CPP Dynamic Pricing & Revenue Management 2 — Questions and Answers
Question 1: A hotel chain uses historical booking data and local event calendars to adjust room rates daily. This is best described as which type of pricing system?
- Cost-plus pricing
- Demand-based dynamic pricing (Correct answer)
- Competitive parity pricing
- Value-in-use pricing
Correct answer: Demand-based dynamic pricing
Demand-based dynamic pricing uses historical and predictive demand signals to adjust prices in real time.
Question 2: Revenue per Available Room (RevPAR) is calculated as:
- Total revenue divided by number of guests
- Average daily rate multiplied by occupancy rate (Correct answer)
- Room revenue divided by total expenses
- Occupancy rate divided by average daily rate
Correct answer: Average daily rate multiplied by occupancy rate
RevPAR = ADR × Occupancy Rate, combining both price and utilization into a single performance metric.
Question 3: An airline sells 20% of seats at a deep discount early, then raises prices as the departure date nears. This strategy is called:
- Yield management (Correct answer)
- Penetration pricing
- Loss-leader pricing
- Skimming pricing
Correct answer: Yield management
Yield management allocates inventory across price tiers and time horizons to maximize total revenue.
Question 4: Which metric measures the percentage of available capacity that is actually sold over a period?
- Load factor (Correct answer)
- Net promoter score
- Contribution margin ratio
- Price realization rate
Correct answer: Load factor
Load factor (or utilization/occupancy rate) is sold units divided by available capacity.
Question 5: A company detects that a competitor just lowered prices and automatically responds with a matching reduction within minutes. This is an example of:
- Algorithmic repricing (Correct answer)
- Demand segmentation
- Price skimming
- Contribution pricing
Correct answer: Algorithmic repricing
Algorithmic repricing uses automated rules or ML models to react to competitive price changes in near real time.
Question 6: In revenue management, a 'booking curve' refers to:
- The relationship between price and total revenue
- The pattern of reservations accumulating over time before a service date (Correct answer)
- A graph of fixed versus variable costs
- The elasticity curve for a single product
Correct answer: The pattern of reservations accumulating over time before a service date
The booking curve tracks how reservations build up over the lead time before a flight, event, or hotel stay.
Question 7: Which of the following best defines 'price fencing' in dynamic pricing?
- Setting a floor price below which sales are refused
- Using conditions or restrictions to separate customer segments so each pays a different price (Correct answer)
- Raising prices as inventory depletes
- Offering the same price across all channels
Correct answer: Using conditions or restrictions to separate customer segments so each pays a different price
Price fencing uses qualifying conditions (advance purchase, loyalty status, channel) to prevent higher-willingness-to-pay customers from accessing lower prices.
CPP Dynamic Pricing & Revenue Management 2
A hotel chain uses historical booking data and local event calendars to adjust room rates daily.
This is best described as which type of pricing system?