ROOM RATES AND THEIR CATEGORIZATION

1. FACTORS AFFECTING ROOM TARIFF , BASIS OF
CHARGING, TYPES OF ROOM RATES

2. INTRODUCTION TO ROOM TARIFF
 Room tariff is a daily rate which is charged for the
usage of hotel rooms and services, is among a traveler's
basic criteria for choosing a particular hotel for stay.
 Price is one of the major element involved in the
marketing and positioning of a product or service.

3. Target market
Factors Affecting Room Tariff
Competition
Level of services
Location
Cost

4. Cost
 The total expenditure done in providing services and
products to the consumer of the hotel services is the
cost of service.
 The total cost includes fixed cost, material cost and
labour cost
 The higher the investment that has been made in a
hotel property, the higher would be the room rent.

5. Competition
 Competition between similar hotels in the market also
plays an important role in determining the rack rate of
the hotel.
 Law of Demand & Supply (Economics) says that
increase in demand increases price & increase in
supply results in fall in price.
 The higher the competition, the lower will be the room
rate.
 Similar hotels should have competitive rates or they
will fail to attract customers.

6. Target market
 The target market also governs the rack rate of a hotel
room.
 Hotels, while selecting their room rates, find out the
disposable income of their target segment.
(Disposable income= Monthly income-Household
expenses-Savings)
 Thus a budget or limited-service hotel quotes lower
prices to attract guests with less disposable income
and an up-market hotel quotes higher prices for high
spending guests.

7. Location
 The location of the hotel also plays an important role
in deciding the room tariff.
 Hotels in a city centre or business centre, near places
of tourist interest, or on scenic locales would have a
higher tariff. Cost of buying land in such places is very
high.
 The location and view of the room also determines the
room rate. E.g. penthouse, lanai etc.

8. Level of services
 The level of services offered by a hotel determines the
room rent to a large extent.
 A hotel offering best of services like spa, gymnasium,
banquet halls, specialty restaurants etc. will charge a
higher room rent in comparison to other hotels,
offering limited services.
 Level of service is directly related with labor cost. Five
star hotels will need more staff to give personalized
services and will have to spend more on salaries &
wages.

10. Fixed Check-in/Check-out Time
 Most of the hotels follow the fixed check- in/check-out
system for establishing the end of the day.
 In this system, a particular time is fixed to mark the
end of the day.
 Generally, it is 12 noon. This means that a day begins in
the hotel at 12 noon every day, regardless of the actual
check-in time of the guest. The day ends next day at 12
mid-day.
 The major advantage of this system of charging the
room rent is that the same room can be sold more than
once in a day.

11. Twenty-four hour basis
 In this system of charging room rent, there is no fixed
check-in/check-out time.
 A room is assigned to a guest for twenty-four hours
from the time of her arrival.
 This system is generally followed in transit hotels and
hotels that are located in the vicinity of railway
stations, where guests normally stay for few hours.
 In this system, the hotel does not allow relaxation of
time after the completion of twenty-four hours of stay.
In fixed time system, hotel may relax time up to 2
hours.

12. Night basis
 This system of charging the room rent is a
modification of the twenty-four hour system.
 Here, the room rent is charged on the basis of the
number of nights spent in the hotel room.
 If a guest does not stay at night, a half day rent is
charged from him.
 This system, once popular in Resorts, is now outdated
and not used much.

14. RACK RATE
The rack rate is the full, published room rate and does not contain any
discounts. The rack rate also does not include any taxes or surcharges.
It is the maximum amount the hotel may charge for the room.Rack
rate is also called standard rate, legal rate.
SPECIAL RATES
Very often a room may not be sold at the tariff quoted on the tariff sheet. The
rooms may be discounted or special rates may be applied under certain
conditions, or as a special case.
 COMPANY VOLUME GUARANTEED RATE (CVGR)
Based on the room night potential of different companies, certain hotels give
a special rate to those companies which contribute a large volume of room
nights. This special rate offered came to be called as the ‘Company Volume
Guaranteed Rate’ (C.V.G.R) or ‘Company Guaranteed Rate’ (C.G.R.). The
higher the volume of business, the higher was the percentage of discount
given. For this purpose, all those companies which offer a large quantum of
business could be ‘A’ rated. As the contribution figure dipped, the company
rating would also drop to ‘B’ or even ‘C’ for those with a relatively poor
volume of business.

15.  PACKAGE RATES
Many resort hotels (especially during lean/Off season periods)
and some commercial hotels from time to time coin seasonal
packages for different durations (e.g: two nights three days/three
nights four days), which may include besides the room and meal, a
complimentary airport transfer, sightseeing, entertainment etc.
 OFF-SEASON RATES
Most resorts and other seasonal hotels have separate tariffs for
peak and off-seasons. The off-season rates are much lower than
regular or peak-season rates.
 EMPLOYEE RATE
Employees of major hotel chains have a special employee rate for
all employees at their member hotels within the chain. This is
however based on the availability of space and policy of the
individual hotel.

16.  F.H.R.A.I DISCOUNT
The Federation of Hotel and Restaurants Association of India
(F.H.R.A.I) is a major association of hotels and restaurants in India. As
a gesture of goodwill for members of the same fraternity, the
association issues membership cards to the Proprietor / Partners /
Chairman / M.Ds of these establishments, which entitles them to a
special discount( presently 30% on room rent, food and beverage
(excluding liquor), if paid by cash and 25% if settled through a credit
card. The percentage of discount and other conditions are subject to
change).
 DAY RATE
This rate is applicable for the guest who spend few hours only upto
maximum 6 hours in the hotel. It is generally 50% of the room tariff.
 WEEKEND RATE
A special weekend rate applies for weekend packages usually Friday,
Saturday and Sunday nights. This package include accommodation
with a food and beverage allowance at hotels restaurant.

17.  AIRLINE CREW
Most airlines enter into a contract with hotels in different cities
where its flights commute, wherein staff of the airline (crew) are
given a very special rate for a fixed period. Their duration of stay
may be a few hours upto a maximum of 24 hours. There is also
another special rate negotiated for the lay-over passengers. The
food-plan applied would be based on the requirement, but the
food element computed is also on a discounted basis.
 AGENT RATE
It is a discounted rate for the travel agents. Agent rate is generally
not valid during the period when he hotel is sold out.
 GROUPS
Groups (G.I.T - Guest inclusive Traveler) are given special rates
due to the number of rooms taken by them at a time. A group
under standard stipulation, comprises of 15 guests or more. Based
on the discretion of the Management, the group leader may be
given a complimentary room for a minimum of 15 paying
customers.

18.  CRIB RATE
This is a special rate applicable in some hotels to children.
Most Indian hotels prefer to compliment upto a maximum
of two children below the age of twelve.
 EXTRA BED / EXTRA PERSON CHARGES
As most five star hotels today do not have single rooms,
but have only double rooms which could accommodate a
minimum of two guests, a third person if present, is given
an extra bed and charged. This charge is in most hotels
levied even if an extra bed is not given. The rate charged
could be approximately 20 to 25% of the room rate.

19. BHAVVESH JOSHI
ASSISTANT PROFESSOR
BHIKAJI CAMA COLLEGE OF HOTEL MANAGEMENT
SWAMI VIVEKANAND SUBHARTI UNIVERSITY