$$Case Study: $$Demand$-$Driven Rates Drive Kaiser to the Competition

On October $10,$ Mr$.$ Doug Kaiser telephones the Gizmo Motel and explains to the reservations

agent that he would like to reserve one single room from December $11$ through December $15.$

The agent checks room availability information and finds that although there are rooms available

for all four nights that Mr$.$ Kaiser is requesting, the night of December $13$ is almost sold out. The

agent explains to Mr$.$ Kaiser that the motel will need to charge him a

$$15$ premium, added to his $$65$ room rate, for his room on the night of the thirteenth.

Mr$.$ Kaiser, confused about the differential rate, asks to speak to the reservations manager. The

manager, Ms$.$

Betty Lou Lewis, restates the motel$$s policy of charging premium rates on those nights for which

there is high demand. Mr$.$ Kaiser thinks about the demand$-$driven policy and agrees it is

reasonable. He reaffirms his reservation and hangs up$.$

In late November, Mr$.$ Kaiser calls the Gizmo Motel and advises the reservations agent that his

travel plans have changed. He will be needing his single room only for the nights of December $11$

and $12.$ He requests that his reservation be modified. Recalling the motel$$s unusual pricing

policy, he asks for a quoted room rate. She informs him that his room will cost $$75$ per night. He

explains that his rate was formerly $$65$ for the nights of December $11$ and $12.$ The agent in turn

explains that the demand for rooms on those two nights has significantly increased and,

HOTEL AND RESORT OPERATIONS MANAGEMENT HAR $1003$

PMS and Reservations

therefore, so have the motel$$s room rates. Frustrated by the fluctuating rates and the demeanor

of the reservations agent, Mr$.$ Kaiser cancels his reservation and calls the Cybex Inn, the motel$$s

primary competition. There he receives a $$60$ nightly rate and a cheerful thank$-$you for his

business.

Discussion Questions

$1.$ Is a demand$-$driven approach to room rating a good idea? Should a room be assigned

different rates during a guest$$s stay? $(10$ pts$)$

$2.$ Is it appropriate to change the guest$$s previously quoted room rate when guests change their

reservations? When might such a pricing plan be effective? $(10$ pts$)$

$3.$ How should Mr$.$ Kaiser$$s business have been handled? $(5$ pts$)$