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UNIT – 1 – ROOM TARIFF

Tariff: It is the published room rate.

Tariff Card: Hotels display their room rent on tariff card, which provide information about the room rate fordifferent types of rooms available in the hotel.

Factors for deciding a room tariff

(i) Cost: The total expenditure that is incurred in providing services and products to the ultimateconsumer of the hotel services is the cost. Higher the cost of the room, the higher will be the roomrent.

(ii) Level of Service: A hotel offering the best services li e spa, gymnasium, ban!uet halls, specialityrestaurants, etc, will charge a higher room rent in compasrision to other hotels offering limited

services.(iii) Com etition: "ompetition between similar hotels ( i.e., hotels with similar standards and providing

similar services and facilities in similar locations of the city) in the mar et also plays an importantrole in determining the rac rate of the hotel. The higher the competition, the lower will be the roomrent.

(iv) Target mar!et: Target mar et is basically the surrounding mar et of that particular city where thehotel is situated and hence as per the mar et, the room rate is decided.

(v) C"stomer #rofile: "ategory of customer coming to your hotel .The social status and financial status

i.e. #aying "apacity, should be ept in mind.

(vi) Location: $ocality where hotel is situated whether posh area%&hopping ' other facilities.

(vii) Room Location: ront room and rooms opening to better view would cost more than dar rooms,corner rooms.

(viii) #"$licit%: The amount of publicity done by hotel. The type of expense has to be ad usted somehowas it has no source of return but is a must in populari*ing the various service of a hotel.

(ix) Standard Of service: +ore amenities, higher the standard and so higher the room rate.

&asis of c'arging room tariff

(i) C'ec! in c'ec! o"t $asis: Here hotels consider -. noon as the reference for guest chec in andchec out. /hat ever the time the guest chec s in he has to chec out at -. noon for days tariff.0x1 if a guest chec s in at 2. am on march, he has to chec out at -. noon on march. Ifthe guest continues to stay after -. noon he is liable to pay for - days tariff.

(ii) ()'rs $asis: In this method irrespective of the time, the guest chec s in and can stay for -3hrs for

days tariff. 0x1 If the guest chec s in at 2. am on th +arch, he can chec out at 2. am on th+arch for days tariff.

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(iii) *a% rate: Here rooms are let only on day basis and the guest does not stay for the night. Hence,guest can stay between 4. am and 4. pm. 5ay rates are generally published on the tariff card.0x1 Airport hotels offer this service.

(iv) +o"rl% $asis: Here the guest is charged based on hourly basis, hence the guest is charged based onthe number of hours he stays. 0x1 capsule hotels and airport hotels, offer this ind of service.

Tariff fi,ation - Calc"lating room tariff.

Room Tarif

Fixation

COST BASED PRICING

MARKET BASED PRICING

% 6ule of Thumb Approach % As per competition% Hubbart ormula % 6ate "utting

% +ar et Tolerance% 7uest 6e!uirements% Inclusive and non

inclusive rates

) COST &AS/* #RICIN0:

a) R"le Of T'"m$ A roac': 6oom rent is fixed at the rate of 6s for each 6s spent on constructionand furnishing of the room. This is also called as 8cost rate formula.9 0.g., assume that the average construction

cost of a hotel room is :; . H

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ST/#S:

) Total Investment D =wners "apital B $oans

-) 6eturn on investment (6=I) D Total investment E 6eturn #ercentage

F) Total 0xpenses D operating expenses ( Include expenses directly associated with selling and cleaningrooms and providing food services)

i. B Taxes and insuranceii. B Interest paid on loans

iii. B 5epreciation on boo value

3) 7ross =perating 6evenue D Total 0xpenses B 6=IG) "alculate non%rooms income 1 Hotel can ma e profit from food 'beverage dept. or from telephone toll

charges or laundry.4) 6evenue to be generated by room D 7ross =perating 6evenue 6evenue generated from other sources

(e.g. food 'beverage sales, laundry, rent and lease of the hotel area, fitness centre etc)

2) Average daily rate D 6evenue generation from room total no of rooms.

+"$$art form"la is "sef"l $eca"se

• It provides an ade!uate return to the hotel9s owner.• "overs the hotel9s fixed cost.• "onsidered the hotels operating cost• Accounts for all the hotel9s non %room income• 6esult in a definite and ustifiable rate goal.

(2 MAR4/T &AS/* #RICIN0 It is setting a price based on value of the product in the perception of thecustomer.

A2 Com etition: 6ate must be competitive (at the same time it should be able to produce ade!uate revenue tomeet fixed obligation) with other hotels of the same standards and providing almost similar services andfacilities as provided by other hotels situated in the same vicinity of the city.

&2 Rate C"tting: $owering of rates to increase occupancy level, especially during off%season also at a time ofthe year or day of the wee when you need business.

C2 0"est Re5"irements: Jarious room tariffs as per guest re!uirements e.g. early chec %in on "# basis or latechec out on +A# basis. Jarious amenities the hotels is going to provide to the guest such as air conditioningin all rooms , carpeting ,provision of swimming pool, tennis court e!uipment, arrangement for conferences halls, lobbies, lawns ,par ing spaces ,special aspect of "ontinental ' Indian cuisine, cutlery and croc ery, moderne!uipments and machinery.

*2 Mar!et Tolerance: "hec ing competing hotels best available rates for a room. These rates can be found out by hotels by calling up the competing hotels without disclosing their identity.

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/2 Incl"sive and Non6Incl"sive Rates: "harging room rates on the basis of meals provided on a "# +A# A# basis

T% es of room tariff: Rac! rate7 disco"nted rates.

ROOM RAT/S

o 6ac 6ate o "orporate 6ateo &easonal 6ate o Advance #urchase 6ateo /ee 5ay /ee end 6ate o 5ay Half day 6ateo 7roup 6ate o Tour 7roup /hole &ale 6ateo Travel Agent 6ate o "ompany Jolume 7uaranteed 6ateo Airline "rew 6ate o 7overnment 6ateo 0ducational 6ate o +embership 6ateo Introductory 6ate o "omplimentary 6ateo #ac age 6ate

% +eeting #ac age% +arriage #ac age% +eal #ac age% Holiday #ac age

o "rib 6ate

) Rac! Rate: &tandard rate for each of the category of rooms offered for accommodation to guest. Thestandard rate of a particular type of room before any discount is called rac rate.

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-) Cor orate Rate: It is a promotional rate to attract the corporate mar et segment .It is generally to - Klower than the rac rate.

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F) Seasonal Rate: &eason and resort hotels which usually have fluctuating demand change their rate usually as per the seasonality and offer different rated for one season and off season.

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3) Advance #"rc'ase Rate: Though popular in the airline industry, the advance purchase rate is a relativelynew concept in the hospitality industry. It entails heavy discount on room rates when room boo ing are done in

advance . or e.g. a hotel may give more discounts to a boo ing which is done one month before as compared toa boo ing which may be only one wee in advance.

G)8ee! *a% -8ee!end Rate 1 &ome hotels observe a fluctuation in their occupancy level with regard to thedays of the wee .The demand for rooms in a hotel may be more on certain days in a wee .In vacation resorthotels the wee end rate would be higher than wee day rate as the demand for room is higher on wee ends. Itwould be reverse in the case of a commercial hotel.

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4) *a% And +alf *a% Rate: The day rate charged from guest not staying overnight at a hotel, is lower than therac rate for e.g. if the chec s in at am and chec s out the same evening at a t around Gpm he may be chargedthe day rate .&ometimes a guest may wish to stay for a very short duration of the time, not exceeding five hours.This is called Half 5ay 6ate.

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2) 0ro" Rate: As a large group (+ore than G #ersons) provides bul business to a hotel, hotels offersdiscounted rates to groups. The group rate depends upon the no. =f persons in the group and the fre!uency oftheir visits .The rate are negotiated by the sales team of the hotel and representative of the groups.

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;) To"r 0ro" 8'olesale Rate: These are heavily discounted rates for a wholesaler who operates a series oftours groups arriving and departing together.0.g. A tour operator may conduct a wee s tour of the 7olden Triangle (5elhi%Agra%Laipur) on the -nd, -thand --nd of every month for groups of - persons. He guarantees the hotel that it would provide this series of

business every month for a period of year.

@)Travel Agent Rate: Travel agent rate sell travel products li e hotel rooms, airline boo ing

0tc. on a commission basis to the end users (guest) they provide a substantial volume of ?usiness to hotelsoffers them special discount and commission .e.g. are "ox ' Mings, Thomas "oo .

) Com an% 9ol"me 0"aranteed Rate: Hotel may offer a special rate (lower than the rac rate) in order toattract high volume of business from special mar et segment. It is given when a guaranteed number of roomnights within a specific time frame are re!uired. It is important that the company ensures that the room night

production is maintained.

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) Airline Cre Rate: It is special discounted rate for the crew of one or more airline that offer a certainvolume of business throughout the year on a consistent and continuous basis.

-) 0overnment rate:

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F) /d"cational Rate: 0ducational rates are special rates by hotels to students and educationists who have alimited travel budget. They are significant sources of business because of their large number and fre!uency ofvisits.

3) Mem$ers'i Rate: +embership rates are offered to guest who are member of influential organisation that provide volume of business to hotels .The membership rates are much lower than the rac rates and may alsoinclude discount on food ' beverage .&pecial discount rates are given to H6AI member,

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4) Com limentar% Rate: /hen a hotel does not charge the room rent from a guest, it is nown ascomplimentary rate. 7iven to the tour operators, travel agencies. Also along with the marriage pac age and

bul boo ing.

2) Cri$ Rate: This is the rate charged for children above five years and below age of - years, who areaccompanying their parents.

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;) #ac!age Rate: A pac age offered by the hotel of a combination of one or more hotel of a combination of

one or more hotel product or services. Also called bundling. #ac age rate may include room rent, meals, specialarrangement and may also include products and services offered by other service providers li e transportation(rail, road and air) sightseeing s and so on. The hotel may offer the following pac age. M//TIN0#AC4A0/7 M/AL #AC4A0/7 MARRAI0/ #AC4A0/7 +OLI*A; #AC4A0/.

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T% es of Meal #lan "sed in t'e 'otel ind"str%.

A plan is a pac age proposal of room and meals. Hence rooms in a hotelare offered in different combination with meals. The different types of plans are

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/"ro ean lan: 0uropean plan (0#) consist of room rate only and the meals are charged separately as per actual.

Continental #lan: "ontinental plan ("#) consist of room rate and continental brea fast.O Continental&rea!fast incl"de sliced bread with butter , am ,honey, cheese, "roissants and 5anish pastries, rolls,fruit uice and coffee tea hot chocolate mil .)

American lan: American plan (A#) also nown as en pension (full board).It includes room rent andall meals (i.e. brea fast, lunch and dinner.)

Modified American #lan: +odified American plan is also nown demi%pension (Half ?oard).The tariff consist of room rent ,brea fast an one ma or meal(either lunch or dinner).

&ed < &rea!fast &

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