REVENUE MANAGEMENT. The Cleveland Downtown Inn is a 100-room hotel that has historically charged one set price for its rooms, $150 per night. The variable cost of a room being occupied is low. Management believes the cleaning, air-conditioning, and incidental costs of soap, shampoo, and so forth, are $15 per room per night. Sales average 50 rooms per night. Figure 13.5 illustrates the current pricing scheme. Net sales are $6,750 per night with a single price point.
APPROACH \blacktriangleright Analyze pricing from the perspective of revenue management. We note in Figure 13.5 that some guests would have been willing to spend more than $150 per room—“money left on the table.” Others would be willing to pay more than the variable cost of $15 but less than $150—“passed-up contribution.”
