Final answer:
The hotel charging higher rates might be suitable for upscale resort properties, while the hotel with lower rates and higher occupancy fits budget or commercial properties. Additionally, the location quotient can indicate market strength and saturation levels, guiding management strategy. Similar to the Yoga Center scenarios, a hotel’s operational decisions depend on revenue vis-a-vis costs.
Step-by-step explanation:
When considering the profitability of two fictitious hotels with the same gross rooms revenue but different strategies, we can identify different merits for each scenario. The first hotel, with higher rates and lower occupancy, might be more appealing if you were managing upscale resort properties where exclusivity and a high standard of service justify premium pricing. However, the second hotel's approach with lower rates but higher occupancy could be more suitable for managing budget economy properties or commercial convention properties, places where volume is crucial and competitive pricing can drive market share.
Regarding a location quotient, if there's a high concentration of hotels in your area relative to the state, it implies a potentially strong (or oversaturated) market for hotels locally, influencing managerial strategy. For instance, a budget economy property in an area with a high location quotient may focus on competitive pricing to maintain high occupancy and compete with many local hotels. Conversely, for unique commercial convention or upscale resort properties, a high location quotient could be leveraged to focus on specialized services or amenities that distinguish them from the competition.
If we look at the Yoga Center scenarios, similar principles can apply. In all cases where the business is experiencing losses, the decision to continue operations isn't solely based on revenue but also on whether the variable costs, such as the cost of hiring yoga teachers, are covered. These decisions would have a direct analogy to hotel management styles and the necessitation to understand both market saturation and cost structures.