ROOM TARIFF IN HOTEL

ROOM
TARIFF
www.indianchefrecipe.com

Topics
 Factors Affecting Hotel Room Tariff
 Establishing The End of the Day
 Fixed check-in/chek-out bais-24hrs,night bais
 Room rate Designations
 MEal plans
 Room Tariff card,broucher and its importance
 Room tariff fixation-cost based ,Rule of thumb vs
Hubbart formula and competiton based ,market based
and demand based

Room Tariff

Room Tariff
• It is the the daily rate charged for the usage of the hotel room
and services

Q&A
• 1.What is Tariff Card?
• 2.What is the rate for the Foregigners
• 3.What is the single occupancy rate
• 4.What is double occupancy rate
• 5.What Room rent ++ means what?

Factors Affecting Hotel Room
Tariff

Factors Affecting Hotel Room Tariff-
Cost
• Hotel : Raffles
• Fixed Cost: It doest not
effect the occupancy
%
• Eg :land and buliding
• Material Cost: Raw
• Labour Cost: Man power
in constructing the
Buliding
• The higher the investment
the higher would be the
room rent

level of service
• Provides Luxury
services Like
• Like :
Gym,spa,speciality
Rest.banquets
RMS,parlor,Concierge,
Traveldesk,coffeeshop
etc
• Staff required more.
• Hence room rent to
charged higher

Competiton
• Competiton :
• competiton between
similar hotels in market
• effect the rack rate
• Lower the rate-
negative
• Higher the rate : lack of
occupancy

Target Market
• Target Market :
• Attaract the guest with
with low rates
• Suitable for Budget
hotels

Location
• Location:
• Business center
• beaches
• Good view : high rates
• room facing view
• Not good view :
• Low rates Like
• Room facing parking
• Effect on room rates

Q&A
• 1.What are the factors effecting Room Tariff
• 2.How does it effect on Cost ?
• 3.How does it effect on Competition?
• 4.How does it effect on Location?
• 5.How does it effect on levels of services?
• 6.How does it effect on Target Market?

Establishing End of the Day
• end of the day Posting of the tariff to guest
rooms
• all faninacial transaction to be end at the end
of the day
• it remains round the clock
• it is very important the end of the day and
begning of a new day

Establishing End of the Day
Establishing the End of the Day
check-in/check-out 24 hrs basis Night Baisi

Fixed Check-in/Check-out
• checkin :12.00 noon
• Checkout : 12.00 noon
• Advantage of this system:
• 1 Room can again and again
• There is time for relaxation

24 hrs
• any time check-in
• any time check-out
• No-fixed time of check-in and checkout
• Used in transiet hotels
• NO relaxation

Night Basis
• it is charged on night basis
• if guest stay only in morning and checkout in
night then half day is charged
• this system is out dated nowdays

Q&A
• How is we estbalish the end of the day
• What is Fixed check-in and checkout?
• What is 24hrs basis
• What is Night basis?

Room rate /Tariff
Room Rate
Govt Rate
Volume
Guarantee Rate
Tour Group
Rate
Half day rate
Advance
Purchase Rates
Corporate
Rate
Crib Rate
Introductory
Rate
Educational
Rate
Airline rate
Travel Agent
Group Rate
Week day
Seasonal
Rage
Rack Rate
Package
Compli.
Rate
Membership
Rate

Q&A
• What is Rack Rate?
• What is crib rate?
• What is package rate?
• What is day rate?
• What is group rate?
• What is seasonal rate?
• What is CVGR ?
• what is week day rate?
• What is corporate rate?www.indianchefrecipe.com

Meal Plans
• EP : nothing given complimentary
• CP : Room rent + Taxes and b/f is given
complimentary
• M.A.P : Room rent + Taxes and b/f and luch or
dinner is given complimentary
• A.P : all are complimentary
• B&B or Bermuda plan : room rent + taxes and
American breakfast given complimentary
• EX: eggs, bread and jam ,butter cornflakes etcwww.indianchefrecipe.com

Q&A
• What is meal plan?
• What is CP?
• What is EP?
• What is MAP?
• What is AP?

Room Tariff
• It is published raes
given to all guest
• DFIT ,FFIT,GIT, walkin
• Rates offered with out
any discount

brochure
• It shows all facilities of
the hotels
• Shows all the
information about hotel

Importance of Broucher
• Embrace the technophobes:new technolgy, old grand
parents can operate facebbok but tehy can read
broucher felxible to all
• 2.Easy to take away: easy to carry,read hotel,home
• 3.Business card : chances of missing card and doesnt
give entire information ,broucher gives all iinformation
• 4.Target specific markets: target guest and mnc
companies
• 5..Cost effective: tv,radio are costly and brocuher is
easy and gives more information less cost

Q&A
• What is Tariff card?
• What is Broucher?
• what is the importance of broucher

Room Tariff fixation
• Fixing room is difficult task for mgt:
• If low room rent - cannot support ecomically
mgy
• If high rate - guest will not come
• hence to fix a room rent mgt follows
• 1.Cost-based pricing
• 2.Market based pricing

Room tariff Fixation

Costing
• Fixing room rate : ???
• Cosidering : Basic cost at
operations+ROI(fixed assest and variable
cost)+ 5 to 10 % profit margin= selling price
• 15,00,000 cost operation+5,00,000 F.A+10%
Profit
• 20,00,000+10%
• 20,000 ( IT Is old style of deciding a room
rent)

costing
• The following are the 2 widely used cost -based
pricing techiques:
• 1.Rule of Thumb Approach
• 2.Hubbart Formula
• .Rule of Thumb Approach:
• It is oldest method of deciding room rent
• room rent will be fixed at Re.1 for each Rs.1000
spent on contruction
• Eg: 15,00,000 spent on constructon on room
• Then RoomRent :?? 15,000

Draw back of Rule of Thumb
Approach
• I t consider only cost not worry of
inflation,,competiton,expenses etc
• sets as occup. as70 % it may or may not occupied in hotels
• it doest not consider depreciation of Fixed assest
• Return on Investment is not consider
• Money bought to start a hotel ( Family,investors,shares,) we
need to pay amount from income
• Unexpected expenses to hotel provision is not made
• it is will not consider the cost of setting F&B outlets, it will
consider only room

Hubbart Formula
• It is invented by Roy Hubbart in 1940 in america
• it is scientific way of determing room rent
• calculated in 6 steps
• Step 1: Calculation of Total Investment
• Total Investment = owner capital + loan
• ROI Return on investment
• ROI = Total investment * Return %
• Step 2 : calculating Total expenses :
• Total expenses = operating expenses + taxes and
insurance + interest paid on loans
+ depreciation

Hubbart Formula
• Step 3 : Calculating Gross Operating Revenue
• Gross Operating Revenue = Total Expenses + ROI
• Step 4 : Revenue generated by room sales
• Revenue generated by room sales and ROI = operating
revenue -Revenue generated from other sources
• Step 5 :Total Rooms available during year
• Total Rooms available during year = Total number of
room in hotel * number of days in year
• Total rooms available after making provision for
vacancy:total rooms available after making provision for
vacancy = total room in year * occupancy %

Hubbart Formula
• Step 6:
• Calculate Average Daily Rate
• Average Daily Rate : Revenue generated by room sales / total
number room available
• Total Area Room :
• Rate per square foot for year = Revenue generated by room sales
/ Total area Room
• Rate per square foot per day: rate per sq.ft for year / no.day in
year
• Single room rent will be :
• Rate of single room = Area of single room *Rate per sq.ft per day
• Double room Rate
• Double room Rate = Area of double room *Rate per sq.ft per day

market pricing
• it setting the price of room according the guest
perception
• The concept is based on idea
• The guest is prepared to pay and use it services
• common methods of market pricing as follows:
• As per competition : lower the rate
• Market tolerance : giving competion rates to hotels
• Rate cutting : off season reducing rates
• Meals : giving meal plan in packages
• Giving early check-in to guest according guest rooms

Q&A Short
• 1.Define Room Tariff
• 2.What are different types of check-in used in
hotel?
• 3.What is crib rate,package,day rate,half day
rae?
• 4.what are the different types of meal plans
used?
• 5.What is tariff card and broucher

Q&A Long
• 1.What are the different bases of charging the
room rent?
• 2.Which is criteria of charging room rent is
suitable for commerical hotel? and why?
• 3.What do yoou understand by a meal plan and
explain different types of meal plans offered in
hotel?
• 4.What do you understand by term "Room rate
designations" edplain
• 5.A package rate is beneficial for guest as well as
the hotel ?

Q&A Long
• 6.What do you understand by the rule of
Thumb approach of fixing the room rent?
• 7.What are the major draw backs of the rule of
Thumb Approach?
• 8.What are the cost-based room rent determing
techniquest?Explain?
• 9.Explain hubbart formula for detremining
room rent and average daily rate with
examples

ROOM TARIFF IN HOTEL

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