8. Pricing, Revenue Management and Profitability

Introduction and Context

Pricing is one of the most consequential decisions in hospitality marketing and sales. A hotel may invest heavily in branding, distribution, service design, and promotion, yet fail to create financial value if its prices do not reflect customer willingness to pay, operating costs, competitive conditions, and capacity constraints. Unlike many manufactured products, a hotel room is perishable: an unsold room tonight cannot be stored and sold tomorrow. This characteristic makes hospitality pricing both strategically important and analytically demanding.

Pricing also affects market positioning. A luxury hotel that consistently discounts may weaken its prestige, while a budget hotel that prices above credible alternatives may lose volume without gaining sufficient margin. Consequently, pricing cannot be treated merely as a short-term sales tool. It is a coordinated managerial process involving marketing, revenue management, finance, sales, distribution, operations, and senior leadership.

Revenue management extends this logic by deciding which customer should receive which offer, through which channel, at what price, and under what conditions. Profitability management goes further still: it evaluates whether revenue generated from a booking actually produces satisfactory contribution after distribution costs, servicing costs, commissions, discounts, and resource consumption are considered.

This chapter examines value-, cost-, and competition-based pricing; price elasticity; segmentation; forecasting; yield and revenue management; dynamic pricing; profitability analysis; digital tools; and ethical responsibilities. The emphasis is on managerial judgment rather than mechanical price changes. Effective hospitality pricing combines data with brand strategy, customer understanding, operational discipline, and professional integrity.

Learning Objectives

After studying this chapter, students should be able to:

1. Explain the strategic role of pricing in hospitality marketing and profitability.

2. Distinguish value-based, cost-based, and competition-based pricing.

3. Analyse price elasticity and its implications for demand decisions.

4. Apply market segmentation and fences to differentiated pricing.

5. Explain forecasting, yield management, revenue management, and dynamic pricing.

6. Calculate and interpret important hospitality performance measures.

7. Evaluate channel, customer, and booking profitability.

8. Identify ethical, legal, technological, and managerial risks in pricing.

9. Develop an integrated pricing and revenue strategy for a hospitality business.

Pricing as a Strategic Value Decision

The price of a hotel room communicates more than a monetary amount. It signals quality, exclusivity, affordability, urgency, and market position. Customers compare the price with the expected experience, location, convenience, reputation, and alternatives available to them. A price is therefore acceptable when perceived benefits are sufficiently greater than perceived sacrifice.

The central managerial question is not simply, “What price can we charge?” It is, “What value does a particular customer segment perceive, and how can that value be converted into profitable revenue?” Perceived value may include a comfortable bed, reliable Wi-Fi, breakfast, flexible cancellation, access to a convention venue, safety, status, or time savings. Two guests occupying identical rooms may assign different values to the same stay because their purposes and constraints differ.

Hospitality firms commonly pursue one or more pricing objectives:

• revenue maximisation;
• profit maximisation;
• occupancy growth;
• market penetration;
• premium positioning;
• customer retention;
• demand smoothing; and
• cash-flow protection during weak periods.

These objectives can conflict. A hotel that maximises occupancy through deep discounts may increase room revenue but reduce contribution and strain operations. A luxury resort may deliberately accept lower occupancy to preserve rate integrity and exclusivity. Pricing objectives must therefore be defined in relation to the property’s positioning, cost structure, capacity, demand pattern, and long-term strategy.

Three Foundations of Hospitality Pricing

Value-Based Pricing

Value-based pricing begins with customer willingness to pay and perceived benefits. It asks what the offer is worth to the target customer rather than starting with internal cost. A city hotel near an airport may command a premium from a traveller who values convenience and risk reduction, even when its room is physically similar to one located farther away.

Value-based pricing requires segmentation and research. Managers examine customer needs, purchase motives, alternatives, urgency, service attributes, reputation, and willingness to pay. It is especially appropriate for differentiated products such as boutique hotels, resorts, experiences, meeting packages, and branded services.

Its principal advantage is that it captures economic value created for customers. Its limitation is that willingness to pay is not directly observable and may vary by date, purpose, channel, and competitive context. Poorly designed research can lead managers to overestimate perceived value.

Cost-Based Pricing

Cost-based pricing establishes a price by adding a margin to cost. A simple formula is:

Price = Unit Cost + Desired Mark-up

In hospitality, managers distinguish fixed costs, variable costs, semi-variable costs, direct costs, and shared overheads. Variable room costs may include housekeeping supplies, laundry, amenities, utilities, and transaction charges. Fixed costs include rent, depreciation, property taxes, and many salaries. A room price below fully allocated cost may still be rational in the short run if it covers incremental cost and contributes toward fixed costs, but persistent pricing below economic cost is unsustainable.

Useful cost concepts include contribution margin and break-even point:

Contribution per room = Room price – Variable cost per occupied room

Break-even room nights = Fixed costs ÷ Contribution per room

Cost-based pricing provides a financial floor and supports budgeting. However, it should not be used mechanically. A hotel cannot assume that customers will pay a price simply because the property has high costs. Nor should common overheads be allocated in a way that makes every individual sale appear unprofitable when it contributes positively to the business.

Competition-Based Pricing

Competition-based pricing uses comparable properties as reference points. Managers examine public rates, packages, restrictions, quality differences, distribution presence, and customer reviews. The objective is not always to match competitors. A property may price above a competitor because it offers superior location or service, or below it because it is pursuing penetration or has weaker perceived value.

Competitive information is useful but incomplete. Publicly displayed prices may differ by cancellation policy, taxes, inclusions, loyalty benefits, or channel. Excessive imitation can produce destructive price competition. A sound approach uses competitors as a reference while preserving the property’s own value proposition and economic requirements.

In practice, effective pricing integrates all three foundations. Cost establishes feasibility, competition provides market context, and customer value guides the upper boundary of willingness to pay.

Price Elasticity and Demand Behaviour

Price elasticity of demand measures the responsiveness of quantity demanded to a change in price:

Price elasticity = Percentage change in quantity demanded ÷ Percentage change in price

When the absolute value is greater than one, demand is elastic: a small price change produces a proportionately larger change in demand. When it is less than one, demand is inelastic. Hotel demand is often elastic for leisure customers with flexible dates and many substitutes, but relatively inelastic for urgent business travel, major events, or unavoidable travel.

Elasticity varies according to:

• purpose of travel;
• booking lead time;
• season and day of week;
• destination accessibility;
• availability of substitutes;
• income and budget;
• cancellation conditions;
• brand loyalty;
• event calendars; and
• the transparency of online comparison.

A lower rate does not automatically increase total revenue. If a 10 per cent price reduction produces only a 5 per cent increase in room nights, revenue decreases. Conversely, during a capacity-constrained period, reducing price may unnecessarily surrender revenue because demand would have materialised at the higher rate.

Cross-price elasticity is also relevant. Demand for one hotel may change when a competitor alters its price. Substitution can occur between hotels, destinations, room types, or even products such as accommodation and short-term rentals. Managers should interpret elasticity as segment-specific and time-specific, not as a permanent property of the entire market.

Segmentation, Rate Fences and Price Differentiation

Revenue management depends on selling essentially similar inventory at different prices to customers with different willingness to pay. This is legitimate price differentiation when it is transparent, rationally related to customer conditions, and consistent with law and professional ethics.

Common hospitality segments include transient leisure travellers, corporate travellers, groups, government or institutional business, wholesalers, airline crew, long-stay guests, local residents, and meeting delegates. Each segment has different booking behaviour, price sensitivity, cancellation risk, lead time, and service requirements.

A rate fence is a condition that separates one price from another. Examples include:

• advance-purchase requirements;
• non-refundable terms;
• minimum-stay restrictions;
• length-of-stay restrictions;
• membership or loyalty status;
• age or student eligibility where lawful;
• corporate account qualification;
• package inclusion;
• booking channel; and
• room-type or service differences.

Good fences are clear, enforceable, and meaningful to customers. A non-refundable rate should provide a genuine price benefit and clearly disclose its restriction. Hidden charges or confusing conditions may generate short-term revenue but damage trust, increase complaints, and expose the organisation to regulatory action.

Forecasting: The Basis of Revenue Decisions

Forecasting estimates future demand, occupancy, room-type needs, average daily rate, cancellations, no-shows, and revenue. It is not a prediction of certainty; it is a structured assessment of likely outcomes under stated assumptions.

A practical forecasting process begins with historical data and is adjusted for current conditions. Relevant inputs include prior occupancy, booking pace, on-the-books reservations, lead time, cancellations, citywide events, holidays, weather, flights, competitor actions, economic conditions, group wash, and distribution performance.

Important forecasting approaches include:

1. Historical pattern analysis: compares current periods with comparable past periods.

2. Booking-pace analysis: tracks reservations accumulated by days before arrival.

3. Moving averages and time-series methods: smooth fluctuations and identify trends.

4. Event-based forecasting: adjusts demand expectations for conventions, festivals, sports, and disruptions.

5. Scenario forecasting: develops conservative, expected, and optimistic cases.

6. Judgmental adjustment: incorporates local knowledge not captured in historical data.

Forecast accuracy should be monitored using measures such as mean absolute percentage error or forecast bias. A forecast that is consistently optimistic may cause overpricing and unsold inventory; one that is consistently pessimistic may cause premature discounting.

From Yield Management to Revenue Management

Yield management originated in capacity-constrained industries and was adapted to hotels. Its basic logic is to allocate limited, perishable inventory among customer segments to maximise revenue. A hotel may protect rooms for high-value late demand rather than sell all rooms early at discounted rates.

Revenue management is broader than traditional yield management. It integrates room type, length of stay, booking channel, ancillary services, customer profitability, and total property revenue. The decision is not merely whether to sell a room, but whether accepting one booking prevents a more profitable booking later.

A simplified booking-limit decision compares the value of an incoming booking with the expected value of future demand. If the probability of selling the room later at a higher rate is substantial, the hotel may reject a low-rate booking. This is not an invitation to speculate without evidence; it requires reliable forecasts and a clear understanding of cancellation and no-show behaviour.

Core performance indicators include:

Occupancy percentage = Rooms sold ÷ Rooms available × 100

Average Daily Rate (ADR) = Room revenue ÷ Rooms sold

RevPAR = Room revenue ÷ Available rooms

RevPAR can also be calculated as ADR multiplied by occupancy percentage expressed as a decimal. It combines volume and rate, but it does not measure total property profitability. A hotel with lower RevPAR may produce higher profit if it has better channel economics, lower servicing costs, or stronger food and beverage contribution.

Other measures include gross operating profit per available room (GOPPAR), total revenue per available room (TRevPAR), net RevPAR after acquisition costs, cancellation rate, booking conversion, and channel contribution. Each metric answers a different question and should not be treated as a complete performance measure in isolation.

Dynamic Pricing and Commercial Controls

Dynamic pricing changes prices or restrictions in response to expected demand, inventory, booking pace, competitor conditions, and customer behaviour. Typical controls include rate levels, room-type differentials, minimum length of stay, closed-to-arrival restrictions, overbooking limits, and availability by channel.

A price ladder may contain several levels, such as promotional, standard, flexible, premium, and last-room-availability rates. The levels should be logically structured so that price differences reflect genuine differences in flexibility, inclusions, or expected value.

Dynamic pricing should be coordinated across direct channels, online travel agencies, wholesalers, corporate agreements, and sales contracts. Rate parity policies and distribution agreements may constrain how prices are displayed. Managers must also account for commission. A room sold at a high public rate through a costly channel may generate less net revenue than a slightly lower direct booking.

Overbooking is another revenue-management decision. Because some guests cancel or fail to arrive, a hotel may accept reservations beyond physical capacity. The practice can protect occupancy but creates serious service and reputational risks. Overbooking limits should be based on historical show rates, booking patterns, walk costs, room-type availability, and the hotel’s ability to relocate guests fairly and professionally. A guest should never be treated as a purely statistical inconvenience.

Profitability Analysis Beyond Room Revenue

Revenue is not the same as profit. Profitability analysis evaluates the financial contribution of a booking, segment, product, or channel after relevant costs. A basic contribution approach is:

Net contribution = Gross booking revenue – variable operating costs – commissions – transaction costs – promotional costs

For example, a discounted direct booking may generate a lower room rate but retain more of the amount because it avoids an intermediary commission. Conversely, a corporate account may provide predictable volume but require negotiated rates, loyalty benefits, meeting support, or flexible cancellation.

Customer profitability analysis should consider the total relationship. A guest who books rooms, consumes food and beverage, uses meeting facilities, and returns frequently may be more valuable than a one-time guest with a higher room rate but substantial acquisition cost. Nevertheless, ancillary revenue should not be assumed to be profitable; food cost, labour, waste, and service complexity must be included.

A useful managerial dashboard may compare, by segment and channel:

• gross ADR;
• net ADR after commission;
• occupancy contribution;
• cancellation and no-show cost;
• ancillary revenue;
• servicing cost;
• acquisition cost;
• customer lifetime value; and
• total contribution or GOPPAR.

Profitability analysis should guide resource allocation. It may justify shifting marketing expenditure toward direct channels, redesigning packages, renegotiating contracts, or discontinuing apparently high-volume business that destroys contribution.

Technology, Analytics and Artificial Intelligence

Modern revenue systems combine property-management systems, central reservation systems, customer relationship management platforms, channel managers, digital advertising data, competitor-rate shopping, and business-intelligence dashboards. Revenue-management systems can identify booking pace, recommend rate changes, estimate demand, and flag unusual patterns.

Machine-learning tools may improve forecasts by processing large volumes of structured and unstructured data, including search behaviour, event calendars, weather indicators, and online demand signals. However, automated recommendations are not automatically correct. Data may be incomplete, biased, outdated, or distorted by extraordinary events. Managers remain responsible for interpreting outputs, checking exceptions, and ensuring that automated decisions do not create unfair or unlawful outcomes.

Technology governance should address data quality, cybersecurity, access controls, privacy, audit trails, model explainability, and human override. Personalisation based on customer data must respect consent and applicable privacy obligations. A technically sophisticated pricing system can still damage the brand if customers perceive inconsistent or discriminatory treatment.

Ethical and Regulatory Boundaries

Pricing must be commercially intelligent and ethically defensible. Deceptive practices include advertising unavailable “bait” rates, concealing mandatory charges until late in the booking process, misrepresenting scarcity, fabricating countdowns, manipulating reviews, or applying undisclosed discriminatory prices. Transparent disclosure of taxes, resort fees, cancellation conditions, deposits, and inclusions is fundamental.

Managers should distinguish legitimate segmentation from prohibited discrimination. Prices may differ because of documented conditions such as flexibility, membership, package content, or distribution cost; they should not be based on protected characteristics where such treatment is unlawful or unethical. Competition law may also restrict collusion, coordination of prices, and misuse of market power.

Ethical revenue management includes fair treatment during overbooking, honest communication during disruptions, responsible use of personal data, and avoidance of exploitative pricing during emergencies. A price that can technically be charged may still be damaging to trust and organisational legitimacy. Long-term profitability depends on repeat business, reputation, employee confidence, and stakeholder relationships.

Illustrative Case: Harbour View Hotel

Background

Harbour View Hotel is a 180-room urban property serving corporate travellers during weekdays and leisure visitors on weekends. It sells through its website, two online travel agencies, corporate contracts, wholesalers, and local meeting planners. Its management focused heavily on occupancy and reported a satisfactory annual occupancy rate, but cash profitability had declined.

Situation and Problem

The hotel’s revenue report showed that online travel agencies produced substantial room volume. However, their average commission was high, promotional discounts were frequent, and cancellation rates exceeded those of direct bookings. A corporate contract generated steady weekday occupancy but required low rates and flexible terms. Weekend demand was strong during festivals, yet the hotel continued to sell discounted packages until late in the booking cycle. Managers were using ADR and occupancy separately and had no consistent measure of net contribution.

Analysis

The revenue manager segmented demand by weekday, purpose, lead time, channel, and cancellation behaviour. Forecasting showed that festival weekends regularly reached high occupancy several weeks before arrival. The hotel was therefore giving away rate during periods when demand was relatively inelastic. Channel analysis showed that direct bookings produced lower gross ADR than some agency bookings but higher net contribution after commissions. The corporate contract was profitable on ordinary weekdays but less attractive during dates when transient demand was strong.

A break-even review also showed that some heavily discounted packages covered room variable costs but consumed considerable housekeeping and breakfast resources. They were not loss-making on a narrow room basis, yet they generated less contribution than alternative business.

Approach and Strategy

The hotel introduced a demand calendar with rate tiers and booking restrictions. Festival dates were closed to the lowest promotional rates and received minimum-stay controls where demand justified them. The direct website offered a transparent member benefit rather than an undisclosed price reduction. Corporate rates were restricted on selected high-demand dates, with advance communication to account managers.

Management created a net contribution dashboard showing gross rate, commission, payment cost, variable servicing cost, ancillary contribution, cancellation risk, and estimated customer value. The hotel also improved cancellation terms and trained the reservations team to explain restrictions clearly. Overbooking limits were reviewed by room type using historical show rates and relocation capacity.

Outcome

The hotel’s decision-making shifted from occupancy maximisation to contribution management. It accepted that some low-demand dates required tactical offers, while high-demand dates required inventory protection. The case does not assume a specific numerical result; its principal outcome was a more disciplined commercial process in which marketing, sales, revenue management, and operations evaluated the same economic information.

Learning Points

1. High occupancy does not guarantee high profitability.

2. Gross rate must be evaluated after channel and servicing costs.

3. Rate restrictions should reflect demand conditions and be communicated transparently.

4. Corporate volume can be valuable but should not be accepted at the expense of stronger demand.

5. Revenue systems support judgment; they do not replace managerial accountability.

Challenges and Common Managerial Errors

Several recurring errors weaken hospitality pricing. The first is treating competitors’ public rates as the only evidence of value. The second is discounting reactively whenever occupancy is below target, without examining booking pace or remaining demand. The third is focusing on ADR while ignoring commissions, cancellations, and operating costs. The fourth is allowing sales contracts to remain unchanged for years despite market shifts.

Other risks include inaccurate inventory data, poor communication between sales and revenue teams, excessive rate complexity, uncontrolled discount codes, forecast bias, and overreliance on automated recommendations. Customers may also experience frustration when different channels display confusing conditions or when a promised benefit is unavailable.

Best practice involves a documented pricing calendar, clear approval authority, regular forecast review, disciplined post-event analysis, consistent rate governance, cross-functional meetings, and training for reservations and sales staff. Every major pricing decision should have a stated objective, evidence base, expected outcome, and review date.

Current Developments and Emerging Directions

Hospitality pricing is increasingly moving toward total-revenue and profit-oriented management. Hotels are evaluating rooms together with food and beverage, spa, parking, meetings, activities, and ancillary services. Personalised offers, mobile booking, subscription models, alternative accommodations, and real-time demand signals are changing distribution and customer expectations.

Sustainability is also entering pricing decisions. Guests may value low-impact operations, while hotels face higher costs for energy, water, labour, and responsible sourcing. Pricing should communicate genuine environmental value rather than use vague green claims. Future systems are likely to combine demand forecasting, customer relationship data, profit optimisation, and sustainability indicators, but governance and transparency will remain essential.

Chapter Summary

Hospitality pricing is a strategic process that converts perceived customer value into revenue while protecting long-term profitability and trust. Value-based pricing focuses on willingness to pay, cost-based pricing establishes economic feasibility, and competition-based pricing provides market context. Effective decisions integrate all three.

Price elasticity varies by segment, purpose, timing, and competitive conditions. Segmentation and transparent rate fences permit differentiated pricing without deceptive treatment. Forecasting supports yield and revenue management by estimating demand, booking pace, cancellations, and capacity pressure. Dynamic pricing adjusts rates and restrictions as conditions change, while profitability analysis examines net contribution after commissions, servicing costs, and acquisition expenses.

Occupancy, ADR, and RevPAR are useful but incomplete. Managers should also examine net revenue, TRevPAR, GOPPAR, channel economics, customer lifetime value, and total contribution. Technology and AI can improve forecasting and decision support, but they require data governance, privacy protection, human oversight, and ethical boundaries. Sustainable pricing practice is transparent, evidence-based, strategically aligned, and accountable to customers, employees, owners, and regulators.

Key Terms

Value-based pricing: Setting prices primarily according to customer-perceived value and willingness to pay.

Cost-based pricing: Setting prices by adding a desired margin to relevant costs.

Competition-based pricing: Using comparable competitors’ prices and conditions as market reference points.

Price elasticity of demand: The responsiveness of quantity demanded to a change in price.

Cross-price elasticity: The change in demand for one offer resulting from a price change in another offer.

Rate fence: A condition that separates one price from another, such as advance purchase or membership.

Segmentation: Dividing a market into groups with distinct needs, behaviours, or willingness to pay.

Forecasting: Estimating future demand, occupancy, rates, cancellations, and revenue.

Booking pace: The rate at which reservations accumulate before the arrival date.

Yield management: Allocating limited, perishable inventory among segments to maximise revenue.

Revenue management: Coordinating price, inventory, channel, segment, and timing decisions to optimise financial performance.

Dynamic pricing: Adjusting prices or restrictions in response to changing demand and market conditions.

Occupancy: The proportion of available rooms sold during a period.

ADR: Average Daily Rate, calculated as room revenue divided by rooms sold.

RevPAR: Revenue per Available Room, calculated as room revenue divided by available rooms.

TRevPAR: Total Revenue per Available Room, including revenue beyond rooms.

GOPPAR: Gross Operating Profit per Available Room.

Contribution margin: Revenue remaining after deducting variable costs.

Overbooking: Accepting reservations beyond physical capacity to offset expected cancellations or no-shows.

Channel profitability: Financial contribution generated after considering the costs of a booking channel.

Review Questions

Short Answer Questions

1. Why is hotel-room inventory described as perishable?

2. Distinguish between ADR and RevPAR.

3. What is a rate fence? Give two examples.

4. Define price elasticity of demand.

5. Why may high occupancy fail to produce high profitability?

Long Answer Questions

1. Compare value-based, cost-based, and competition-based pricing and explain why an integrated approach is preferable.

2. Discuss how segmentation, rate fences, and elasticity influence hotel pricing decisions.

3. Explain the role of forecasting in yield management and dynamic pricing.

4. Analyse the limitations of using occupancy, ADR, and RevPAR as the only performance indicators.

5. Discuss ethical and regulatory responsibilities in hospitality revenue management.

Analytical / Application Questions

1. A hotel reduces its rate by 12 per cent and room nights sold increase by 6 per cent. Analyse the likely effect on room revenue and explain what additional information a manager should examine.

2. A booking through an online travel agency has a higher gross rate than a direct booking but incurs commission, payment fees, and higher cancellation risk. Design a method for comparing the two bookings’ profitability.

3. A resort is nearly sold out for a major festival but continues offering its lowest promotional rate. Recommend changes to its forecasting, inventory controls, and communication strategy.

22. Multiple Choice Questions with Answers

Question 1

Which pricing approach begins primarily with customers’ perceived benefits and willingness to pay?

A. Cost-based pricing

B. Value-based pricing

C. Historical pricing

D. Uniform pricing

Correct Answer: B. Value-based pricing

Question 2

A hotel reduces its price by 10% and demand increases by only 4%. Assuming other conditions remain constant, demand is most likely:

A. Elastic, and room revenue must increase

B. Unit elastic, and room revenue is unchanged

C. Inelastic, and the price reduction may reduce revenue

D. Perfectly elastic, and occupancy will reach capacity

Correct Answer: C. Inelastic, and the price reduction may reduce revenue

Question 3

Which measure combines room rate and occupancy into a single indicator?

A. ADR

B. RevPAR

C. Cancellation rate

D. Contribution per room

Correct Answer: B. RevPAR

Question 4

Which of the following is a rate fence?

A. A hotel’s fixed rent

B. A competitor’s advertising campaign

C. A non-refundable advance-purchase condition

D. A property’s annual depreciation

Correct Answer: C. A non-refundable advance-purchase condition

Question 5

Why might a hotel reject a low-rate booking even when rooms are currently available?

A. The hotel is required to maintain zero occupancy

B. It expects higher-value demand later

C. Variable costs disappear when rooms are unsold

D. Low-rate bookings always violate competition law

Correct Answer: B. It expects higher-value demand later

Question 6

Which calculation best represents room contribution per occupied room?

A. Room price plus variable cost

B. Room price minus variable cost

C. Fixed cost divided by occupancy

D. Room revenue divided by available rooms

Correct Answer: B. Room price minus variable cost

Question 7

Which statement best distinguishes revenue management from traditional yield management?

A. Revenue management ignores capacity constraints

B. Revenue management considers channels, room types, ancillary revenue, and profitability more broadly

C. Yield management is used only by restaurants

D. Revenue management requires identical prices for all customers

Correct Answer: B. Revenue management considers channels, room types, ancillary revenue, and profitability more broadly

Question 8

A hotel has strong festival demand several weeks before arrival. Which action is most consistent with sound revenue management?

A. Keep all promotional rates open indefinitely

B. Protect inventory and review restrictions as demand strengthens

C. Close the hotel’s most profitable room types

D. Reduce all rates to increase already strong demand

Correct Answer: B. Protect inventory and review restrictions as demand strengthens

Question 9

Why can a booking with a higher gross ADR produce lower net contribution?

A. Gross ADR always excludes room revenue

B. The booking may involve higher commissions, servicing costs, or cancellation risk

C. Net contribution is unrelated to costs

D. Higher ADR automatically creates lower occupancy

Correct Answer: B. The booking may involve higher commissions, servicing costs, or cancellation risk

Question 10

Which practice is most clearly inconsistent with ethical pricing?

A. Offering a disclosed non-refundable rate at a lower price

B. Restricting a corporate rate on documented high-demand dates

C. Advertising a rate that is unavailable in order to attract customers

D. Using forecasts to adjust prices before a major event

Correct Answer: C. Advertising a rate that is unavailable in order to attract customers