Revenue Management Pricing Decision

To decide, compare the group rate to the expected revenue from transient guests. Currently, 120 rooms are booked at $99, leaving 60 rooms available. If the group takes 30 rooms at $89, that's $2,670 in revenue. The remaining 30 rooms could be sold to transient guests at a higher rate due to the sporting event. The comp set is at 85% occupancy with $109 average rate, suggesting strong demand. If we accept the group, we forgo the opportunity to sell those 30 rooms at a potentially higher rate. However, if we reject the group, we risk not selling those rooms at all. Estimate the expected transient demand: with the event, we might sell out at an average rate of $119. If we sell all 60 rooms at $119, revenue = $7,140. If we accept the group, we get $2,670 from the group plus potentially selling the other 30 rooms at $119 = $3,570, total $6,240. That's lower than $7,140. But we must consider the probability of selling out. If the probability of selling all 60 at $119 is 70%, expected revenue = 0.77140 + 0.3(maybe sell only 40 at $99?) = more complex. Alternatively, use displacement analysis: group rate $89 vs. expected transient rate $119, difference $30 per room. For 30 rooms, that's $900 potential loss. But if we don't accept the group, we might not fill the rooms. Given the event, it's likely we can sell the rooms at a higher rate. However, the group provides a base. A common rule: accept group if group rate > marginal cost and if the rooms would otherwise be empty. Here, the rooms might not be empty. So I would decline the group at $89, unless we can negotiate a higher rate. But the group is tentative and decides Wednesday; we can wait. I would hold off and see if transient demand materializes. If by Wednesday we haven't seen enough pickup, we might accept the group. So my recommendation: do not accept the group at $89 now; instead, release the block and focus on transient sales at higher rates. But monitor pickup and if by Wednesday we are not on pace to sell out, reconsider. Also, consider the group's ancillary spending (F&B, etc.) but this is select-service, so limited. So decline.

At $95, the group revenue for 30 rooms is $2,850. Compared to potential transient at $119, the difference is $24 per room, or $720 total. Still, if we are confident of selling those rooms at $119, we would lose $720 by accepting the group. However, the group at $95 is closer to the current average rate of $99. The decision hinges on the probability of selling out at high rates. If the probability of selling all 60 rooms at $119 is high (e.g., 80%), expected transient revenue = 0.87140 + 0.2(maybe 40 rooms at $99 = 3960) = 5712+792=6504. Group scenario: $2,850 + 0.83570 + 0.2? Actually, if we accept group, we have 30 rooms left. If we sell them at $119 with 80% probability, expected = 0.83570=2856, total = 5706. Still lower than 6504. So even at $95, it might be better to decline. But if the probability of selling out is lower, say 50%, then transient expected = 0.57140+0.53960=5550, group expected = 2850+0.53570=4635, still lower. So unless the group rate is very close to the expected transient rate, decline. At $95, it's still $24 below, so decline. However, if the group is risk-averse and guarantees the rooms, it reduces uncertainty. But the numbers suggest declining is better. So my answer: at $95, still decline, but it's closer. Consider negotiating to $99 or $105. If the group can go to $105, then it's above current average and might be worth accepting. So I would counteroffer at $105.