The primary target market for me would be the hotel guests, since they are alrea

Question

The primary target market for me would be the hotel guests, since they are already using my hospitality services and they are aware of my brand. They have chosen to stay at my property because they believe in our service quality. So the first hurdle before selling any service or product, is of brand recognition,which has been overcome here. Despite my hotel having 80%+ occupancy, my amenities are being used only 45% of the capacity. This means there is some issue in the way pricing has been done and the amenities have been packaged.

I would offer bundle of Spa and Massage together at price of 150$. This price guarantees almost 35% profit for the hotel, and this offers a combined experience for the customers. The cost incurred by hotel on Spa is 73.70$ and on Massage is 42.84$. Hence, all factors into account, this bundle looks a good experience.The concern with the pricing scenario, is that the profit margin expected by the hotel is very high.The cost of goods is also in the higher range, so they need to keep profit margin lower to attract price sensitive customers.

I would recommend the same package to non hotel residents at rate 160$. Price guarantees 40% profit margin. The concern with the pricing scenario, is that the profit margin expected by the hotel is very high.The cost of goods is also in the higher range, so they need to keep profit margin lower to attract price sensitive customers.

Explanation / Answer

As a part of the hotel amenities, they have offered a variety of activities for their guests. The main amenities that they have offered over this past year include:

Professional massage package – price: $60 for a 30 minute massage (40% PM)

Paddle boating/kayaking on the river (transport guests to the dock which is about a mile from the hotel) – price: $25 for the first 60 minutes rental and $5 for each additional 30 minutes beyond the first hour (35% for the first hour and 20% for the remaining hours)

Spa package (sauna, facial treatments, heated rock therapy but does not include a massage) – price: $95 for a 30 minute sauna followed by a facial treatment and then heated rock therapy (30% PM)

Aerobics classes – price: $35 for a 30 minute session (40% PM)

Based on the previous years’ experience, management has realized that while occupancy rate at the hotel was high (80%+,) the use of the above amenities was not. They determined that these facilities were only being used at 45 percent capacity. To maintain the offerings of these amenities, it is important for the hotel to increase the usage. Management decided there were two options. Option 1 is to increase the number of hotel guests that are using these amenities. One possible option would be to create a package type deal. Option 2 is to develop and promote a program for non-hotel guests from the local community.

After a quick price comparison, the hotel determined that their pricing structure is close to the prices offered by other facilities in the area. Currently, they desire a 35 percent profit margin on all of their price offerings; however, this is not always possible as noted above with the prices

b: Hotel management wants you to develop a package or set of packages to offer to non-hotel residents. They would like to see the profit margin for this package be approximately 40%. The additional profit margin is to cover the additional costs related to outsiders using the facilities. Identify the primary target market you would use for this project. What would you offer and why? Explain the pricing approach and final price you would use for the bundle(s). If you know the customer group has a high level of price sensitivity, what is your concern with this pricing scenario?

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