When it comes to setting prices for rooms, establishing the highest rate is important. This rate is called the Rack Rate, and it is from this maximum price that all other rates take their lead. But that is not to say that one Rack Rate will apply to every room in a hotel. No. With rack rate setting it is essential to apply a different rate to each room category, otherwise occupancy (and therefore revenue) could be adversely affected.
When setting the Rack Rate for each category, a hotel will first consider key determinants, such as current and forecasted occupancy, deals, contracts with corporate clients, e.g., and any seasonal or out-of-season offers and discounts. Armed with this information, it can then set a Rack Rate that will ensure revenue is always maximized.
Hotels always have more than one rate code category for each room type. Room rates categories generally correspond to types of rooms available to sell in the hotel ( Eg: Suite, Deluxe, Premiere, Studio, Pent house etc. ).
Types of Room Rates
- Corporate or Commercial Rate
These are rates offered to companies that provide frequent business for the hotel or its chain. This rate may vary according to the volume of business guaranteed by the companies. Eg: NEG1, COR1 etc.
- Group Rate
These are rates which is offered to groups, meetings and conventions using the hotel for their functions.
- Incentive Rate
The Rate offered to individuals who belong to an association or holders of special membership cards or Credit cards. Eg: Amex / VISA / Master card holders get 5% discount on Rack Rate, Lufthansa Frequent Flyer members get 25 % discount etc. For hotels these rates always give potential referral business.
- Package Rate
Rates that includes a guest room in combination with other available events or activities. ( Eg: Best of London package which includes room rental, all meals, site seeing, airport transfers etc. ) Package rate can be also a simple room and meal package like American Plan (AP), Modified American Plan (MAP) etc.
Honeymoon packages floated by some resorts attract business during the winters, e.g.- In Mussoorie, Packages are pre-paid usually for the full amount and refunds are not allowed. The families on holiday prefer such packages which range from 2 to 4 nights and can be extended on pro-rate basis.
- Airline Rate
- Day Rate
This rate is charged when a guest arrives at around 9 am and would stay only a few hours till about 3pm. Hotels only sell nights and hence this special day rate is charged which is sometimes 50% to 60%of the regular rack rate.
- Half Day Rate
- Travel Agent Rate
A rate which is offered by a hotel when the guest books via a travel agent. This rate is offered on condition of the Travel Agent providing regular business to the hotel.