KEY CONCEPT CASE STUDY Thanks for taking the time out to be here, said Damario, the revenue manager at the Barcena Resort. Damario was addressing the members of the resorts newly formed Strategic Pricing and Revenue Management Advisory Committee. As you know, Sofia has asked me to chair this committee, continued Damario. Im looking forward to hearing your thoughts on lots of the topics that will directly affect the revenue optimization and strategic pricing decisions we will make in the coming months. Well, I can already tell you what I think, said Mark Chaplin, the hotels Controller. With our owners expectations and the financial pressures on the property, we should be targeting customers who seek a premium product and are willing to pay a premium price. Im talking about the top 15 percent of the resort-going public. Thats the customer who wont haggle with us on rates. And that approach would allow us to increase our prices to the level we need to support our cost structure. Those are savvy consumers, Mark, and their standards are pretty high. I dont know if the product we can deliver will consistently match the expectations they have, replied Pam, the propertys DOSM. I would match our rooms against any of our competitors, protested Adrian, the resorts rooms manager. Guests dont have a problem paying a premium price if the product we deliver is outstanding. In my area, that means an exceptionally well- trained staff providing service that is as good as the food we make, said Sam, the resorts F&B director. No over-cooked steaks, he continued, and servers that are friendly, knowledgeable, and efficient. Thats the secret to good food. I agree. Service delivery is every bit as critical as our product quality, so staff training really is important, said Damario as he looked in the direction of Shingi Rakuni, the resorts human resource director. Shingi, said Damario, Have all of our departments implemented a regularly scheduled training plan for each of their staff positions? Shingi looked down uncomfortably at the papers she had spread in front of her as she said. Maybe you should ask each department head. They would be more up to speed in their own areas than I would. When we first opened, we really stressed staff training, said Adrian quickly, but when the budgets tightened up, I think most of us had to make cut backs. The other department heads nodded in agreement. Damario quickly considered the other resort properties competing against the Barcena. Some were newer and had some modern guests features the Barcena did not have. Some were older properties that were showing their age, but they were all pretty well maintained and they typically priced their rooms lower than the Barcena. On the whole, he thought, some of our competitors are newer and some are older. We have some service features they dont have and some of them have some features we dont have. For a five-year-old property, he felt the product offered could hold its own in this market. But that assumed its service levels were where they needed to be Thats right, quickly added Amanda, the front office manager. Its hard to implement training when you only have enough payroll budgeted to schedule the exact number of desk agents we need to handle our check-ins and departures. Amandas spot on, said Bev, the resorts executive housekeeper, and when we are short staffed, its all we can do to get the rooms turned on time. Id love to increase the training of my room attendants if I had the money. We would have better room quality and our room inspections could be speeded up. Thats exactly why we need to go after the premium market, said Mark. Thats the way we will get the revenue we need to increase training budgets and fix some of these problems. All of the department heads except Pam seemed to nod their concurrence. Higher prices? Now? In this economy? she said aloud. Therere good, but Im not sure my team can sell that, she concluded, as she gave Damario a troubled look.

For Your Consideration

1. Assume that in a recently completed competitive site survey, Damario found the physical quality of the rooms sold and food served at the Barcena to be in the mid-range of its competitors with regard to quality. Now consider the buyers view of value formula you learned about in this chapter. What would be the likely impact on that formula if the resort immediately implemented Marks suggested pricing strategy?

2. In this meeting, Damario learned about two reasons (lack of money and lack of time) typically given for not having formal staff training in a hospitality organization. Assume that Damarios ultimate goal is in fact the ability to charge a premium selling price relative to the resorts competitors. Do you think it is likely that such a goal could be achieved with the lower-than-average levels of guest service and product delivery that typically result when employee training programs are deficient? Explain your answer.

3. AssumetheBarcenaiscurrentlycompeting for a 400-room-night contract against a newer resort whose total bid is nearly identical to that of the Barcena. What would Mark advise Pam to bid? If you were the customer in this scenario, what would be your likely reaction be to such a bid? Support your position with information you learned in this chapter.

4. Marks pricing strategy assumes immediately increasing the resorts prices will generate the revenue needed to improve its products and services. Do you believe such an assumption is reasonable? Explain your answer using the buyers view of the value formula

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