Chapter 3: Case Study

RM at Work 3.2

"How many rooms do we have left for next weekend?" asked Ben Humphrey, GM of the Lennox Suites.

"165," replied Hillary, the Lennox Suites' Front Office manager.

"We got too aggressive," said Ben.

It was Thursday afternoon, and Ben and Hillary were discussing room pricing for the Friday, Saturday, and Sunday that were now only eight days away. The three weekend days they were discussing coincided with the International Cattle Breeders Association meeting, which was to be held at the convention center in the city where the Lennox was located.

Together, Ben and Hillary filled the role of revenue manager for their property, and they were discussing room rates.

"The organizers claimed their attendance would be higher," said Ben. "That's why I felt we should keep the rates at full rack, plus 20 percent, for so long. If we had known their attendance was going to be this soft, we could have backed our rates off earlier. But since we have only 200 rooms reserved as of today, we need to move quickly if we are going to sell our remaining 165 rooms."

"What do you think we should do?" asked Hillary.

"Let's take the rates from $299.00 per night to $199.00. Put that on our Web site. If we aren't fully booked by next Thursday, drop the rates another $50.00 per night. That should allow us to sell out any remaining rooms."

1.Consider the buyer's value formula. Do you think Ben's pricing strategy will significantly increase value offered and thus help the hotel sell out?

2.What impact will Ben's pricing strategy likely have on the value perceptions of those guests who have already booked at the Lennox?

3.Is it likely that those guests who have already booked rooms at the Lennox will find out about the new room rates? How would they? If you were Hillary, how would you respond to a telephone inquiry from an "early buyer" regarding the hotel's willingness to change the rate the guest had agreed to pay previously to the newer and lower room rates?