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HOSPITALITY REVENUE MANAGEMENT FINAL EXAM REVIEW
QUESTIONS AND ANSWERS
"Which industry was the first to use Yield Management principles? - CORRECT ANSWER
airline" "What is the industry term used to describe the selling of rooms which are not actually available
for sale? - CORRECT ANSWER overbooking"
"What is the formula used to calculate Average Daily Rate? - CORRECT ANSWER 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? - CORRECT ANSWER 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? - CORRECT ANSWER $140"
"What is the industry term for the average revenue generated by each occupied guestroom
during a defined period of time? - CORRECT ANSWER RevPOR"
"Charging guests for watching a "Pay-Per-View" movie in their hotel guestroom is an example of
what type of pricing? - CORRECT ANSWER two-tiered pricing"
"What is the fundamental assumption upon which the concept of consumer rationality is based?
- CORRECT ANSWER 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? - CORRECT ANSWER 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? - CORRECT ANSWER value proposition"
"Which of the following foodservice costs is a variable cost? - CORRECT ANSWER food"
"Which of the following lodging costs is a fixed cost? - CORRECT ANSWER 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? - CORRECT ANSWER 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? -
CORRECT ANSWER Unit costs will vary based upon how high or low an item is priced"
"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? - CORRECT ANSWER 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? - CORRECT ANSWER 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? - CORRECT ANSWER 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? - CORRECT
ANSWER inseparability"
"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? - CORRECT ANSWER
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? - CORRECT ANSWER quality of service offered"
"What is the most common guest complaint about hotel guest rooms? - CORRECT ANSWER
service deficiencies"
"What is the most common guest complaint in the food service industry? - CORRECT
ANSWER service quality"
"Consider the formula: (A + B) - C = D Where: A = Perceived tangible product benefit B = Perceived intangible service benefit C = Price
"What is the name of the US legislation that outlawed all contracts and conspiracies that
unreasonably restrain interstate trade? - CORRECT ANSWER sherman antitrust act"
"What is the name of the US legislation that prohibits competing hospitality managers from meeting to agree upon the room prices that will be charged for upcoming events or charged to
specific groups of customers? - CORRECT ANSWER sherman antitrust act"
"What is the name of the US legislation that prohibits illegal discrimination in pricing? -
CORRECT ANSWER clayton act"
"Which group of employees is most responsible for implementing the revenue optimization
strategies and tactics developed by a revenue management team? - CORRECT ANSWER line-
level employees" "What vehicle do effective revenue managers use to best develop and evaluate their
organizations' pricing and revenue management strategies and tactics? - CORRECT ANSWER
regular strategy meetings"
"Who should lead the revenue management efforts of a lodging or foodservice organization? -
CORRECT ANSWER a qualified revenue manager"
"Donna is a hotel revenue manager preparing next year's rooms forecast. Donna knows that in November of next year a new hotel is opening near her own. As a result, she is considering reducing her rooms forecast for that month. If she does so, what data type will she be primarily
using to make her decision? - CORRECT ANSWER future data"
"What is the formula revenue managers use to calculate the percentage change in sales which has
occurred from the last accounting period to the present period? - CORRECT ANSWER Total
Sales This Period - Total Sales Last Period Total Sales Last Period = % Change in Sales"
"What is one consistent characteristic of desirable rooms revenue? - CORRECT ANSWER
leads to higher GOPPAR values" "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 any room type (except
suites) available at the time one of Expedia's customers wants to make a reservation. What is the
industry term for Expedia.com's contract request? - CORRECT ANSWER last room
availability" "Francisco is the revenue manager at the 1500 room BayShore hotel. Tonight he forecasts 750 stay-overs and 750 arrivals. Assume he is accurate in forecasting a 6% no-show rate. How many additional reservations could Angelina accept before she would be required to walk an arriving
guest? - CORRECT ANSWER 90"
"To optimize revenues while enhancing property operations, which strategy pair should revenue
managers seek to implement? - CORRECT ANSWER Maximization of room codes,
minimization of rate codes" "What strategy should be put into action when revenue managers implement special event rates
and expect a sell out? - CORRECT ANSWER Enhance guest value by providing product and/or
service enhancements"
"Which of the following is not a hotel intermediary? - CORRECT ANSWER front desk agents"
"Which travel industry-related business group developed the Global Distribution System? -
CORRECT ANSWER airline industry"
"For which distribution channel type do hotels typically employ a shopper's service? -
CORRECT ANSWER Sales made via the telephone"
"Which is most often true about room sales made by a hotel's group sales department? -
CORRECT ANSWER ADRs are lower than average and Net ADR Yield is higher than average"
"How are most CVBs in the United States funded? - CORRECT ANSWER By a combination of
hotel occupancy taxes and membership dues"
"What is true about rooms that are sold at prices below a hotel's variable operating costs? -
CORRECT ANSWER they will cause an increase in RevPAR"
"Scott is a revenue manager who calculates the following for his hotel: Total (rooms + non-rooms) revenue Total occupied rooms
"Last month Carl's hotel had a RevPAR index of 100. His occupancy index was 132.5 and his ADR
index was 75.5. What is true about his hotel's performance last month? - CORRECT ANSWER
His GOPPAR is not optimized because it is low relative to the RevPAR index" "Last month Carl's hotel had an ADR index of 80.0% and an occupancy index of 120%. What was
Carl's RevPAR index for last month? - CORRECT ANSWER 96%"
"Last month Carl's hotel had a RevPAR index of 133.0%. Based on that information alone; what
does Carl know for sure about his hotel's performance last month? - CORRECT ANSWER His
ADR or occupancy index will exceed 100%" "Last month Carl's 500-room hotel had a comp. set that included five additional hotels offering a
total of 2000 rooms. What was Carl's supply share % last month? - CORRECT ANSWER 20%"
"Last month Carl's hotel supplied 10.8% of the rooms in his comp set. It attracted 11.6% of all the rooms sold (demand) and generated 9.1% of the total revenue achieved by the comp set. What is
true about Carl's hotel? - CORRECT ANSWER Its rates are low relative to the comp. set's and
the hotel has an occupancy index above 100%." "What metrics are best used to assess the relative merits of a specific lodging industry
distribution channel's contribution to a single hotel? - CORRECT ANSWER Rooms sold and
Net ADR Yield" "It is near the end of the month and Tamrika is a revenue manager considering the impact of selling 200 room nights, for use this month, but at a room rate far below her hotel's average room
rate. What would be the impact on her hotel's operating statistics if she makes this sale? -
CORRECT ANSWER Increased RevPAR and reduced flow-thru %"
"An income statement is also commonly referred to as a(n) - CORRECT ANSWER P&L"
"An operation's year-end income statement shows before tax profits of $210,000. Revenues for
the year were $1,850,000. What were this operation's expenses for the year? - CORRECT
ANSWER $1,640,000"
"An operation's income statement shows total expenses of $45,500 for a specific month. Before
tax - CORRECT ANSWER $48,750"
"Why are a business's vendors interested in information contained in that business's income
statement? - CORRECT ANSWER So they can make decisions about payment terms that
should be offered"
"A manager's total revenue for an accounting period is $150,000. Revenue from one of the operation's three revenue sources is $30,000. What was the sales percentage of that revenue
source? - CORRECT ANSWER 20%"
"What is an example of a controllable cost? - CORRECT ANSWER marketing"
"What is an example of a fixed cost? - CORRECT ANSWER licenses and permits"
"What is the formula for prime cost? - CORRECT ANSWER Total cost of sales + Total labor =
Prime cost" "A manager's operation had an income before income taxes of $2,000 in a month. Total expenses
were $18,000 in that month. What was the operation's total sales amount in that month? -
CORRECT ANSWER $20,000"
"A manager compares the revenue results for a 28-day P&L period to the results of the 28-day P&L report from the previous 28-day period. What source of information is the manager using to
analyze the revenue portion of the current P&L statement? - CORRECT ANSWER historical
performance" "What business segment best describes a company that is engaged primarily in the sale of
intangible goods? - CORRECT ANSWER service"
"Tammy owns a tanning salon. Her salon has five tanning beds; thus she faces supply constraints
based on capacity. In her business what additional factor acts to constrain supply? - CORRECT
ANSWER time"
"Revenue optimization strategies can make the most impact on inventory management in
industries with which kind of cost structures? - CORRECT ANSWER low variable costs and
high fixed costs" "Selling season tickets to sporting events such as professional baseball or basketball games at a price per game that is lower than the cost of individual tickets to all of the games is an example of
what revenue optimization activity? - CORRECT ANSWER product versioning"
"Which of the following would not be considered highly perishable inventory? - CORRECT
ANSWER french champagne"
"What is the business term used to describe the application of statistical formulas to past events
for the purpose of predicting future events? - CORRECT ANSWER probabilistic modeling"
"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? - CORRECT ANSWER
constrained supply"
"What is the formula used to calculate GOPPAR? - CORRECT ANSWER (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? - CORRECT ANSWER market segment"
"What is a rack rate? - CORRECT ANSWER 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) - CORRECT ANSWER RevPASH
formula" "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? - CORRECT
ANSWER 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? - CORRECT ANSWER target market"
"What is the term used to describe efforts undertaken to encourage travel and tourism to a
specific geographic area or attraction? - CORRECT ANSWER destination marketing"
"What is the name for the value given up by a buyer and a seller in a business transaction? -
CORRECT ANSWER price"
"Which of the following terms would be included in the Place portion of a hotel's marketing mix?
- CORRECT ANSWER distribution channels"
"What is the fundamental assumption upon which the Law of Supply is based? - CORRECT
ANSWER 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? - CORRECT ANSWER The demand for the 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? - CORRECT ANSWER
The new price (P2) would be higher than the previous price (P1) and supply would increase"
"What concept is displayed by the intersecting point on a supply and demand curve? -
CORRECT ANSWER 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? -
CORRECT ANSWER Revenues must exceed costs"
"What is the specialized branch of accounting that focuses on recording and analyzing the
expenses incurred by an organization? - CORRECT ANSWER cost accounting"
"What is the industry term for the point at which an organization's revenues exactly equal its
costs? - CORRECT ANSWER break-even point"
"Which of the following statements about the relationship between costs and pricing is true? -
CORRECT ANSWER 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?
CORRECT ANSWER an understanding of an organization's customers"
"Which formula represents a buyer's view of a sales transaction? - CORRECT ANSWER
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? - CORRECT ANSWER intangible"
"What will be the typical case in an auction when the initial price bid for the item being sold is
very low? - CORRECT ANSWER the number of potential bidders will be high"
"Penny Larson is travelling 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? - CORRECT ANSWER 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
"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? - CORRECT
ANSWER consumer surplus"
"What is the relationship between differential pricing and consumer surplus? - CORRECT
ANSWER 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? - CORRECT ANSWER 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 has purchased to interested individuals who visit the Hotticket website. What is the name of the activity Hottickets.com is
engaging in? - CORRECT ANSWER arbitrage"
"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? - CORRECT ANSWER 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? - CORRECT ANSWER pricing based on location"
"Which statement about high volume buyers in the hospitality industry is true? - CORRECT
ANSWER The per-unit cost of selling to them is less than the cost associated with low-volume
buyers" "Offering reduced room rates only to those room buyers willing to book their reservations via an
internet website is an example of which type of differential pricing strategy? - CORRECT
ANSWER Pricing based on distribution channel"
"What is the formula revenue managers use to calculate Net ADR Yield? - CORRECT ANSWER
Net Room Rate Standard ADR = Net ADR Yield" "Offering guests the opportunity to purchase a sandwich, fries and a soft drink at a price lower than that which would be charged for those same items purchased separately is an example of
which type of differential pricing strategy? - CORRECT ANSWER pricing based on bundling"
"Which statement about revenue management and revenue optimization is true? - CORRECT
ANSWER Revenue management seeks to maximize income while revenue
optimization seeks to maximize long-term profits" "Which US law would be violated if a hotel charged different room rates based upon a room
buyer's race, religion or ethnic background? - CORRECT ANSWER civil rights act"
"What is the name for the price perceived by consumers to be the normal or standard price for a
product or a service? - CORRECT ANSWER reference price"
"What is true about the way buyers generally view variance in a seller's prices? - CORRECT
ANSWER Discounts are viewed more favorably then surcharges"
"In the revenue management field, what do the letters "STR" refer to? - CORRECT ANSWER A
company that specializes in helping hospitality managers evaluate their effectiveness" "What is the name of the hospitality management position responsible for the housekeeping and
front office areas of a hotel? - CORRECT ANSWER rooms manager"
"What is the name of the hospitality management position responsible for the accounting
functions in a hotel? - CORRECT ANSWER a controller"
"To whom would a Revenue Manager likely report if consistency across multiple properties was
of most importance? - CORRECT ANSWER a corporate level executive"
"According to the most recent Hospitality Sales & Marketing Association International (HSMAI)
survey, to whom do the largest percentage of hotel revenue managers report? - CORRECT
ANSWER their hotel's general manager"
"Donna is a hotel revenue manager. Donna knows that for tonight she has sold 175 of her 200 available rooms. As a result, is eliminating room discounts on her remaining 25 rooms. In doing
so, what data type is she primarily using to make her decision? - CORRECT ANSWER current
data"
"In a limited service hotel, what is the incremental expense incurred in selling one guest room? -
CORRECT ANSWER CPOR"
"What is the lodging industry term for the situation that occurs when a hotel is unable to accommodate a guest's reservation preference due to the unavailability of the room or service at
the price, or on the date, originally requested by the guest? - CORRECT ANSWER denied"
"What is the most customer-centric strategy for revenue managers to employ if they seek to
optimize ADR and RevPAR in periods of temporarily heightened demand? - CORRECT
ANSWER eliminate discounts"
"What is the most likely result of a revenue manager's decision to reduce rack room rates during
periods of reduced demand? - CORRECT ANSWER competitor's rates will also be reduced"
"What is the most likely result of a revenue manager's decision to raise room rates during periods
of very high demand? - CORRECT ANSWER RevPAR will also be increased"
"What is the most likely result of a revenue manager's decision to raise room rates during periods
of moderate to low demand? - CORRECT ANSWER number of potential buyers will decline"
"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?
CORRECT ANSWER 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? - CORRECT ANSWER rooms inventory"
"What is a rate code? - CORRECT ANSWER 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? - CORRECT ANSWER price"
"What is the lodging term used to describe two independent data management systems that have
been electronically connected? - CORRECT ANSWER 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? - CORRECT
ANSWER 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? - CORRECT
ANSWER 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? - CORRECT ANSWER contract rate"
"What is true about a revenue manager's rooms demand forecast? - CORRECT ANSWER It is
based on customer demand at an established price" "In the airline industry, airline companies establish ticket prices. In the lodging industry, who is
responsible for establishing room selling prices for hotels that are part of a lodging company? -
CORRECT ANSWER hotel owners or their designees"
"in the lodging industry, what is a rack rate? - CORRECT ANSWER A room's selling price
when no discounts of any type are offered"
"What is true about discounts offered on the selling price of hotel rooms? - CORRECT
ANSWER they should be easily explainable and defensable"
"In which situation would a customer-centric revenue manager likely implement a special event
rate? - CORRECT ANSWER During a local festival that would fill all of the area hotels"
"Hanna is the revenue manger at the Waterford hotel. For a Saturday in the future she has determined her hotel will accept reservation only for those guests seeking to stay for three or more days. Which of the following revenue management control (restriction) strategies is she
using? - CORRECT ANSWER MLOS"
"Bob is the revenue manger at the Waterfront hotel. For the third week in December next year he has determined the hotel will accept reservations for guests seeking to arrive on Dec 21st. Dec 22nd. or Dec 23rd; but not on Dec 24th or Dec 25th. Which of the following revenue management
control (restriction) strategies is she using? - CORRECT ANSWER CTA"
"Which of the following is not a strategy typically used by revenue managers to optimize revenue
during periods of high demand? - CORRECT ANSWER Implement rack rate discounts to
maximize occupancy"
"What was the original purpose of THISCO? - CORRECT ANSWER To develop a single GDS
connection for major hotel companies" "What is true about the calculations required to calculate the following Net ADR Yield formula? Net Room Rate
Standard ADR = Net ADR Yield - CORRECT ANSWER Standard ADR (-) Distribution Channel
Costs (=) Net Room Rate" "Lani is the revenue manager at the Aloha Inn. In which situation would Lani optimize the Inn's
gross rooms revenues? - CORRECT ANSWER High Standard ADR, high Net ADR Yield"
