Rate categories

ROOM RATES AND THEIR CATEGORIZATION

1. ROOM TARIFF 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.

9. BASIS OF CHARGING

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.

13. TYPES OF ROOM RATES

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. Thanks and regards BHAVVESH JOSHI ASSISTANT PROFESSOR BHIKAJI CAMA COLLEGE OF HOTEL MANAGEMENT SWAMI VIVEKANAND SUBHARTI UNIVERSITY