Pricing Elasticity In Hospitality Case Study

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In hospitality is one question the key to success or not. What to charge for a room a night? Unfortiontly, most smaller or private owned hotels just set a price. Reality is that such price is usually too high or much too low and will not increase any revenue. Key to set the right price is in understanding economics. To achieve business revenue the product price multiplied by the number sold. A high price charged can end up selling fewer rooms and as result, a high revenue is denied. A low price in combination with a low number of rooms sold cannot increase your sales numbers. Pricing elasticity in hospitality is reflected by a response to price changes in the change of room demand. Which means If the price goes down how much more rooms can…show more content…
Even the numbers of units sold seem to fall in response to the price increase, overall the boost in revenues will be noticeable compared to the charges per units. To determent, if customer demand is price elastic or inelastic regarding the product it needs to be analyzed in several steps. Regarding rooms, it is helpful to understand if the guests who rent a room are in for a luxury or a necessity. As an example, if rooms are sold as a necessity for construction workers the price tends to be inelastic. In this scenario, the price could increase since the rooms are necessities and the workers rather not go without a room. In comparison to set the price very high is compared to see as luxury and as such people in general could live without out booking those high price rooms. To ask for a higher price than competitors will be possible if the hotel and its brand stand for a high end luxury stay. As such guest will not hesitate to pay the higher…show more content…
Trained front desk employees use a guideline to cover important questions to ensure the guest will book a room which he will enjoy, and as well as a higher rate if possible. Revenue management can come in form of forecast demand with the goal to optimize profit. Such demand can as an example be set to true third party booking sides online. Expedia as an example could be contracted to offer online 25% of the open rooms to a competitive price. Alternative Expedia could receive the right to sell online all rooms up to 85% of the hotel. Such coalition is helping both sides in several ways. Expedia has always rooms to offer and charges a commission fee. The hotel in online strong presented and the price Expedia offers is created by comparison of competitor’s overall price

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