TABLE OF CONTENTS Learning objectives
After studying this chapter, you should have developed an appreciation of:
Factors affecting pricing policy
Cost-based approaches to F&B pricing
Cost-based approaches to setting room rates
The importance of variable cost in the context of short-term price setting.
Pricing is an important and challenging aspect of hospitality decision making. The choice on restaurant menus highlights the number of meals that have to be priced, and a price differential frequently exists between lunchtime and dinner menus. With respect to accommodation, many hotels offer a range of rooms with different configurations. These different rooms have to be priced in busy as well as quiet seasons. These pricing decisions are made more challenging by the fact that it is rare to find two restaurant meals that represent exactly the same dining experience, and no two hotel stays constitute exactly the same accommodation experience. As a result, a hotel cannot conduct direct price comparisons to the same degree as companies operating in the retail sector. Supermarkets, for example, have a large volume of goods to price, however they can conduct direct price comparisons with competing outlets that offer identical products.
The distinct nature of the various goods and services sold in the hospitality industry constitutes a further factor that complicates pricing. Compare the variable cost to revenue ratio for a room night sold with the variable cost to revenue ratio for a bottle of wine sold through a restaurant. The cost of selling one more room...
