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Pricing Strategy at Tropical Paradise Resort

The Tropical Paradise Resort is located on the coast of an exotic island in the Pacific Ocean. The room rates are $300 a night. If you have a room, you also have free access to the pool, gym and tennis courts.

The resort offers also the following services:
- aerobics classes ($5 per class)
- therapeutic massages ($40 per massage)
- scuba diving trips to a nearby coral reef ($60 per trip)
- day trips to the volcano that is located on the island ($100 per trip)

The average visitor stays for 5 days. The hotel is considering two pricing options: The first is to charge the regular room rate and then charge each visitor for any of the additional services separately. The other is to provide a package where a higher room rate would allow free access not only to the pool, gym and tennis courts, but also to the aerobics, massage, diving, and volcano trips. The objective of the resort is to maximize the long term profits by attracting repeat as well as new customers. Should they price their services separately or bundle them in a single price? Why?

Solution Preview

In an idea situation, the resort would offer both pricing models to appeal to everyone.

However, if only one pricing model is available, the resort to stick to the a la carte pricing model. Some new customers would be interested in the all inclusive pricing because they might not be as familiar with the amenities and attractions ...

Solution Summary

The solution solves a pricing dilemma faced by the Tropical Paradise Resort relative to bundled versus a la carte pricing.