1. Why is loss of sales from hotel rooms not occupied a greater problem than loss of sales from restaurant customers not showing up? The fixed cost for a restaurant are lower than the fixed cost for a hotel, also a hotel only sells one room a day and a restaurant has many customers a day by turning seats over and over.
2. Why is the averge room rate different from the rack rate? Rack rate is the full price of a room before the discounts are applied
3. Why is the averge room rate diff erent from the rack rate? Rack rate is the full price of a room before the discounts are applied
4. Define the terms rack rate and potential average room rate. Potential average room rate is the revenue the hotel would receive if they were multiple and at 100%. Rack rate is the full price rooms are sold to customers before discounts are applied.
5. Define the term elasticity of demand. This is when demand for a good or service varies with its price. Sales increase with drop in prices and decrease with rise in prices. Change in demand based on change in price.
6. State the equation for calculating elasticity of demand.(% change in quantity demanded)/(% change in price)
7. What implications does the breakdown of costs into fixed and variable categories have on the pricing decision? Fixed cost exist regardless of the revenue level. Variable cost are a function of revenue, pricing must cover variable cost and fixed cost in the long run.
Attachment:- HOS 372 Chapter 6 - P2 HW Template 2014.xls