Pearson New International Edition International pcl tp indd 1

Room Rate Economics
Any serious exploration of hotel room rates and their management must include
detailed information about room rate economics. The study of economics related to
room rates (1) examines the social science associated with the making, marketing and
consumption of goods and services and (2) considers how the forces of supply and
demand allocate scarce resources (such as hotel rooms). Revenue managers must
know and use room rate economics to price rooms and to understand how con-
sumers react to the pricing strategies they use.
FRONT OFFICE SEMANTICS
Economics:
Social science associated with the making, marketing, and consumption of goods and serv-
ices and how the forces of supply and demand allocate scarce resources.
Supply:
Total amount of a good or service available for sale.
Demand:
Total amount of a good or service consumers want to buy at a specific price.