Thumb rule

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Information about Thumb rule

Published on March 6, 2014

Author: sarbomania


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.

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