O Case Studies Case Study 1: The Last Two Rooms The Hotel Empire is a 460-room full-service, branded, upscale hotel with a clien- tele that is 80 percent corporate transient and 20 percent affluent pleasure travel- ers. Larry Parks, the assistant front office manager of this downtown hotel, has had a very busy Friday evening. The activity in the lobby was winding down as he looked at the list of Expected Arrivals at 11 P.m. in the Front Office. All the names Marketing Strategies for Revenue Management 127 were checked off, meaning everybody on the list had arrived. The hotel picked up six walk-ins as well earlier in the evening. Three were walked from The Astor, a competing hotel a couple of blocks down the road, which is sold out and evidently overbooked due to a large convention. The downtown hotels were also filling up. Larry always liked the idea of picking up overflow from neighboring properties. The Empire was practically full with 458 rooms occupied. Only two rooms were still vacant. The rack rate was holding up at $220; all walk-ins were paying just that. Everything looked pretty good for a Friday night. Later, Larry was in the back office finishing off some paperwork when the switchboard called. "Larry, I've got two lines on hold for you, both outside calls. Where do you want me to transfer them?" asked the operator. Larry took the calls there at his desk in the back office. The first one was from The Astor, the hotel that had walked three of its guests earlier. "Hi Larry, this is Amy-Lou from the Astor. Thanks for picking up our walks earlier today. Our incoming traffic is winding down, but, before I finish my shift, I need to know if there is any chance you can pick up more walks if we need you to." Larry said he had two rooms left at $220, first-come, first-served. Amy-Lou took note and thanked him. Then Larry took the second call. The caller was part of a family of four that had just arrived in town. The caller sounded a bit desperate. Larry thought he might have a chance to complete the perfect fill by selling the last two rooms. The parents, Nigel and Janet Watson, were taking their two sons on a one- week vacation to explore the nearby lake district. Their plan was to find a budget hotel or motel for the night, then pick up their rental car the next morning and hit the road. Their sons were 10 and 12 years old. Nigel wanted to book two rooms: one for himself and the older boy, and one for Janet and the younger boy. Nigel hadn't anticipated any difficulty finding two rooms for around $100 per room for The Watsons had taken a cab from the airport upon landing and were sur- prised to see "No Vacancy" signs lit up all around the motels on the airport strip. They asked the cab driver to take them downtown, and soon learned that most hotels were sold out in the downtown core as well. Nigel was willing to pay up to $140 per room now, if push came to shove, but no more. When the second budget hotel turned them away, he had asked the driver to wait grabbed his cell phone, and started to work the hotel directory he'd been given by a friendly guest service agent. The Empire was the third hotel he called. Once Nigel had explained his reason for calling, Larry glanced at his watch, noted the time was 11:03, and quoted the rack rate of $220. Nigel asked if that was the best he could do. Larry replied that their rate for the Friday night was $220 and that satisfaction would be guaranteed. The rooms were on the top floor and included Wi-Fi access, a coffee maker, in-room safe deposit box, flat screen HD television set, super-soaker shower heads, fog-free make-up mirror, and more, but Larry hadn't finished describing all the room features when Mr. Watson abruptly apologized and put his wife on. Janet Watson took over the conversation from her husband. She pointed out that their budget was $100 a room, but, as all the hotels in that price range were full, they realized that they would not find what they were looking for. Given the the night. circumstances, they were prepared to pay up to $140 per room- but that was the highest they would pay. If the Empire agreed, the Watsons were ready with credit card in hand, would guarantee both rooms, and would arrive in mere minutes. Janet stressed that they would love to find a place for the night because the hour was getting late. "The kids should be in bed by now. Please, Mr. Parks, be consider- ate. I'm sure you have the authority to adjust that rate." Discussion Question What factors should Larry consider when deciding whether to accept the Watsons at $140 per room