Market based pricing 1 price follower ship many

Info icon This preview shows pages 5–6. Sign up to view the full content.

contribution towards the fixed cost. Market based pricing 1. Price follower-ship – many hotels simply follow the prices established by their competitors. This is also known as competitor based pricing. If the leader in the market reduces the price, even others reduce accordingly. The problem is that it does not take into account of the followers’ capital structure, profit targets or operating costs. 2. Top down pricing – this approach is used by hotels proposing to enter a new market. Once the market opportunity is identified, the procedure is very similar to Hubbart formula. The difference is that you start at the top by establishing how many rooms we think we can sell at a given rate and then working downwards through the cost figures to see whether these will result in expected rate of return. a. Rate cutting – most pricing approaches assume that demand will increase, if prices are lowered. This can be risky. If done once to come back is really difficult. On the other hand, there can be heavy loss in revenue. b. Prestige pricing – it is not always true that demand will increase if prices are lowered. Raising the price may make the hotel more exclusive and this changes the nature of the product. This strategy will only work where the market is not particularly price conscious. Why don’t you visit a few hotels around and collect tariff cards ? Now you shall do a Practical Exercise illustrating the material discussed above. Practical Exercise – 19: Hotel Tariff Pricing and Tariff Card Design i) Study the Contents given in Sec. 5.3. ii) Submit a Practical Journal indicating various pricing methods to be adopted as per situations. Also include in it a tariff card created for a hotel using the details specified by the LC Faculty. 5.4 Summary This unit discusses various aspects to be considered while designing hotel brochure and tariff. Tariffs are classified into cost based and market based pricing. The best tariff is a combination of both as these are interrelated. One must understand the clientele’s expectations and rate of return before designing any hotel brochure or tariff. 5.5 Terminal Questions 1. Create one brochure for a resort hotel. 2. State the reason for the difference between weekday and weekend rates. 5.6 Answers
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Terminal questions 1. First you plan the type of facilities you would like to offer through the resort hotel. Accordingly add statements, pictures, photographs etc. 2. The occupancy is generally low at week ends since the offices are closed and the business travellers prefer to spend their week ends at their homes. The hotels keep high rates during week days, when the demand is high.
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.
  • Summer '17
  • Amruta Turme
  • Pricing, Hotels

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern