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Bundled pricing program for the amenities of the hotel
The suggested bundle would include a sauna, spa treatment, massage therapy, and paddle boating/kayaking on the river and would have a price of $170. The program would include a standard 30-minute massage session and a standardized kayaking route from the dock to the hotel that would not exceed 50 minutes. When taken separately, the said amenities would cost $180 and would have an average profit margin of 35%. Therefore, the combined cost of services can be estimated at $117. A minimum desired profit margin would thus produce a bundle price of $156. An additional $4 would raise the PM to 26.8%, which would be an acceptable difference. However, if the elasticity of demand is 1.3, even the small increase in price could lead to a disproportionate decline in demand (LOKAD, n.d.). In this case, it would be advised to keep the price of the bundle at $156, or even drop it to $155 (24.5% PM) if acceptable.
Develop a package or set of packages to offer to non-hotel residents
Since the hotel already has an inventory and staff necessary to run the kayaking service, it can be expanded to include more starting points, routes, and levels of difficulty. The primary target market for this project would be the individuals interested in sports and outdoor activities. Hence, the current 60 minutes rental would probably be insufficient, so the time of the services is to be expanded to 5-hour and 8-hour programs. Considering the desired 40% PM, the hourly price must be $27. Thus, the recommended pricing of the service is $140 for a five-hour trip (41.9% PM) and $215 for an 8-hour trip (39.5 PM). In the case when the price sensitivity of the customer group is high, the primary concern would be the existence of the competing services specializing in outdoor programs, which would likely have more attractive pricing strategies.
Reference
LOKAD. (n.d.). Price elasticity of demand. Web.
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