ADR=(Total room revenue/Total no.of rooms available for sale |
Where, |
Total room revenue= Price*No.of rooms sold |
Total no.of rooms available for sale =500 |
RevPAR=Revenue per available room= |
Total Room revenue-Expenses for all the rooms available |
Total room revenue= Price*No.of rooms sold |
Expenses for all the rooms available=150*500=75000 |
GOPPAR= Gross Operating Profit Per Available Room= |
Total Room revenue-Expenses for all the rooms available+Total Non-room operating revenues |
Total room revenue= Price*No.of rooms sold |
Expenses for all the rooms available=150*500=75000 |
Total Non-room operating revenues=500*500=250000 |
1 | 2 | 3 | 4 | 5=Col.4/500 | 6=(Col.4-$150*500)/500 | 7=(Col.4-($150*500)+($500*500))/500 |
Pricing Strategy | Price level/room | No.of Rooms sold | Room Revenue | ADR=(Total room revenue/Total no.of rooms available for sale | RevPAR | GOPPAR |
Single- price | 4000 | 200 | 800000 | 1600 | 1450 | 1950 |
Three-price | Low-2000 | 100 | 200000 | 400 | 250 | 750 |
Regular-4000 | 100 | 400000 | 800 | 650 | 1150 | |
High-5000 | 100 | 500000 | 1000 | 850 | 1350 | |
Total | 300 | 1100000 | 2200 | 1750 | 3250 | |
We need to take weighted averages to calculate per available room metrics for the three-price strategy: | ||||||
Wt.Av. ADR--(33.33%*400)+(33.33%*800)+(33.33%*1000)= | 733.26 | |||||
Wt. Av. RevPAR--(33.33%*250)+(33.33%*650)+(33.33%*850)= | 583.28 | |||||
Wt. Av. GOPPAR--(33.33%*750)+(33.33%*1150)+(33.33%*1350)= | 1083.23 | |||||
% change between the 2 approaches(1083.23-1950)/1950= | -44.4497% | |||||
Further to the above calculations, it can be seen that | ||||||
Single-price approach will be a better choice for Shawn to maximise revenue | ||||||
as all the Per Available Room metrics are lower with the three-price strategy. |
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