Tariff

10/2/2020 Senior Lecturer - Sudhanshu Sundaram 1
Tariff structure and
Types of Rate

Tariff
Basis of charging
Tariff Fixation
Tariff Card

 Tariff means rate and when applied to rooms of a hotel it means
room rate.
 Hotel room rate fixation is a difficult task. They are both qualifiable
and quantifiable.
 The quantifiable aspect is that they can be measured and structured
to meet certain criteria.
 The qualifiable aspect is that large amount of discretion are allowed in
which rates are implemented.
 The combination of all the rates offered at a hotel is called “Rate
Structure.

Competition
Various amenities
Price cuts for special business
Publicity
Customer’s profile
Standards of service
Locality
Room location

Rates must be competitive with other hotels
of the same standard and providing almost
similar services and facilities as provided by
other hotels situated in the same vicinity of
the city.

The category of customers coming to the hotel must also
be considered.
Their social status and financial status , i.e.
paying capacity ,should be kept in mind.

Standards of services provided by the hotel are also
important while fixing room tariff.
The U.S.P. of hotel should be kept in mind while
deciding the room tariff. More the amenities , higher the
standard , so also higher the room rate.
Note
U.S.P - Unique Selling Proposition

The locality in which the hotel is situated gains prominence
while fixing Room Rates. If the hotel is situated in a posh
locality where all the shopping malls and other facilities are
available, approaches to airports and railway stations are
easy ,the room rate would be comparably higher .
Note:
The guest would not mind paying more if he get amenities
and facilities to his taste and likings.

Various amenities the hotel is going to provide to the guests
such as air –conditioning in all the rooms , carpeting,
swimming pool & tennis court equipment , conference halls ,
lobbies.
Special aspects of continental and Indian cuisine , cutlery
and crockery , modern equipment's and machinery.
These things do count when factors of room – rates are
considered.

The location of the room also matters a lot.
Front rooms and rooms opening to better views would cost more than
dark rooms , corner rooms or opening to indifferent chambers.

The amount of publicity done by a hotel and special budgets
prescribed for hotel publicity also matters in deciding the room
rates.
This type of expense has to be adjusted somehow as it has no
source of return but is a must in popularizing the various
services of a hotel.

Cost – Based
Pricing
Market Based
Pricing
Rue of thumb
Approach
Hubbart’s
Formula
Inclusive and
Non Inclusive
Rates
Market Tolerance
As per
Competition
Rate Cutting
Guest
Requirements

Check-in and check-out basis
Twenty-four hour basis
Night basis
Day basis
Inclusive taxes

 It is the most common way of fixation of tariff.
 The hotel fixes a specific time usually 12.00 noon as check-out time
which means the guest charging cycle begins from 12.00 noon and
finishes at 12.00 noon on the next day.
 For a guest staying in a hotel after 12.00 noon , next day’s charge may
be levied.
 Accounting keeping is simple in this system.

In this system the charges of room starts from the
time when the guest checks in and he has to pay for
one day up to 24 hours from the time of arrival.
This system is good for small and budget hotels
only.

In this system the guest is charged on the
basis of number of nights that he spend
in the hotel he irrespective of time of
arrival (i.e.) If he spends two nights he will
be charged for two nights with a minimum
of one day charges

Sometimes a guest may stay in the hotel for a few
hours only and may not spend the night in the hotel
at all.
In such cases where he stays only for six hours
maximum hotels may charge special discounted
rate and the rate is called “day rate or day use
rate”.

Hotels also charge room rates on the basis of meals provided or not provided
along with room to the guest.
European plan: where the tariff of room includes only in the room rate for
meals charged extra rate.
Continental plan: where the room tariff includes along with room rate the
continental breakfast also.
American plan: where the room tariff includes alongwith room rates the
English breakfast , table d’hote lunch and dinner may also include.
Modified American plan : where the room tariff alongwith room rates include
English breakfast and one of the two major meals either lunch or dinner.

Another very traditional way of charging room rate is rule
of thumb.
In this system “one Rupee” rate is fixed for every
Rs1000/- spent on room construction cost.
This is also called as ‘cost rate formula’.

 Potential market is identified.
 An estimated figure of number of rooms that we shall be
able to sell annually on pre determined rate is changed
 Often suitable when an organization wants to enter a new
market.
 We put this method also under cost based group because
here also ultimately it is the cost only that decides that
whether we can achieve our Targeted RO.I. (Return on
Investment ) or not.

The Hubbart’s Formula is a formula that can be used in hotel
management. It is used to determine the proper average rate
to set for rooms in a given hotel. The Hubbart’s Formula is used
to help with setting prices.
It can be expressed as a formula:
[(Operating expenses + Desired return on investment) – other
income]/projected room nights = room rate.
As hotels see a constant increase in competition, they are
forced to try and compete with other big name companies by
providing better quality rooms or lower prices. In order to offer
these lower prices, the Hubbart’s Formula is often used to
deduce these prices.

Room tariff is a document published by the hotel for use by the
travel trade , organization and individual prospective guest.
The list includes prices of rooms classified into different categories ,
such as single room , double room , twin room , suites , etc. and
meal plans such as American , European and Continental etc.
Meals such as American , European and Continental
also.

• Rack rate is a term which refers to the normal room
rate of the hotel.
• This is the room rate which is published on the
room tariff card.
• This is also the rate which is written on the shannon
slip which is slipped in room rate of those hotels
which operate on whitney system.

This programmed covers corporate offices and usually 15-25%
discount can be given to the officers coming from corporates.
The corporate rate is widely accepted as the transient
target rate for most hotels.
This is simply an average rate goal a hotel fixes achieve for a
certain day or market segment.

A Room tariff published in a document to group operators
which is commissionable only to retail travel agents , tour
operators and wholesalers.
Generally commissionable at 10% of the published rack
rate.

Government employees are given per day allowance for
their travelling.
Accommodation and food by their office and some hotels
offer them a rate which give them room and
accommodation with in that price.
DISCOUNTED RATE:
Airlines , travel agent discounts rates should be fixed
in competition to other hotels of the area.

Seasonal Rate: Season and Resort hotel which usually have
fluctuating demand change their rate usually as per the
seasonally and offer different rates for In season and off
season.
Crib Rate : A special rate applicable to children below 12
years of age and accompanying their parents.
Extra bed Rate: Generally one fourth of the published room
rate.

Special rates for families – for example , one couple and
a child below 5 years , then the rate may be for one
double room.
One couple with two children below 12 years , the rate
may be one double room plus one extra bed rate etc.

Tariff

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