Posted: December 1st, 2022

Revenue Management Case Study- In the Best Use Of Inventory You are the revenue

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Revenue Management Case Study- In the Best Use Of Inventory
You are the revenue and inventory manager for Cliff’s Edge Resort at Echo Canyon. Our 2-Bedroom Platinum weeks are currently selling at $45,000
Next week has been booked to 100% occupancy for months, but we’ve been compiling a waiting list in case there’s a cancellation, and guess what? We’ve just had a cancellation on a week long reservation! Now we need you to look at the customer profiles below and tell us which guests to offer the room so that we maximize profit here at the Cliff’s Edge Resort. Keep the timeshare business model (four legged stool) in mind and remember that profit at a timeshare resort is based upon interval sales, customer financing, management fees. You are managing a complex timeshare resort — not a traditional resort hotel.
The Jeffreys:
The Jeffreys have been sold a Vacation Preview package to come stay at your resort for three nights. They’ve been given an attractive rental rate of $50 per night, and Preview guests show up for their mandatory tour 98% of the time. Of those who do show up, 20% buy a week ownership at Cliff’s Edge. Echo Canyon is a mere three-hour drive from the Jeffrey residence, so the lovely couple is planning to drive up in their 2-seater Porsche Boxter and leave the kids at home. The Boxter gets 28 m.p.g. and they’ll have 150 miles to drive up to Echo Canyon. Mr. Jeffrey is kind of a picky eater, so we’re only expecting the Jeffreys to have $5 of incidental purchases per person per day over the course of their stay. Because they’re coming on a Preview Package, the Cliff’s Edge Resort incurred $670 to book them for their Preview Weekend. The Jeffreys are what the marketing department refers to as “Seasoned Sophisticates” which means they’re more likely to purchase than any “Observing Experiential” who tours under the same circumstances.
The Gregorys:
The Gregorys are an unruly party of five, interested in renting a unit for 3 nights at an attractive $115 rate. They are not required to take a tour while they’re staying at the Cliff’s Edge Resort, but there’s a 40% chance that our in-house marketing team will be able to get them to take a tour. The key to that is Mrs. Gregory’s mood. If the snow is good and the suns out she’ll definitely take the tour. If it’s icy and bitter cold she’ll be really grumpy and in no mood to take a tour. The sun has shined 260.7 days out of 365 days this year in Echo Canyon. If the Gregorys do take a tour, there’s a 35% chance that we’ll get them to buy a week. Seeing how all five of the Gregorys will be coming, and flights from Ogden to Echo Cove are $400 per person, they’ll drive the 400 miles up to Echo Canyon in their 1973 Cadillac Eldorado. Of course, that loveable gas-guzzler only gets 8 m.p.g. All of the Gregorys love to get food and drinks from the Fireside Lounge at the Cliff’s Edge Resort. Consequently, we’re projecting that they’ll each spend approximately $10 per day during their stay on incidentals. The Gregorys have arranged for their trip through our reservation line, which only costs us $75 but we will also need to give them an incentive to take the tour in the form of 2 ski lift tickets costing us an additional $200. Our marketing folks have told us that the Gregorys are “Exasperating Coincidentals”, and therefore are 24% more likely to purchase than any “Motivated Couchpotatos” who would tour under the same circumstances.
The Nicklauses:
The Nicklaus family of 3 is anxious to use a Hotel Reward Redemption Certificate for 7 nights here at Cliff’s Edge. Given the fact that the Mr. Nicklaus is a devoted Cliff’s Edge customer and Platinum Elite Member and that he loves the smell of wood burning fireplaces, there’s an 80% chance that they’ll tour. They will need a larger tour gift to take some time away from the slopes but they’re such a nice family it’ll be worth it. They just need to get a babysitter for their precious little Kathy lined up prior to committing. The all-in marketing cost associated with touring this family is $500 per tour. Mrs. Nicklaus really likes to buy souvenirs in the Resort’s Marketplace and take them back to their family in Braintree, Massachusetts so we’re guessing that they’ll average about $10 per person per day on incidental purchases. Being from the Boston area, the Nicklauses are what our marketing department refers to as “Educated Enlighteners” and display a purchasing propensity equal to our project average of 30%. Since they’re coming all the way from Braintree, they’ll have to fly. The good news is that Mr. Nicklaus works for Federal Express, so they can ride in the cargo bay of one of the company planes for $23.98 per person, each way. Since the branded hotel parent company of Cliff’s Edge is allowing the Nicklauses to use a Hotel Reward Certificate the Hotel Reward program will reimburse us $175 rental rate per night for their stay at Cliff’s Edge.
We have an empty week, and need to know who to book. All of the reservations were put on the wait list at the same time, so you don’t have to worry about choosing one over the other based on when they requested the room. The cost of all incidental sales at Cliff’s Edge Resort is 50%. In your submission, explain which guest(s) you are selecting, and why. Your grade is dependent upon your ability to demonstrate your ability to apply the concepts, terminology and principles from the coursework, specifically Rental, Resale & Inventory Management
This file may be helpful in quantifying your response ( attached). 20 points: student demonstrates knowledge of and ability to apply timeshare inventory management concepts, terminology and principles correctly in their response by explaining their choice of guest(s) to book.
5 points are added if student correctly quantifies their choice of guests to book based on revenue and profit for the timeshare resort.

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