Reference no: EM131889584

KEY CONCEPT CASE STUDY

"If anyone should be able to afford our regular rates, it's seniors," said Adrian, the rooms manager at the 480-room Barcena Resort. "You're our revenue manager, don't you follow economic trends? People today have more money when they get older, not less. And with the Baby Boomers starting to turn 60, they're going to have even more to spend than previous generations. All I'm saying is that I think a senior discount for this package just leaves money on the table." Adrian was having coffee in the resort's restaurant with Damario, the resort's revenue manager. They were discussing an idea Damario had presented at the last Strategic Pricing and Revenue Management Advisory Committee. Essentially, Damario had worked with the hotel's sales and marketing department to devise a "thru-the-week" package targeting active senior travelers. Adrian wasn't convinced it was a good idea. "I'm at the desk when they check in," continued Adrian. "Those folks do have money." "You're right," said Damario. "Senior travelers are typically among the wealthiest of all the markets that we target." "Then why offer them special discounts?" asked Adrian.

"Because we have empty rooms," replied Damario. "Seniors have money, but they have something even more important to us. They have time." "Time?" said Adrian. "Time. They have worked all their lives and have had longer to save, so they have more disposable income. That's still true, even after the most recent economic downturn. And lots of them love to travel. Of course, seniors also love discounts. Every group does, and that includes those with plenty of money. But seniors are also in a position to book with us at the last minute. They can vary their travel plans. They have no kids to worry about taking out of school. No limit on when they can get off work, because they already are off work. Permanently. And weekend travel is nice, but weekday travel is just as nice for most of them." They have the freedom to choose. Let me ask you, when is our hotel least used?" said Damario. "Weekdays," replied Adrian. "We're booked solid most weekends. You know that." "O.K. When do we need flexible date travelers?" asked Damario. "Through the week," said Adrian slowly. "Now I get it."

For Your Consideration

1. Assume Damario is successful in "selling" the idea of a discounted thru-the-week package for seniors to the rest of the revenue committee. What specific fences would you recommend he construct to optimize the hotels' revenues from this program?

2. Assume the hotel also hosts senior travelers currently paying full price for their visits. Some visit on the weekend, but others visit during the week. What specific actions could the hotel undertake to ensure these full-paying guests felt they also received excellent value for each travel dollar they spent at the Barcena?

3. Assume you were Damario. What are specific price differentiation tactics you could implement in regard to this specific discount program? Explain why each tactic you selected was chosen.

4. Prices strongly communicate to customers the value a company places on its own products and service? In some cases, prices that are too low can cause some customer perceptions of quality to decline. How can Damario ensure the customers he targets do not respond to his value proposition with the thought that his new package is "too cheap" to truly represent a good value?