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Price/Quality Relationship in the Hotel Industry

Excess capacity represents a loss of business, while undersold rooms represent a loss of revenue (the property could have charged more for the rooms that were rented for the night). Periods of shortages cannot be covered by selling additional rooms in the future (Whithiam, 1989, p. 10).

In order to maximize profits, hoteliers have developed specific products to meet the needs of particular niche markets. Some markets are served by all-suite hotels that cater to business travelers; other properties use a discount approach to bring in one-night travelers. Some properties appeal to families, while others seek to attract singles or couples. Some hotels serve airport areas, while others are located near convention centers and market to groups almost exclusively.

Motels are usually one or two stories and offer limited food service. These facilities are designed for family travelers and not for extended stays. Hotels are multistory buildings that include a coffee shop, lounge, room service, convenience shops, and banquet facilities. Resorts generally offer a vacation atmosphere with extensive recreational facilities for special interests, such as golf or tennis (Buttle, 1986, p. 13).

More than transient hotels or motels, resorts depend on a high level of personal service to bring guests into the property for the first time, and to have them return to the property later. Computer systems are available which can offer strong yield manage


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