Problem:
The Tropical Paradise Resort is located on the coast of an exotic island in the Pacific Ocean. The room rates are $300 a night. If you have a room, you also have free access to the pool, gym and tennis courts.
The resort offers also the following services:
- aerobics classes ($5 per class)
- therapeutic massages ($40 per massage)
- scuba diving trips to a nearby coral reef ($60 per trip)
- day trips to the volcano that is located on the island ($100 per trip)
The average visitor stays for 5 days. The hotel is considering two pricing options: The first is to charge the regular room rate and then charge each visitor for any of the additional services separately. The other is to provide a package where a higher room rate would allow free access not only to the pool, gym and tennis courts, but also to the aerobics, massage, diving, and volcano trips. The objective of the resort is to maximize the long term profits by attracting repeat as well as new customers. Should they price their services separately or bundle them in a single price? Why?