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Hotel Room Pricing Approaches and Factors

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sarbottam silwal

The document discusses different approaches to pricing hotel rooms, including the Hubbart formula approach. The Hubbart formula introduced in the 1940s suggests setting the average daily rate for a hotel room at $1 for every $1,000 spent on constructing and furnishing the room, assuming a 70% occupancy rate. For example, a 190-room hotel that cost $9.5 million to construct would price rooms at $50 per night under this approach. However, this approach does not account for inflation, other facilities/services, or the desired profit level and assumes a certain occupancy rate.

Educación
1 de 9
Presented By: Sarbottam Silwal 20,2nd Semester
Hotel rooms have following abstracts: 1. Major Source Of Revenue 2. Highly Perishable 3. Differs As Per Establishment 4. Differs As Per Type 5. Once Build Can Be Sold Again And Again
 Rack rate  Seasonal rate  Special event rate  Corporate rate  Government rate  Group rate  Package rate
 A property management system (PMS) is a computer system used to manage guest bookings, online reservations, check-in/check-out, and guest purchases of amenities offered by the hotel.  While pricing rooms, the hotel shall keep in mind that rate should be between a minimum (determined by cost structure) and a maximum (determined by competition structure)
 While establishing room rates, management shall be careful about its  operating costs  inflationary factors, and  competition. Generally, there are four popular approaches to pricing rooms:  Cost Approach  Market Condition Approach  Thumb rule Approach  Hubbart formula Approach
 Introduced In The 1940s  In This Approach, The Rate Of A Room Shall Be $ 1 For Each $ 1,000 Of Construction And Furnishing Cost Per Room, Assuming A 70% Occupancy Rate.  Every $ 1000 Investment In A Hotel Property Should Support $ 1 In Average Daily Rate (Adr)  It Is Most Effective Tool Use During The Sale And Purchase Of Hotel Property  Easy To Calculate.
 To illustrate suppose a 190-room hotel has costed $ 9,500,000 of Construction and Furnishing Costs. Therfeore, the cost per room is $ 50000 which would mean that the price per room shall be $ 50.
This Approach, However, Fails To Take İnto Consideration  The İnflation Term  The Contribution Of Other Facilities  Services Towards The Hotel’s Desired Profitablity  Assumes A Ceratin Level Of Occupancy Rate.
Hotel Room Pricing Approaches and Factors

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Hotel Room Pricing Approaches and Factors

  • 2. Hotel rooms have following abstracts: 1. Major Source Of Revenue 2. Highly Perishable 3. Differs As Per Establishment 4. Differs As Per Type 5. Once Build Can Be Sold Again And Again
  • 3.  Rack rate  Seasonal rate  Special event rate  Corporate rate  Government rate  Group rate  Package rate
  • 4.  A property management system (PMS) is a computer system used to manage guest bookings, online reservations, check-in/check-out, and guest purchases of amenities offered by the hotel.  While pricing rooms, the hotel shall keep in mind that rate should be between a minimum (determined by cost structure) and a maximum (determined by competition structure)
  • 5.  While establishing room rates, management shall be careful about its  operating costs  inflationary factors, and  competition. Generally, there are four popular approaches to pricing rooms:  Cost Approach  Market Condition Approach  Thumb rule Approach  Hubbart formula Approach
  • 6.  Introduced In The 1940s  In This Approach, The Rate Of A Room Shall Be $ 1 For Each $ 1,000 Of Construction And Furnishing Cost Per Room, Assuming A 70% Occupancy Rate.  Every $ 1000 Investment In A Hotel Property Should Support $ 1 In Average Daily Rate (Adr)  It Is Most Effective Tool Use During The Sale And Purchase Of Hotel Property  Easy To Calculate.
  • 7.  To illustrate suppose a 190-room hotel has costed $ 9,500,000 of Construction and Furnishing Costs. Therfeore, the cost per room is $ 50000 which would mean that the price per room shall be $ 50.
  • 8. This Approach, However, Fails To Take İnto Consideration  The İnflation Term  The Contribution Of Other Facilities  Services Towards The Hotel’s Desired Profitablity  Assumes A Ceratin Level Of Occupancy Rate.