29NL 3.1 Decisions on prices

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Assignments

Situation

In the history you can seethe prices used by the management until you took over. Now you have to decide on prices yourself; prices which match the new strategy your team has set.

Goal

Make decisions on he prices for rooms during weekdays and weekends, starting from the systems of rack rates and last minutes prices. Next to this the average prices for banqueting has to be set. All of this for the next four years as a plan. Including predicted occupancy rates and predicted revenues. So you need to prepare:

• new prices
• explain why you chose these prices, backed by sources
• and predict occupancy rate and calculate predicted revenues in the new situation.

Task, deliverable

Use the space in your Team document. You can do the calculations and all in the document or make a spreadsheet in the cloud and share the link in your team document.

Price systems
You can use psychological pricing, flex prices, dynamic pricing, revenue management or whatever system you want to use in your decisions. The better your explanations and especially your calculations are, the better your company's results will be, In hospitality, we see the concept 'rates' more frequently then prices.

• 1. Weekend last-minute room-price (rate) per night
  

In the past, the average price was € 80. The last-minute price is the minimum price you will accept to fill up the empty rooms, the gaps in your occupancy.

• 2. Weekend rack rate room-price (rate) per night
  

In the past the average price was € 100. The rack rate price is the highest price you will get.

• 3. Weekdays last-minute room-price (rate) per night
  

In the past the average price was € 100. The last-minute price is the minimum price you will accept.

• 4. Weekdays rack rate room-price (rate) per night
  

In the past the average price was € 140. The rack rate price is the highest price you will get.

• 5. Banqueting and other activities price (rate) per person per day

In the past the average price was € 28. You can not skip this activity totally, so price 0 is not allowed. The occupancy rate of the rooms also has impact on the numbers of booked banqueting arrangements and other activities.

• Other ideas

Of course there is many other prices next to last-minute and rack rate possible. We focus on the total of five price settings: rather explain them more in depth and find benchmarks for this and give links arguing why you chose these prices for these target groups.
If you think a specific, different prices is absolutely necessarily, use the marketing costs, or other costs, to promote this. Use the row Extra Information for your coach for explaining your plan. Then be sure to make calculations on costs and revenues and predicted additional revenues compared to the normal situation. Your coach might reward this with a bonus, if consistent, well-thought over etc. If so, you could find additional results from this at the bonus or fines (row 51-52). This will always be profit or losses, not revenues. But please (first) focus on the regular opportunities, they are plenty.

Additional information

• rates
• occupancy rate

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