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Exam 9: Role of the Room Rate

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Question 21

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Industry experience has proven that declines both in occupancy and in average room rate can be recovered by aggressive rate-cutting.

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Question 22

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Generally, the industry standard dictates that resorts charging anything over $211 per night will not charge guests a "resort fee."

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Question 23

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Mathematically, a 10 percent increase in occupancy will exactly offset a 10% rate discount. A 20 percent increase in occupancy will exactly offset a 20% rate discount.

Hotel operators sometimes complain that lodging taxes they collect are used by the community for things which are not tourism-related. Such operators might argue that it is fine to use lodging taxes to help pay for a new convention center facility. But argue against using lodging taxes to help pay for a new prison.

The Building Cost (Room) Rate:

Based upon the following information, calculate the ideal room rate: The hotel has 150 rooms (75 kings at $90 single and $100 double, 50 deluxe kings at $110 single and $125 double, and 25 mini-suites at $150 single and $170 double) . The double occupancy rate is projected at 20%. What is the ideal rate?

Using the traditional or building cost rate, how much should a 200 room hotel charge per night if construction costs were $16,400,000 and land acquisition costs were $1,600,000? The hotel should charge:

Lodging taxes paid by hotel guests often find their way into the community's coffers for use in a myriad of local municipal expenses.

Using the ideal room rate method, if your actual ADR is lower than the ideal room rate, thisindicates:

Front office guest service agents (GSA) should be trained to attempt to up-sell guests at the time of registration by offering a more expensive accommodation and only quoting the supplemental price difference. In other words, rather than saying; "You can stay in our luxury suite for only $345 per night."The well-trained GSA might say; You can stay in one of our luxury suites for only $65 more than the standard rate you are already paying."

The most expensive community in the United States with regard to lodging taxes is Albuquerque, New Mexico, with a 23.75% lodging tax rate.

Published rates (printed in advertising materials) and posted rates (legally required by state laws) must be the same.

All else being equal, a reservationist should be trained to first offer the caller a:

Sketch or explain why one guest who stays in the hotel between 5 and 7 hours pays the same room rate as another guest who spends between 15 and 20 hours.

The hotel industry uses fewer rate categories today (perhaps three to five rate levels in the average hotel) than was customary a decade ago.

Inelastic markets respond to small changes in price (room rates) with large changes in demand, either up or down. In other words, a hotel operating in an inelastic market would see a large increase in occupancy from a relatively small decrease in the average rate.

Use the following information to calculate an Ideal Average Room Rate Formula: The New York Metropolis Lodge has 350 rooms. There are three categories of rooms; 200 are standard rooms that sell for $80 (and $90 double occupancy) ; 100 are city deluxe rooms that sell for $110 (and $125 double occupancy) ; 50 are executive parlors that sell for $145 (and $165 double occupancy) . Calculate the rate assuming a 30 percent double occupancy rate:

In regards to room rates which of the following IS NOT true. Room rates:

Per diem room rates are those established by the American Hotel & Lodging Association (AH&LA) for each major U.S. city, but all cities in the nation cannot be covered (generally those with populations under 50,000).

Suggesting the guest might prefer to pay a little extra for better accommodations than he/she originally reserved is called: