Question 1: Yield management

Raglan Hotel Company has opened a new boutique hotel in Raglan catering for luxury          travellers.  The hotel has 70 rooms and the manager is proposing a pricing structure with two main room rates:  a full-price and a discount-price.  In addition, the manager wants to have a third last minute room rate i.e., a deep-discount price that is only released when demand for  rooms is significantly lower than expected.

Required:

a)   In the first six months of operation, the manager used the Threshold Curve approach to   manage the availability of different room rates.  Detailed below are two curves related to two different dates during this period showing the actual and expected bookings 15 days before the occupation date.  Explain what action the manager should take in response to this data:

i)

ii)

(4 marks)

b)  Discuss two sorting mechanisms the hotel could use to ensure the full-price customers do not purchase discount or deep discount tickets.  Identify the type (purchase pattern,       product characteristics, or customer characteristics) of sorting mechanisms you have proposed.

(6 marks)

c)  After the first six months, the manager has enough data to start using the EMSR method to determine the number of full-price and discount-price rooms to sell.  The full-price    tickets are sold for $400 and the discount tickets for $200.  Currently, demand for          discount tickets is very high and the hotel could sell all the rooms at this rate, but the     manager would like to reserve as many rooms in the hotel as possible (which has 70      rooms in total) for the full-price customers.  He has collected the following information on customer demand:

Assume the demand for the full-price tickets can be modelled using the empirical        distribution above.  How many rooms should the hotel reserve for the full-price           customers?  What should the booking limit be for discount-price customers?  (For this question ignore the deep discount tickets.)

(8 marks)

d)  Discuss how the hotel could use the Threshold curve approach and EMSR together.

(3 marks)

(Total for Question: 21 marks)

Question 2:  Linear Programming

After the first year of operation, the manager of the Raglan Hotel Company wants to              introduce linear programming to more accurately model hotel prices.  He proposes using it to model a new marketing initiative related to weekend packages.  During the winter months,    demand is low, and he is going to introduce a special three-night package deal comprising     Friday, Saturday and Sunday night.  The package will be available for $700 per stay.  As part of the package deal, guests will receive complimentary spa treatments worth $100 purchased by the hotel from a local business.  For customers not wanting the three-night package, the    standard full-price room rate of $400 will be available.  In addition, there will be a discount- price rate of $200 for advance bookings.

The hotel has 70 rooms.  The hotel has estimated customer demand for the three-night         packages will be 30 packages per weekend.  Customer demand for single-night rates will be as follows:

a)   Formulate this proposal for the pricing of rooms using proper LP formulation.

( 12 marks)

(Total for Question: 12 marks)

Question 3: Strategy and Pricing

EasyBookings is a mobile application that allows customers to search for businesses          providing personal services (e.g., personal trainers, hairdressers, beauty salons, mechanics, plumbers, and electricians) in their local area.  The app allows businesses to advertise their services and attract new customers.  The app also allows these businesses to better manage their customer bookings, as the app can be integrated with most accounting information     systems.

Customers can download the app for free, search for the type of service they want, select a business, and then make an appointment.  Businesses register their services with the          EasyBookings mobile app, and are charged a fixed subscription price of $150 per month.  Currently, EasyBookings has 150,000 customers who have downloaded the app and 2,500 registered businesses.

EasyBookings is currently considering whether to introduce new pricing structure to better reflect the value of the services they provide.

Required:

a)    Identify three main features provided by the mobile app and create a mission statement for EasyBookings that reflects these main features.

(4 marks)

b)    Using the information provided and your mission statement created in (a) explain who you think the primary customer is for EasyBoookings applying Simons’s (2014)          framework (perspectives, capabilities and profit potential).

(6 marks)

c)    Apply Porters Five Forces to the mobile booking app market to assess the overall           attractiveness of this market segment.  For each force, provide a brief rationale based on your own judgement of the strength of that force.

(7 marks)

d)    The CEO of EasyBookings is concerned about making the pricing structure too            complicated.  Instead, she has proposed reducing the standard subscription to $100 per month and then charging a surcharge of $1 for every booking made in the month.        Explain whether this proposal will be acceptable to EasyBookings business customers using Prospect Theory concepts.

(4 marks)

e)    Identify three types of business customers that have different willingness to pay.  For each type of business customer, propose a pricing structure using Berry & Yadav ’s

(1996) pricing strategies.  You must propose a different type of pricing structure for each customer group.

(6 marks)

(Total for Question: 27 marks)