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REVENUE MANAGEMENT FINAL EXAM
QUESTIONS AND VERIFIED ANSWERS
"What does a pace report track? - CORRECT ANSWER The OTB reservations against the
forescasted reservations"
"Who attends the weekly RM meetings? - CORRECT ANSWER -Revenue manager
-General manager Sales manager -Rooms manager ***and sometimes -Food and Beverage management -Marketing -HR management" "Consumer reference prices: what is bigger, the increase in demand derived from reducing a rate
by $100 or the decrease in demand resulting from augmenting a rate by $100? - CORRECT
ANSWER the decrease in demand resulting from augmenting a rate by $
-because it is more impactful" "What is more appealing to hotel guests: a discount of $10 in three supplementary products (total savings are $30), or a discount of $30 in just one supplementary product so that it becomes free?
CORRECT ANSWER a discount of $30 in just one supplementary product so that it becomes
free -Discount in just one supplementary product so that it becomes free is more appealing to a guest"
"Rate portfolio - CORRECT ANSWER The matrix of available rates by forecasted occupancy"
"What airline ticket is less expensive (in general terms): the Thursday‐
Saturday or the Friday Sunday?‐ - CORRECT ANSWER Friday Sunday‐
-80% of the customers for airlines are businesspeople and they want to get that one-day home for weekend"
"If there is a pattern / event, then we use larger or smaller n? - CORRECT ANSWER smaller
n"
"For nonstationary data, what method is employed? - CORRECT ANSWER Weighted Moving
Average"
"When doing the forecasting, do we match by day or by date? Are there any exceptions to this
rule? - CORRECT ANSWER by day
-Calendar Holidays - Jan 1, July 4, Dec 25"
"Materialized Room Demand is defined as and formula - CORRECT ANSWER the number of
customers that actually occupy the room = number of reservations - cancellations - no shows"
"Materialization rate - CORRECT ANSWER = Materialized rooms (the number of rooms that
actually have been occupied) / number of reservations"
"What is a guaranteed reservation? - CORRECT ANSWER prepaid reservation, already paid,
so you can't cancel it"
"What is the anticipated wash? - CORRECT ANSWER is cancellation and no shows in the
context of groups" "You can be more aggressive in terms of overbooking decisions if the city-wide demand is higher
or lower? - CORRECT ANSWER lower"
"In an overbooking situation, where can we more easily identify and, therefore, protect key
customers, in the airline industry or in the hotel industry? Why? - CORRECT ANSWER 1.
Airline, easily identify because everyone is right there"
"What does RPASH stand for? - CORRECT ANSWER Revenue per Available Seat Hour"
"What is a "dessert room"? - CORRECT ANSWER implicates that you will spend more money
on dessert and alcohol, and creates higher turnover because you are making a new table available by moving them to a different room"
"An example of a conflict between market segments? - CORRECT ANSWER skiing forbid
snowboarding -because they didn't want the snowboarders to mess up the snow for the skiers they just want to ski and that snowboarders tend to be more aggressive"
"Which two models can we find within the indirect distribution channels? - CORRECT
ANSWER Agent model vs Merchant model"
"In Strategic Revenue Management as in Strategic Marketing, not everyone is a potential
customer. Why? Due to... - CORRECT ANSWER Hotels target markets"
"Market segments are: - CORRECT ANSWER groups that share commons needs and buying
habits"
"The basic purpose of packaging is to: - CORRECT ANSWER does not reveals the individual
price of the different components so it create a perception of value."
"A positive aspect of matching competitors' prices is which of the following? - CORRECT
ANSWER it drives the choice to other differentiators or competitive advantages."
"What is a potential drawback of competing solely based on offering the lowest price? -
CORRECT ANSWER Price-driven guests are loyal to lowest prices, not the hotel offering
them; Any competitor can beat a low price if it wants to; Other ways of generating demand are more profitable and sustainable..... All of the Above" "Restaurant Revenue Management primarily focuses on front-of-house operations. However,
other aspects of running a restaurant are also tied to RRM. These are: - CORRECT ANSWER
All of the above" "If a 210-seat restaurant is open 360 days a year for 8 hours a day and has total annual revenue of
$6,000,000. Its RevPASH is: - CORRECT ANSWER $6,000,000 ÷ 210 * 360 * 8 = $9.
"A process flow diagram: - CORRECT ANSWER all of the above"
"A diner has an average dining duration of 36 minutes at breakfast time. The standard deviation of dining duration is 5 minutes. Which of these RRM solutions would NOT help decrease the
variation in duration? - CORRECT ANSWER issuing a coupon for an late breakfast special"
"For the this question, consider this table: Table Size (tops or NR of seats) 2 48Total Tables Available 614 2 Seats Available Seats Used 62515 46
Tables Used 382 13 Seat Occupancy Table Occupancy
The overall seat occupancy and overall table occupancy for the restaurant are: - CORRECT
ANSWER seat occupancy percentage = (Total Nr. of Seats Used ÷ Total Nr. of Seats Available) x
100 =46 ÷ [(6 tables x 2 seats)+(14 tables x 4 seats) + (8 tables x 2 seats)] = (46 ÷ 84) x 100 = 54.8% table occupancy percentage = (Total Nr. of Tables Used ÷ Total Nr. of Tables Available) x 100 = ( ÷ 22) x 100 = 59.1% 54.8% and 59.1%"
"Throughput time measures: - CORRECT ANSWER the time a customer spends in the system
from enter to exit" "If a restaurant had an overall average RevPASH of $14 and an overall seat occupancy of 66%, its
average check would be: - CORRECT ANSWER $21.
RevPASH = Av.Check x Occ. So $14 ÷ 66% = $21.21" "The throughput rates for the three major processes that make up a service delivery system are provided below. ActivityTake OrderAssemble OrderDeliver OrderThroughput rate (customers/min)1.21.92.
Which of the activities is the bottleneck and why? - CORRECT ANSWER Taking the order,
because its throughput rate is lowest."
"Time-variable demand means: - CORRECT ANSWER different market segments use a
service at different times"
ADR formula - CORRECT ANSWER Total Rooms Revenue / Total Rooms Sold"
"Value proposition - CORRECT ANSWER 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"
"Owners ROI formula - CORRECT ANSWER Owners Investment Return/ Owner's Original
Investment"
"Profit - CORRECT ANSWER net value achieved by both parties in a business transaction"
"GOPAR formula - CORRECT ANSWER Total revenue - Management Controllable Expenses /
Rooms Available to sell"
"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"
"T/F: Discounts are viewed less favorably than surcharges - CORRECT ANSWER false"
"When is a guest considered an over-stay? - CORRECT ANSWER When the guest checks out
of the hotel after his or her original check out date"
"What is the result of raising room rates during high demand? - CORRECT ANSWER RevPAR
will increase"
"Rooms manager - CORRECT ANSWER responsible for the housekeeping and front office
areas"
"Clayton Antitrust Act - CORRECT ANSWER US legislation that prohibits legal
discrimination in pricing"
"Sherman Anti-trust Act - CORRECT ANSWER US legislation that outlawed all contracts and
conspiracies that unreasonably restrain interstate trade" "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" ""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 hotel GM"
"What is true about proprietary websites administered by a hotel s franchisor? - CORRECT
ANSWER Content changes must be implemented by the brands managers"
"Where on a hotel s statement of income and expense (income statement) does the 10th Edition of the Uniform System of Accounts for Lodging Industry (USALI) recommend travel agency
commissions be recorded? - CORRECT ANSWER rooms expense portion"
"What are two synonymous lodging industry terms used to identify the difference between the
purchases a group pledges to make and the purchases it actually makes? - CORRECT
ANSWER Attrition and Wash"
"What two things does Place refer to in hotels - CORRECT ANSWER location and distribution
channel" "" To optimize revenues while enhancing property operations, which strategy pair should
revenue managers seek to implement?" - CORRECT ANSWER Maximization of room codes
and minimization of rate codes"
"Fade rate - CORRECT ANSWER lower rate that is offered when a potential rooms buyer
exhibits intial price resistance"
"What is true about discounts offered on the selling price of hotel rooms? - CORRECT
ANSWER They should be easily explainable and defensible"
"How are most CVBs in the United States funded? - CORRECT ANSWER By a combination of
hotel occupancy taxes and membership dues" "What strategy should be put into action when revenue managers implement special event rates?
- CORRECT ANSWER Enhance guest value by providing products/services enhancement" "Which of the following rooms marketing strategies would contribute to the commoditization of
hotel rooms? - CORRECT ANSWER Participation on a web site that lists only a hotels name
and a single rack room rate"
"room code - CORRECT ANSWER A property-specific, shortened description used to identify
a specific room product"
"Which is most often true about room sales made by a hotel s group sales department? -
CORRECT ANSWER ADRs are higher than average, and Net ADR yield is lower than average"
"For which distribution channel type do hotels typically employ a shopper s service? -
CORRECT ANSWER Sales made via the telephone"
"What was the original purpose of THISCO? - CORRECT ANSWER To develop a single GDS
connection for major hotel companies" "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 guest? - CORRECT
ANSWER ADR and RevPAR would increase, and occupancy would be unchanged"
"At Lauren s restaurant the check average is always higher on Saturday night than on any other
night. What is the most likely cause of the check average variance she experiences? - CORRECT
ANSWER The sales mix"
"What foodservice value-related factor is most affected when a revenue manager successfully
implements a price blending strategy? - CORRECT ANSWER menu mix"
"Offering the same menu item in a variety of portion sizes is an example of what type of
differential pricing strategy? - CORRECT ANSWER Product versioning"
"Which value-related factor does a revenue manager seek to impact if prices for carry-out menu items in a restaurant are 10% less than the price of the same items when they are consumed in
that restaurant's dining room? - CORRECT ANSWER service level"
"Which tasks would be of most importance to revenue managers with multi-unit revenue
generating responsibilities? - CORRECT ANSWER Revenue manager training and
motivating"
"Who are the customers of a hotel or restaurant franchisor? - CORRECT ANSWER
Franchisees"
"Brand equity - CORRECT ANSWER the accumulated value of a brands image or identity by
consumers" "Which factor has historically provided the basis for a foodservice manager s assessment of
revenue generation efficiency? - CORRECT ANSWER menu items sold"
"What would be the typical impact on RevPASH of an increase in guest duration? - CORRECT
ANSWER RevPASH would decrease if check average did not change"
"In the hospitality industry what is the financial basis used for calculating the franchise fees or
royalties that are paid to franchisors? - CORRECT ANSWER An operations total revenue"
"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"
"RevPASH formula - CORRECT ANSWER seat utilizationns % X Check average"
"Larissa is the corporate revenue manager for Sandstone hotels. She oversees 10 of her company s
franchised properties. Which of the following is an example of Larissa s internal customers? -
CORRECT ANSWER Sandstone company controller"
"What is the CVB structure - CORRECT ANSWER A quasi governmental agency"
"Probabilistic modeling - CORRECT ANSWER The application of statistical formulas to past
events for the purpose of predicting the likelihood of future events." ""What is the role of a revenue manager within a franchise organization if that manager is assigned the task of assisting others within the same company in the their implementation of
revenue management-related strategies, tactics and tasks?" - CORRECT ANSWER Internal
brand support" "It is Saturday night at 7:30 p.m. and Alexander s restaurant is slower than expected. Only 50% of its seats are filled. Gene, the manager, wants to increase revenue by offering a two-for-one special between 8:00 p.m. and 9:00 p.m. this same night. What will be Gene s greatest challenge in
implementing this revenue optimization strategy? - CORRECT ANSWER Ability to
communicate efforts"
"Brand consolidation - CORRECT ANSWER shrinking number of alternative franchisors
offering increasing numbers of franchise alternatives" "In the US what is the dominate vehicle used by governmental authorities to fund local area
destination marketing efforts? - CORRECT ANSWER A special tax on the sale of hotel rooms"
"Which of the following revenue management activities would not be included in the typical job
description of a revenue manager employed by a CVB? - CORRECT ANSWER Product pricing"
"Arbitrage - CORRECT ANSWER the nearly simultaneous purchase of a product at a low
price and reselling of it at a higher price with the intention of keeping the difference in price" "Lisa is the revenue manager of a 500 room hotel property. Next week-end demand for her rooms will exceed the number of rooms she has available for sale. Which high demand pricing strategy
will optimize revenue for her property? - CORRECT ANSWER Implement a differential
pricing strategy and allocate the limited supply to those who value the rooms most highly" "Which components of the hotel industry s current reservation system currently offers its users
the ability to simultaneously see comparative hotel rate information? - CORRECT ANSWER
The GDS and IDS"
-Think of an airplane: staffing, airport fees (fixed) - huge amount of the costs for airplanes come from fixed costs; food, fuel (variable) - not as easy to determine the variable costs" "We can reduce prices (even below total cost per room), as long as the
reduced price covers, fixed cost per room or variable cost per room? - CORRECT ANSWER We
can reduce prices as long as the reduced price covers the variable cost per room -because we are going to have the fixed costs not matter if we have the person in the room or not"
"High Value Customers tend to book early or last? - CORRECT ANSWER last"
"Do we sell "time blocks" or "physical products"? - CORRECT ANSWER time blocks"
"What implication do time blocks have? - CORRECT ANSWER we cannot store it for
tomorrow, it is gone once it is not sold for that day"
""I want my hotel to be the first to sell out in the market": Correct or incorrect? - CORRECT
ANSWER incorrect"
"RM can be organized with different levels regarding the people involved. How many? Which
ones? - CORRECT ANSWER Property Level - Corporate Level - 3rd Party Services"
"What does a booking curve represent? - CORRECT ANSWER the expected number of
bookings for each day until the arrival date -forecasted bookings"
"How many internal performance indicators do we have? - CORRECT ANSWER 6: OR, ADR,
RevPar, and the percent changes of each of them"
"How many external performance indicators do we have? - CORRECT ANSWER 6: OR index,
ADR index, RevPar index, and the percent changes of each of them"
"What is the minimum number of hotels in a comp set? - CORRECT ANSWER 4"
"What is the threshold in the OR, ADR and RevPar indexes that determines the point we are
outperforming the comp set? - CORRECT ANSWER 100"
"Price from a marketing standpoint includes both monetary and
________________costs - CORRECT ANSWER non monetary"‐
"price - CORRECT ANSWER The amount of money charged for a good or service."
"BAR and BRG - CORRECT ANSWER The hotel makes a promise that the room prices found
on their website are the best rates compared to any other sites."
"Example of BAR guarantee? - CORRECT ANSWER If you found a better rate then you will get
that rate plus some additional discount (within 24 hours of making the reservation) in PA"
"Who requires whom to sign a rate parity agreement? - CORRECT ANSWER OTA"
"In what type of rates are the "Last Room Available Agreements" signed? - CORRECT
ANSWER Corporate"
"What type of strategy allows you to: i) create more effective pricing strategies; ii) create demand
forecasts with more accuracy; and iii) optimize the hotel's market mix? - CORRECT ANSWER
Market segmentation"
""Values and lifestyles" is a criterion used to segment the market according to - CORRECT
ANSWER psychography"
"The big three market segments proposed by the AHLA and its Uniform System of Accounts for
the Lodging Industry are: - CORRECT ANSWER transient, group and contract"
"Do we use constrained demand to forecast unconstrained demand, or do we use unconstrained
demand to forecast constrained demand? - CORRECT ANSWER We use constrained demand
(which is what we have from last year) to forecast the unconstrained demand" "Insights, past, current and future data are the four components of forecasting. In which one do
human beings outperform machines? - CORRECT ANSWER insights"
"Stationary vs nonstationary: in which type of series there is an upward or downward trend over
time - CORRECT ANSWER nonstationary
-Stationary tends to go to an average value, central point that all the data points are around, can make a line out of it"
"The greater the variance, the more complex the forecast or the simpler the forecast? -
CORRECT ANSWER more complex the forecast"
"In a "random walk" (naïve forecasting), the forecasted value for the next period t+1 equals to...?
CORRECT ANSWER the value of the current value t"
"For stationary data, what method is employed? - CORRECT ANSWER Moving Average
Methods"
"cross selling - CORRECT ANSWER selling additional products or services to an existing
customer -when you add in breakfast, dinner, etc" "In what stage can upselling actions be implemented? At booking? A few days before arrival? At
arrival? - CORRECT ANSWER Traditionally at arrival, but now can do more in advance"
"In what sense have the groups been regarded as a "filler" market? - CORRECT ANSWER
Groups as a filler market during hotels down time to use it as a filler which is a traditionally view. Now, hotels implemented the group displacement analysis because they realize that groups may not spend as much so they want to see if they should accept them or not -Reason why we do the group displacement analysis"
"Who books first, groups or transient? - CORRECT ANSWER Groups book first, can be up to
two years in advance"
"In a group displacement analysis, what do you compare? - CORRECT ANSWER The total
value of the transient business that would be displaced if the group business were accepted."
"Extensions of Revenue Management - CORRECT ANSWER Catering
Restaurants Entertainment Attractions"
"what is the difference between Agent model vs Merchant model? - CORRECT ANSWER
Commission vs margin -Agent model there is the price of the room and there is a 10% commission -Merchant model is the one that buys the room and then sells it for an added margin" "According to the Phocuswright Report (2018), more than half (52%) of all U.S.
travel was booked online or offline? - CORRECT ANSWER offline"
"In what types of tourism products is the offline system predominant? - CORRECT ANSWER
Packages and Cruises"
"What's the proportion of offline business in these two types of tourism products? - CORRECT
ANSWER Two thirds"
"On average, what is the comission OTAs charge to branded and independent
hotels? - CORRECT ANSWER From 10% (branded hotels) to 30% (independent hotels)"
"Marriott strongly depends on OTAs: 88% of its bookings come through OTAs.
True or False? - CORRECT ANSWER False: it is the other way around."
"Which industry is more fragmented and atomized: the airline or the hotel industry? -
CORRECT ANSWER Hotel industry - have 10% of the market share, meaning that the OTAs
call the shot because 90% goes to them -whereas airlines have a lot of companies and there is not a dominant one (80% of the market share)"
"Why the tourism distribution system is sometimes called a duopoly? - CORRECT ANSWER
Expedia and Priceline"
"What's the new name of Priceline? - CORRECT ANSWER Bookings Holding"
"What are the essential knowledges and skills of the future Revenue
Manager? - CORRECT ANSWER The strategic view of revenue management. Obviously, it
will depend on the type of hotel: from basic calculations in Excel to interpretation with sophisticated software" "In January, the 200-room SnowBound Inn ran a skiers special that resulted in them selling 5,
rooms during the month. What was the occupancy percentage for the month? - CORRECT
ANSWER Occupancy % = Room nights sold in a period / Room nights available in that period
Answer: 5,735 / (200x31) = 5,735 / 6,200 = 92.5%" "When the American Airlines CEO developed yield management, what type of information was
crucial to its success? - CORRECT ANSWER forecasting"
"The goal of revenue management is to MAXIMIZE REVENUE per Available Time-Based
Inventory Unit (or RevPATI). RevPATI formula applied to all industries translates into...? -
CORRECT ANSWER Capacity Utilization x Average Revenue per Service Transaction"
"Which of the following is NOT a criterion needed for an industry to unlock the full potential of
revenue management? - CORRECT ANSWER low fixed costs and high variable costs"
"To interpret measures of a hotel's performance, managers often compare those measures with:
CORRECT ANSWER industry or sector averages, the budget for the period, and historical
figures from comparable earlier periods at the hotel."
"Which of the following statements about hotel revenue management is FALSE? - CORRECT
ANSWER Revenue management is new, as are all of the strategies that are employed to
maximize profit."
"When might a revenue manager choose without questions to accept a less profitable group
booking over more profitable transient business? - CORRECT ANSWER The group is a
regular customer of the hotel or a key account group from your comp set." "Displacement Analysis can determine the quantifiable benefits of different options. However it
needs to have the right circumstances. When is it appropriated? - CORRECT ANSWER When
a reliable forecast indicates that there's more demand than our capacity, it will be a period of high demand"
"What information is needed to calculate a net room rate? - CORRECT ANSWER room rate,
variable costs, and all costs and fees that apply to the booking" "In a property forecasted high period of demand period, if the RM displacement analysis shows that by accepting a certain group the overall net revenue gain is positive (more revenues than the costs of displacement transient demand in the future), increasing profitability, than its Sales or
Reservations departments should be inclined to - CORRECT ANSWER Accept the group
reservation" "When might a revenue manager choose without questions to accept a less profitable group
booking over more profitable transient business? - CORRECT ANSWER The group is a
regular customer of the hotel or a key account group from your comp set."
"What type of traditional market segmentation is often identified by postal code? - CORRECT
ANSWER geographic"
"What is the elasticity of a hotel that sees a 10 percent increase in occupancy when it lowers its
room rate from $100 to $80? - CORRECT ANSWER 10 ÷ 20 = 0.
"To maximize profitability by allocating sufficient inventory to the most important segments is
the objective of what? - CORRECT ANSWER Market Mix Management"
"Which of the following statements is FALSE? - CORRECT ANSWER Repositioning is a
common alternative to rebranding." "Hotels location as a competitive advantage can change over time. What is NOT an appropriated
example? - CORRECT ANSWER Hotels in the heart of Paris (France)"
"Which of the following statements is FALSE? - CORRECT ANSWER Repositioning is a
common alternative to rebranding."
"Which of the following is NOT a question that any Customer Relationship Management (CRM)
system helps to answer of interest to a revenue manager? - CORRECT ANSWER How do I
forecast the best customers?"
"What is a successful positioning strategy based on? - CORRECT ANSWER a set of
competitive advantages" "The major traditional market segmentation variables are geographic, demographic, psychographic, and behavioral traits and price-sensitivity. Which of these considers criteria such
as social class, personality and lifestyle? - CORRECT ANSWER Psychographic"
"What is a successful positioning strategy based on? - CORRECT ANSWER a set of
competitive advantages"
"Which of the following traits are considered to be part of psychographic segmentation? -
CORRECT ANSWER Lifestyle and personality"
"Which of the following is considered a non-physical rate fence? - CORRECT ANSWER
booking channel"
"What is the goal of rate parity? - CORRECT ANSWER To charge the same price for the same
room regardless of booking channel." "What revenue stream in a hotel - excluding casino hotels - typically has the highest contribution
margin? - CORRECT ANSWER Rooms"
"Which of the following is not one example of an internal packaging component? - CORRECT
ANSWER Theatre Tickets"
"What's not part of a Hotel Package Development Information? - CORRECT ANSWER None
of the above"
"What is the goal of rate parity? - CORRECT ANSWER To charge the same price for the same
room regardless of booking channel."
"Which is not a key category of Rate Fence? - CORRECT ANSWER Non-physical fence related
to buyer racial profile e.g. Asian versus Caucasian" "Sandy has 100 hotels 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"
