Rack rate: what it means in a hotel

The rack rate is the price a hotel would charge for a room if it gave no discount at all: the figure on its tariff card. Each room type has its own, and some hotels set one for each season.

Most hotels now change their price with demand, so on most nights guests pay less, and the rack rate is the price the others are measured against.

The name is usually traced to the rack behind a front desk, where each room's card and its price were kept. The price on the rack was the one quoted to a guest who walked in without a booking. The word stayed after the racks went.

• As the highest price you will sell a room at, the ceiling your other prices sit under.
• On a tariff card or rate sheet for travel agents and companies, when their price is set as a discount off it.
• As the price quoted at the front desk to a guest walking in, at hotels that still do.
• To show a saving, as money off the rack rate.

• The rack rate is fixed: the full price, set once a year or once a season.
• Your best available rate is the price anyone can book at on a given night, and it moves with demand. On the busiest nights it may reach the rack rate; on quiet nights it sits well below.
• Your average room rate is what the rooms you sold really brought in, after every discount. It is the result, where the other two are prices you set.

That is why many hotels now set company and agent prices as a discount off the best available rate on the night, rather than off the rack rate, so those prices rise and fall with demand too.

1. 1Look at the highest prices your rooms really sold at on your busiest nights last year.
2. 2Check what the hotels around you charged on those nights for a similar room.
3. 3Set the rack rate at or near that level, so it is a price you could really sell at on the best nights.
4. 4Set one for each room type, in the same order as the rooms: the better room always dearer.
5. 5Review it once a year, and change your tariff card, rate sheets and website with it.

• Show a saving against the rack rate only if rooms really sell at it on some nights. A crossed-out price nobody ever paid misleads guests.
• A rack rate set too high makes every discount off it look large and means little; one set too low caps your busiest nights.
• Company and agent prices fixed as a discount off the rack rate can be dearer than your public price on quiet nights, and cheaper than it on busy ones.
• Old tariff cards and rate sheets go on being passed round. Date them, and send new ones when the rates change.