Question

You have just been hired as the dining room manager at a local hotel. The manager asks you to evaluate the menu prices to see if they need to be adjusted. How would you go about this task? Must have 300- 350 words.

Answer 1

To evaluate the hotel’s dinning room menu price, the first step is to analyze the consumer market, their wants, needs and demands, their budget to come up with an break-even price, this will be a markup point of price. The price on the menu should be higher than the markup point in order to make profit, in the same time consider these factors to decide whether the prices should be adjusted or not because pricing decisions must be buyer oriented. The cost-plus pricing method (find out the menu price by combining the markup price and the profit percentage) should be applied at this point. For example, is the profit percentage is 3%, then a bottle of wine which originally cost $14 will have the price of $42 in the menu.

Next up, as for internal factors of setting prices, according to marketing-mix strategy, the price and consumer’s demand must be coordinated. The menu price must have enough margin in order to make profit even in times like discount season or refurbishing. On the other hand, the price also have to cover the total cost, this includes fixed cost such as electric bills and variable cost.

And for external factor, the price must appeal to be affordable and reasonable to the consumer’s point of view. This depends on the consumer market that the hotel’s dinning room is heading to. The price maybe considered to raise up a little bit higher that the market rate if the dinning room’s quality is high and has unique and special offers for the guest, this will make the demand inelastic and consumer’s price sensitivity will be lowered. Otherwise, if the dining room has just average quality, then the price should decrease a little bit than the market rate to attract more demand. Another thing to keep in mind is that the price of one dish in the menu must not be too high, this will create end-benefit effect (the consumer find the price of one dish is too high, their demand will decrease and as a result, they will choose order less food). Further more, a survey among consumers can be done in order to read their minds and understand their habit of spending. It could be directly done by asking them what price they are willing to pay with this service quality, that food quality, etc…

Last but not least, competitor’s price rate is also a great starting point for our hotel’s dinning room to decide our pricing