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REVENUE MANAGEMENT
FINAL EXAM QUESTION & ANSWERS 2024.
"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 rack rate? - CORRECT ANSWER The price of rooms when no discounts of any type are
offered" "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 an algebraic equivalent of the formula: Sales = Costs + Profit? - CORRECT ANSWER Profit =
Sales - Costs"
"What is the name for the net value achieved by both parties in a business transaction? - CORRECT
ANSWER Profit"
"What element is not present in a barter economy? - CORRECT ANSWER Money"
"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"
"What is the formula used to calculate an owner's ROI? - CORRECT ANSWER 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? - CORRECT ANSWER Constrained
Supply"
"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 $140.00"
"What is the industry term for the average revenue generated by each occupied guestroom during a
defined period of time? - CORRECT ANSWER RevPOR"
"What is the formula used to calculate GOPPAR? - CORRECT ANSWER (Total Revenue - Management
Controllable Expenses) / Rooms Available to Sell = GOPPAR" "What is: Total period revenue
(Number of available seats) x (hours of seat availability) - CORRECT ANSWER 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? - 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 The 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"
"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 A value proposition"
"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 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? - 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 her purchase of
the hotel rooms she will need during her trip? - CORRECT ANSWER 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? - CORRECT ANSWER 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? - CORRECT ANSWER Spending someone else's
money on someone else" "What special challenge do buyers of hospitality products such as hotel guestrooms or restaurant meals
face? - CORRECT ANSWER 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? - CORRECT ANSWER Perceived value will increase"
“What is the industry term used to describe the sum of prices paid by a business's customers? -
CORRECT ANSWER Total Revenues"
"Historically, what concept have hospitality managers chiefly used to calculate their selling prices? -
CORRECT ANSWER Costs"
"If quantity and price are held constant how will reductions in product or service quality affect buyers'
perceptions of value? - CORRECT ANSWER 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? - 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"
"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
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? - 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 The 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 D = Value
If all other variables are held constant, which statement is also true? - CORRECT ANSWER As C
decreases, D increases" "Which two factors do successful revenue managers employ when they devise and implement strategic
pricing plans? - CORRECT ANSWER Data management and insight"
"Which statement about revenue management in the hospitality industry is true? - CORRECT ANSWER
Quiz four Question one (??)"
"What is the formula revenue managers use to calculate Net ADR Yield? - CORRECT ANSWER a. Net
Room Rate/Standard ADR = Net ADR Yield"
"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" "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"
"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"
"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" "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 is true about discounts offered on the selling price of hotel rooms? - CORRECT ANSWER They
should be easily explainable and defensible"
"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"
"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" "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"
"In the lodging industry, when is a guest considered to be an over-stay? - CORRECT ANSWER When the
guest checks out of the hotel after his or her originally scheduled check-out date" "When might a revenue manager at a lodging facility be pressured to establish a long-term forecast that
is unrealistically low? - CORRECT ANSWER When a significant financial incentive exists for exceeding
the forecast" "In the lodging industry what factors would be overinflated to produce an unrealistically high RevPAR
forecast? - CORRECT ANSWER ADR and/or Occupancy %"
"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 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 The number of potential buyers will decline"
"What is one consistent characteristic of desirable rooms revenue? - CORRECT ANSWER It leads to
higher GOPPAR levels"
"Which of the following is not a hotel intermediary? - CORRECT ANSWER Front desk agent"
"Which travel industry-related business group developed the Global Distribution System? - CORRECT
ANSWER The airline industry"
"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"
"What is the industry term for a lower room rate that is offered when a potential rooms buyer exhibits
initial price resistance? - CORRECT ANSWER Fade rate"
"What is true about a future room reservation booked for a guest whose original reservation was
booked through expedia.com and who is presently checking out of the hotel? - CORRECT ANSWER No
IDS fees will be paid on the revenue the new reservation will generate" "Harold tracks his hotel guest check outs and the number of new reservations made at check out. Last week a total of 640 guests checked out of his hotel. In that same period, his front desk staff booked reservations for 32 future rooms nights from this group of check out guests. What is true at Harold's
hotel? - CORRECT ANSWER The reservation nights booked per check out for last week was .05"
"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"
"Which statement does not accurately describe a non-electric distribution channel? - CORRECT
ANSWER CRS is a non-electric distribution channel"
"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 hotel's name and a single rack
room rate" "Into which hotel industry distribution channel component would a brand's call center worker enter
room reservations he or she has made? - CORRECT ANSWER CRS"
"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"
"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 The rooms expense portion"
"Which common IDS room sales model is most dependent on selling price for its revenue generation? -
CORRECT ANSWER Opaque Model"
"Last month Carl's hotel had 10,000 available room nights and sold 6,000 room nights. Last month his
comp set had an average occupancy of 80%. What was Carl's occupancy index last month? - CORRECT
ANSWER 75%"
"Last month Carl's hotel had an ADR index of 105%. What is true about his hotel's ADR last month? -
CORRECT ANSWER It was somewhat higher than the ADR of his competitive set"
"Last month Carl's hotel had an ADR of $200.00. The ADR for his comp. set for the same month was $225.00. Prior to last month, Carl's Year-To-Date ADR index was 110%. What will always be true about
his Year-To-Date ADR index when last month's operating results are included in the Year-To-Date data? -
CORRECT ANSWER It will be less than 110%"
"This Year-To-Date, Carl's hotel is averaging an ADR of $125.00. The ADR of his comp. set for the same period is $125.00. Assume Carl's comp. set is an appropriate one. What would you recommend Carl do if
his occupancy index for the same period is 140%? - CORRECT ANSWER Carefully increase rack rates to
optimize GOPPAR" "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 96.0%"
"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 %"
"1. Which of the following statements about restaurant pricing methods is true? - CORRECT ANSWER
Restaurant industry pricing methods are very different from hotel industry pricing methods" "Shaniqua's restaurant utilizes a product cost percentage pricing system. What should be the selling price for a steak dinner she sells if her total plate cost for the dinner is $7.00 and her desired product
cost is 25%? - CORRECT ANSWER $28.00"
"Shaniqua's restaurant utilizes a product cost percentage pricing system. She would like to apply pricing factors to make pricing her menus easier. What would be the pricing factor she would use when her
desired product cost percentage for an item is 40%? - CORRECT ANSWER 2.5"
"Which menu pricing system would utilize an operation's prime costs when calculating its selling prices?
- CORRECT ANSWER Product Cost: Plus" "In which menu pricing approach would Menu Engineering as proposed by Kasavana and Smith be
utilized? - CORRECT ANSWER Contribution Margin Pricing"
"What is the common feature in the Product Cost: Plus Pricing, the Contribution Margin Pricing and the
Product Cost Percentage Pricing systems? - CORRECT ANSWER The amount paid for products"
"For revenue managers seeking to optimize revenues in their foodservice operations, which statement
about menu prices is true? - CORRECT ANSWER An appropriate menu price should dictate an item's
cost" "Shaniqua's restaurant utilizes a product cost percentage pricing system. She would like to sell an item for $19.95. Her targeted product cost is 40%. With a 40% product cost, what is the amount her kitchen
staff can spend on product cost when making this item? - CORRECT ANSWER $7.98"
"Shaniqua's restaurant utilizes a contribution margin pricing system. She would like the selling price of a new menu item she is introducing to be $10.00. Her required contribution margin is $4.00. Her labor
costs are 30%. What is the amount her kitchen staff can spend on product cost when making the item? -
CORRECT ANSWER $6.00"
"Why can foodservice operators sell a 20 year Scotch at a price higher than a one year old Scotch? -
CORRECT ANSWER The quality of a 20 year old Scotch is higher than a one year old Scotch"
"Assume a food and beverage operator offers guests a 20-year old Scotch at a price five times the amount charged for one-year old Scotch. Assume also that the operator's customers very rarely purchase the more expensive Scotch. Which statement would explain why the 20 year old Scotch does
not sell well? - CORRECT ANSWER Customers do not accept this seller's price-value proposition"
"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"
"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"
