respectively. Assuming rates are the same on both nights, should you set the minimum two night stay? a)Yes b)No
yes
What is Menu Engineering
-A method of menu analysis and pricing which helps diagnose a menu and achieve profitability objectives
What are the cons to the Price Cutting Method
-Can be risky due to it ignoring costs (if variable costs are higher than prices, profits will be eroded) -A price war may result if competition lowers prices too
What is a Night Auditor
-Person at front desk overnight -Closes out the day's accounting records, making sure everything has been balanced, and starts the new accounting day -Handles late check-ins and oversees entire hotel (depending on the size of it)
What are the Trial and Error Method Cons
-This method ignores the fact that there are many other variables (like general economic conditions, seasonality of demand, and competition) which affect sales revenues and profits apart from prices -These price changes can be confusing to customers during the testing period -What appears to be the optimum pricing level may later be affected by other factors
What is the Normal Turnover Rate for a Hotel Room
1 per 24 hours
You should Ensure Prices Chosen For Each Room Type Are what
1. Appealing to guests shopping for a good value 2. Competitive with neighboring hotels 3. High enough to cover your costs, with some left over for your profit
What are some Front Desk Staff Skills
1. Be friendly 2. Have great communication 3. Be understanding 4. Be patient
Menu Engineering Concentrates On what 3 Variables
1. Customer Demand (how many eat-in restaurant) 2. Analysis of the menu item's sales revenue mix to determine the popularity of individual menu items 3. Item Contribution (profit) Margin
What are some Common Surprises or Circumstances Front Desk Staff Handles
1. Engineering/Maintenance issues (contacts them) 2. Overbooking 3. Walk-in guests 4. A dirty room after housekeeping has left for the day
What are some Front Desk Staff Responsibilities
1. Must coordinate between the customers and all departments of the hotel 2. Must address all guest issues promptly 3. Check-in reservations and check-in walk-ins 4. Deal with overbookings and "walk" the guest if needed
What are some Reasons for Puzzle menu items
1. Prices are too high 2. Quality is not satisfactory 3. They are not suited to customers
How do you Exploit Plowhorses
1. Raise Prices 2. Review the recipes and purchase specifications and reduce the cost of ingredient or reduce the portion size
What are some Short Run Situations/ Objectives
1. Reacting to short-run changes in price by competition 2. Adjusting prices because of a new competitor 3. Knowing how large of a discount to offer to accept groups while still making a profit 4. Knowing how much to increase prices to compensate for increased costs 5. Knowing how to discount prices in the off-season to attract business 6. Offering special promotional prices
How do you Solve Puzzles
1. Rename the menu 2. Make their menu descriptions more appealing 3. Relocate them to a more favorable position on the menu 4. Reduce the price if the item has elastic demand
What are some Issues with Room Rates
1. Room supply cannot be increased in the short run 2. The number of rooms available is fixed 3. Turnover cannot be increased
What is the difference Between Restaurant and Hotel Operation
1. Room supply for hotel is fixed, while restaurant seats can be increased in the short run 2. Turnover rate for a hotel room is a maximum one, while turnover rate for restaurant is 2 or 3+ 3. If a room is not sold today, revenue is gone forever (Room revenue and cost of the room are not recovered, directly, while food and beverage costs are recoverable in the short run)
What are some Hotel Demand Changes:
1. The weather 2. Events taking place in town 3. The competition
What are the Long Run Pricing Objectives
1. To maximize sales revenue 2. To maximize profitability 3. To maximize ROI 4. To maximize business growth 5. To maintain or increase market share
Your revenue manager tells you that nightly revenue can be approximated by the formula: revenue = 11,000 - (r - 105)2where r is the room rate. Assuming your revenue manager is correct, which of the following rates gives the highest nightly revenue? a)90 b)100 c)120 d)200
100
It is 10:00 am and a guest calls with a plumbing problem. You know that maintenance has a list of 4 problems currently being addressed and history indicates that each takes 35 minutes. When is the earliest you could tell the guest that maintenance staff will arrive? a)12:20 pm b)1:40 pm c)10:50 pm d)12:10 am
12:20 pm
You need to plan staffing for this coming Friday afternoon. Your research shows that a front desk associate can serve a guest in 4 minutes. The 6pm hour will be your busiest on Friday with 340 guests anticipated. How many associates will you need to schedule so guests are served in a timely fashion? (round to nearest whole number) a)23 b)24 c)26 d)30
23
You are working at the front desk of a full service, 800 room hotel, with a pool. On average, 1/5 of the rooms request two extra towels per day. How many extra towels do you expect to need in a day? a)160 b)320 c)800 d)1,600
320
A branch of mathematics called queuing theory gives a formula for the average length of a line given guest arrivals and front desk associate service time. The formula is p2 / (2 x (1 - p)) where p = average guest arrivals per minute / guests served per minute. If the average guest arrivals per minute is 10 and guests served per minute is 11. What is the average line length? (Compute p to 3 decimal places. Round the answer to the nearest whole number.) a)1 b)2 c)5 d)7
5
At your full-service, 500 room hotel, typically, 1/4 of the guests will request room service per day. How many room service calls will likely be received in the next 7 days? a)850 b)875 c)900 d)925
875
Occupancy rate is defined as rooms sold divided by rooms available. If you have 632 rooms available and sell 580 of them, what is your occupancy rate? (Round to the nearest percent.) a)92% b)95% c)98% d)100%
92%
What is an example of the Rule of Thumb Method
A restaurant should price its menu items at 2.5 times food cost to achieve a 40% cost of sales
What is Revenue Management
A set of revenue maximization strategies and tactics meant to improve revenues and profitability
How do you calculate Average Daily Customers
Amount of customers per week/7
What are the cons to the Markup Method
Assuming that 40% is the correct food cost for the restaurant to achieve the desired profit
When calculating Restaurant Pricing you use
Bottom Up pricing
What is the High Price Method
By using product differentiation, they deliberately charge more than competitors, emphasizing factors like quality
What is the Top-Down Method
Calculating revenue and costs to determine if there is a net income
What are cons of the High Price Method
Could encourage customers to move elsewhere if there is low quality, which does not compensate for the high price
What is The $1 Per $1000 Method
Direct relationship between the cost of the building and room rate
You want to Eliminate what type of menu items
Dogs
How is the The $1 Per $1000 Method used
Each $1000 in building cost per room, $1 of room rate should be charged to ensure profitability
True or False: Larger hotels rarely have security to assist the night auditor.
False
Hotel Rooms are what
Fixed quantity, perishable each night
A "walk-in" is a:
Guest arriving without a reservation and looking for a room
When a hotel must "walk" a guest, the hotel:
Has overbooked and cannot provide a room
Your Puzzles what are type of menu items
Have a higher than average contribution (profit) margin but lower than average popularity
Your Dogs are what type of menu items
Have both lower popularity and contribution (profit) margins; some should be removed and some should be kept for few loyal clients
What are Rate Curves and why are they important
Helpful when forecasting future demand; a graph that shows historical room rate info
Which of the following is NOT an example of a third-party reservation site? -Priceline.com -Kayak.com -Hyatt.com
Hyatt.com
what is an example of the Markup Method
If traditionally a restaurant has been operating at a 40% food cost, the selling price of a menu item is $1 for 40 cents of the food cost
What are the cons of the Competitive Method
If used without knowledge of the differences that exist (product, costs, services) between one establishment and another, then this can be risky
What are the cons to the Rule of Thumb Method
It pays no attention to the market price (Competition, value for $); should not be relied on
Your Plowhorses are what type of menu item
Items that are popular but provide a low contribution (profit) margin
What is the Competitive Method
Matching prices to those of competition and then differentiating in such areas like location, atmosphere, and other non-price factors; tends to ensure no price-cutting and resulting reduction in profits; market price stability
What is Rack Rate
Maximum rate that will be quoted for a room
What is the formula for Selling Price
Menu item cost/cost %
Bottom Up pricing uses what formulas to solve for total revenue
NIAT + tax, NIBT + Fixed Costs, Gross Profit + Variable Costs = Total Revenue (SR)
What is the formula for Operating Income Before Tax
Net income after tax/ (1-tax rate)
What is a (PMS) Property Management System
Once a guest checks in, it automatically generates a guest folio
What is the formula for Tax
Operating Income x tax rate
You want to Exploit what times of menu items
Plowhorses
What is the formula for the Rule of Thumb Method
Price * Food Cost % = FC, Price = FC%
PPPP of Puzzles
Price: Down Product: Rename Promotion: Sell Place: Reposition
PPPP of Dogs
Price: Review Product: Replace Promotion: Nothing Place: Nothing
PPPP of Plowhorses
Price: Up Product: Modify Promotion: Nothing Place: Nothing
PPP of Stars
Price: Up/down Product: Nothing Promotion: Sell Place: Nothing
What is the Trial and Error Method
Prices are charged up and down to see what effect they have on sales and profits; when profits are maximized, profits are established
What is the Short Run Pricing Strategy
Pricing policies to take advantage of situations that arise from day to day
What is Integrated Pricing
Products should not be priced independently of each other; both food and beverage prices should complement each other to achieve profit objectives
What is average check by meal period?
Proportion of revenue for each meal period and seat turnover should be known for each meal period.
You want to Solve (make better) what type so menu items
Puzzles
What are the pros to the Intuitive Method
Requires no real knowledge of the business or research into costs, prices, competition of the market (no advantages)
What is Menu Engineering used for
Revenue management for restaurants (combining the "right" menu items with the "right prices)
What is a Guest Folio
Running account of what the guest is being charged for during their stay (will automatically charge guest at the of the stay)
A property management system (PMS) is:
Software that aids communication by the front desk and manages day-to-day accounting
You want to Promote what types of menu items
Stars
What is the Bottom-Up Method
Start with the net income that is required and what prices are to be charged to achieve desired net income
What are the 6 steps to restaurant pricing?
Step 1: determine desired net income after tax. It is usually expressed as a % of investment. Record this $ amount as a first expense. Step 2: add income tax-use algebra to figure out the $ amount of tax. Step 3: add all fixed expenses. Adding step 2 result (income before income tax) plus all fixed expenses will give a gross profit. Step 4: sum all variable expenses in percentage, then subtract this sum from 100% Step 5: determine total revenue by algebra from step 4. Step 6: calculate average check
What is Long Run Pricing also known as
Strategic Pricing
What is Short Run Pricing also known as
Tactical Pricing
What is Supply in a hotel
The number of rooms available to sell each night (inventory of rooms)
What is the Intuitive Method?
The operator just assumes that the prices established are the right ones because customers are willing to pay them
What are the cons of the Intuitive Method
The prices charged are unrelated to profits
What is Demand in a hotel
The total number of rooms that guests would like to purchase on a given evening
What is the Goal of Menu Engineering
To provide the highest overall profit margin with the menu
What is the Price Cutting Method
To use this method, the reduction in prices must be more than compensated by selling additional products; prices are reduced below those of the competition
What is the Traditional pricing Method
Top-Down
What is the formula for Average Check
Total Revenue/(Seats x daily turnover x days open)
How do you calculate Average Daily Turnover
Total Seat Turnover per week/7
What is the Markup Method
Used when a restaurant's traditional food cost % is applied to determine the price of any new menu items offered
Why Seat Turnover important
Useful information for staffing and advertising decision making
What are the cons of the Dollar Per Thousand Method
Uses historical construction costs and ignores current costs (Financing costs)
Retail Goods are what
Variable supply, can be sold at a later date
Who gets charged the Rack Rate
What walk-in guests
What is Walking A Guest
When a hotel overbooks, must find that person accommodations elsewhere (Will usually pay for transportation costs to that new hotel and the 1st night's stay)
What is the Follow-the-leader Method
When there is one dominant operator in the market that generally takes the lead in establishing prices, and its close competitors matching increases and then decreases
What is Net Income also known as
a cost
What is the rule of thumb method
a principle with broad application that is not intended to be strictly accurate or reliable for every situation. It refers to an easily learned and easily applied procedure or standard, based on practical experience rather than theory.
You need to be sure that the prices chosen for each room type are: a)Appealing to guests shopping for good value b)Competitive with neighboring hotels c)High enough to cover costs & create profit d)All of the above
all of the above
The dates a guest checks into and out of a hotel are the:
arrival and departure
Long run pricing is determined how
as a result of supply and demand
As the night auditor at your hotel, you show cash receipts of $3,458 and credit card receipts of $23,975. Your property management system shows that you booked $27,433 in sales. Are your receipts too low, too high, or balanced? a)Too low b)Too high c)Balanced
balanced
You have a major college football game coming to town this weekend. A good revenue manager would likely: a)Use minimum-stay restrictions to fill several nights b)Increase prices c)Both of the above
both of the above
Restaurant pricing is what method?
bottom up
What is so important about menu engineering?
combining the right items with the right price
The most essential skill for front desk associates is:
communication
