This document discusses factors that hotels consider when setting room rates, including: customer profiles and paying capacity, competition in the area, hotel category/amenities, investment costs, location, season, groups, agents, and more. It provides examples of different rates like rack rates, group rates, off-season rates, and rates for crews, families, and packages. The Hubbart formula is described as a method to calculate the average room rate needed based on investment, expenses, profits, and room nights sold.

1. ROOM TARIFF STRUCTURE
A. Room Tariff
B. Room Rate Designation
C. Tariff Card
D. Rack Rate
E. Meal Plans

2.  Tariff means the rate for the room we are charging
from the guest and we have quoted on the tariff
card/ hotel brochure.
 It is difficult task as the rates have to be changed
 There are various methods to fix the room rates
 It depends on various factors
 There are various rates for various clients, FIT, GIT,
Off season, etc
 Taxes as applicable/ taxes extra . Taxes are added
to these tariff rates when preparing the final bill

4. FACTORS WHILE DECIDING ROOM TARIFF
 Customers profile: tourists/ paying capacity/ social
status
 Competition & Room position in city ( market based
pricing): what is the room rate of our competitors in
the city , how much is the competition, how many
rooms of our hotel category are available in the city,
 Category of hotel and standards of service: whether
we are 5 star or 3 star or a guesthouse , what is
the level of service and amenities in our hotel, what
is the cost of providing these services, a 5 star will
charge 10000 rs / night, but a 3 star will charge
4000 , small hotels charge 1000 only.

5.  Cost of hotel project(cost based pricing): how much
we have invested in setting up the hotel. A 5 star
with 100 rooms will cost 50 crore. Management
wants return on investment. (ROI)
 Pay back period and loan/ finance : for loan of 1
lakh we have to pay 2000 rs/month, for 1 crore =2
lakh per month, generally we pay within 7 years
 Location of room: the rooms facing the sea, lakes,
ice, other view will be charged more, the rooms of
club class are superior,

6. BASIS OF FIXING THE PRICES
 24 hours rates : eg. 10000 for 24 hours
 check in 10.00 am, check out 9.00 am
 12.00 noon checkout time: if guest comes at 7.00
am, then leaves the next day at 10.00 am, then we
will charge 2 days tariff.
 Day rates : if guest will not stay in night, 5000 rs
 Night basis : widespread method, eg . Guest is
spending 3 nights, 2 days then we will charge for 3
nights.
 Rule of thumb: 1 rs for every 1000 rs spent on hotel
 Hubbart formulae

8.  Rack rate : the rate which is printed on tariff card
eg, 10000 Rs/ night
 Group rates: when there is a group of 10 or more
persons and taking more rooms, 10% discount on
tariff, 9000 Rs/ night
 Volume rates: when travel agents/companies give
bulk business for the year, given 20 – 30 %
discount. 7000 Rs/night. Bulk business of minimum
1,00,000 rs/year
 Off season rates: in Udaipur season from October
to march. 20% - 50% discount given in off season
from April to September so rooms will be occupied
in off season also

9.  Travel agents rates : all hotels give travel agents
commission (TAC) 20% on tariff . 8000 rs/ night
 Tour rates: special rates for tour operators who sell
packages , it includes room and all meals. Eg
4000rs/ person / day on twin sharing basis
 Company/ government rates: 30% less on tariff
 Crew rate: given to airlines for stay of cabin crew,
pilots, hostesses etc. 30%less then printed tariff
 Weekday/ weekend rate: discount is offered on
weekdays from Monday to Friday

10.  Package rate: package given to MICE, marriages,
conferences, for eg 100 rooms are booked, then we
charge say 7000 rs/ room /night, We will also give
all meals for 2000 rs/ pax .
 Crib rates : rates we charge for childeren. Children
below 12 years are free, we charge 2000 rs/ night
for children above 12 years.
 Family rate: family will include accommodation for
2 adults and 2 children . Suite room/ family room
with extra bed is given
 Plan : EP(only room),CP(room +breakfast) ,
MAP(room + breakfast + one meal), AP(room +
breakfast+ lunch + dinner)

12. HUBBART FORMULAE
Investment + Working capital 10,00,00,000
own 5cr,finance 5 cr
Room nights( 100 rooms* 200 nights =
20000 room nights)
return on investment( 15%
on 5 cr )
75,00,000
+ income taxes 50,00,000
required profit before tax 1,25,00,000
+ interest expenses10% on 5 cr 50,00,000
required profit before tax and interest 1,75,00,000
+ depreciation and local taxes 25,00,000
Required profit 2,00,00,000

13. Operating Expenses
Salary (100 employees* 1,50,000 rs /year) 1,50,00,000
Electricity & power 50,00,000
Repair and maintenance 25,00,000
Advertisement and other 75,00,000
Total operating expenses 3,00,00,000
Required operating income 5,00,00,000
- Income from other departments F&B,
laundry, rentals
1,00,00,000
Required room department profit 4,00,00,000
AVERAGE ROOM RATE ( 4,00,00,000 ÷
20,000 )
2000 rs/ night