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Question

Garland's Lodge is an independent boutique resort located in Oak Creek Canyon just north of Sedona, Arizona. The

resort features 16 individual cabins, situated along the banks of Oak Creek, and a full-service gourmet restaurant. The property is open April 2nd through November 20th each year and closes each Sunday at 1 PM until Monday at 11 AM.

Garland's appeals to the discriminating traveler. Its clientele demands excellent service, luxury accommodations, and pri- vacy. Many dates on the reservations calendar are booked a full year in advance. However, overall, occupancy averages 80% for the 198 nights it is open. Garland's manager has recently hired a full-time marketing coordinator to develop a promotional strat- egy and a revenue management strategy.

The new marketing coordinator learned that the current rate is $295 per night for two persons, which includes afternoon tea, a four-course dinner, and breakfast. This rate applies to all arrival dates throughout the season. The resort requires a two- night minimum stay. In researching occupancy, the coordinator learned that occupancy Fridays and Saturdays throughout the season average nearly 100%. However, Tuesdays and Wednesdays occupancy averages drop to only 60%. With such a small number of rooms, the coordinator is concerned about the financial impact of the perishability of unoccupied rooms.

The coordinator presented a proposal to the manager to adopt a tiered pricing strategy with full rates for Fridays and Saturdays; a 15% discount on Mondays and Thursdays; and, a 20% discount on Tuesdays and Wednesdays. Further, the coordi- nator is looking at offering a joint package with a local Jeep tour company. The coordinator forecasts that the new rate program will increase overall occupancy average to 90% and, although rooms will be discounted four nights each week, overall revenues will increase as a result. In addition, because of increased occu- pancy bar and restaurant revenues will also increase.


Questions:

1. What type of pricing strategy is currently being used? Explain. 2. If total cost associated with an occupied room is $75, what is

the lost revenue for each room that remains unoccupied?

3. Based on the new rate structure, if the coordinator can increase overall occupancy to 90% for the following year (assuming Fridays and Saturdays remain at 100%) will the resort increase overall revenues? Explain. Do you need more

information?

4. Should the resort consider introducing an Internet rate to

reservations booked online through its Web site? Why or why

not?

5. What types of pricing strategies would you suggest?

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