Revenue Management

ACTIVITY 3
Case Study

Name: Yr. & Sec. Date:

Direction: Read and analyze the Case scenario. Then answer the following Case Questions.

Case Scenario
“Thanks for taking the time out to be here,” said Damario, the revenue manager at the
Barcena Resort. Damario was addressing the members of the resort’s newly formed Strategic
Pricing and Revenue Management Advisory Committee. “As you know, Sofia has asked me to
chair this committee,” continued Damario. “I’m looking forward to hearing your thoughts on lots
of the topics that will directly affect the revenue optimization and strategic pricing decisions we
will make in the coming months.”
“Well, I can already tell you what I think,” said Mark Chaplin, the hotel’s Controller. “With
our owner’s expectations and the financial pressures on the property, we should be targeting
customers who seek a premium product and are willing to pay a premium price. I’m talking
about the top 15 percent of the resort-going public. That’s the customer who won’t haggle with
us on rates. And that approach would allow us to increase our prices to the level we need to
support our cost structure.”
“Those are savvy consumers, Mark, and their standards are pretty high. I don’t know if
the product we can deliver will consistently match the expectations they have,” replied Pam, the
property’s DOSM.
“I would match our rooms against any of our competitors,” protested Adrian, the resort’s
rooms manager. “Guests don’t have a problem paying a premium price if the product we deliver
is outstanding.”
“In my area, that means an exceptionally well trained staff providing service that is as
good as the food we make,” said Sam, the resort’s F&B director. “No over-cooked steaks,” he
continued, “and servers that are friendly, knowledgeable, and efficient. That’s the secret to good
food.”
“I agree. Service delivery is every bit as critical as our product quality, so staff training
really is important,” said Damario as he looked in the direction of Shingi Rakuni, the resort’s
human resource director.
“Shingi,” said Damario, “Have all of our departments implemented a regularly scheduled
training plan for each of their staff positions?”
Shingi looked down uncomfortably at the papers she had spread in front of her as she
said. “Maybe you should ask each department head. They would be more up to speed in their
own areas than I would.”
“When we first opened, we really stressed staff training,” said Adrian quickly, “but when
the budgets tightened up, I think most of us had to make cut backs.” The other department
heads nodded in agreement.
Damario quickly considered the other resort properties competing against the Barcena.
Some were newer and had some modern guests features the Barcena did not have. Some were
older properties that were showing their age, but they were all pretty well maintained and they
typically priced their rooms lower than the Barcena. On the whole, he thought, some of our
competitors are newer and some are older. We have some service features they don’t have and
some of them have some features we don’t have. For a five-year-old property, he felt the
product offered could hold its own in this market. But that assumed its service levels were where
they needed to be.
 Revenue Management
“That’s right,” quickly added Amanda, the front office manager. “It’s hard to implement
training when you only have enough payroll budgeted to schedule the exact number of desk
agents we need to handle our check-ins and departures.”
“Amanda’s spot on,” said Bev, the resort’s executive housekeeper, “and when we are
short staffed, it’s all we can do to get the rooms turned on time. I’d love to increase the training
of my room attendants if I had the money. We would have better room quality and our room
inspections could be speeded up.”
“That’s exactly why we need to go after the premium market,” said Mark. “That’s the way
we will get the revenue we need to increase training budgets and fix some of these problems.”
All of the department heads except Pam seemed to nod their concurrence.
“Higher prices? Now? In this economy?” she said aloud. “There’re good, but I’m not sure
my team can sell that,” she concluded, as she gave Damario a troubled look.

Case Questions:
1. Assume that in a recently completed competitive site survey, Damario found the physical
quality of the rooms sold and food served at the Barcena to be in the mid-range of its
competitors with regard to quality. Now consider the “buyer’s view of value” formula you learned
about in module. What would be the likely impact on that formula if the resort immediately
implemented Mark’s suggested pricing strategy?
2. In this meeting, Damario learned about two reasons (lack of money and lack of time) typically
given for not having formal staff training in a hospitality organization. Assume that Damario’s
ultimate goal is in fact the ability to charge a premium selling price relative to the resort’s
competitors. Do you think it is likely that such a goal could be achieved with the lower than
average levels of guest service and product delivery that typically result when employee training
programs are deficient? Explain your answer.
3. Mark’s pricing strategy assumes immediately increasing the resort’s prices will generate the
revenue needed to improve its products and services. Do you believe such an assumption is
reasonable? Explain your answer using the buyer’s view of value formula.