Module 9 – Cost in Pricing

Duration 2 hours approx

  • Following the impact of Covid, understanding cost has taken centre stage in revenue management, and is also the first step in laying out a pricing strategy.
  • Take a deep dive into cost, including fixed and variable costs, the breakeven point and the concept of incremental cost used in revenue management compared to fully allocated costs in finance.


What will you learn?

Build your knowledge of pricing from the ground up. This module introduces the resources required to building a pricing strategy starting with understanding the cost element of the hotel and incorporating this into a pricing strategy. We introduce, define and work with fixed and variable cost and the influence these have on pricing, and the impact on budgets, and therefore what work the pricing strategy has to do to meet the budget needs of the property.

We calculate the breakeven point or threshold at which a property will go into profit and introduce the concept of incremental cost and marginal contribution, both of which are used to assess the cost of accepting or denying a customer in revenue management.

Finally, we look at cost of distribution, and introduce a method of evaluating the revenue contribution of each booking received through all third party distribution partners.

What will you get

  • 7 easy to follow video tutorials provide a step by step guide on how to set up and manage your revenue strategy
  • “How to” Calculations for variable room cost, the break-even point and net contribution analysis
  • A check list to download to calculate your variable room costs.
  • Why we work with incremental cost in revenue management rather than fully allocated cost
  • ‘Test your Understanding’ with our Knowledge Check
  • Need some additional support? Become a member of Revenue Academy and join a live session here, and get some great discounts!

Content and Topics

1. Introduction

2. Topic 1 Fixed and Variable Costs

3. Topic 2 How to calculate Variable Room cost

4. Topic 3 The Break Event point and how to calculate it

5. Topic 4 Incremental cost and Net Contribution

6. Topic 5 Net Contribution Analysis in Distribution

7. Summary

8. “How to” Calculations for variable room cost, the break-even point and net contribution analysis

9. Check list for assessing variable room cost

10. Knowledge check – 10 questions to check your understanding

This is for you if you

  • Want to understand how pricing works and what ground level work is required t set up a pricing strategy so you understand your cost base
  • Are a revenue manager who wants to understand the difference between cost as treated in revenue management compared to the finance department
  • Want to fine tune your pricing skills


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