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    Calculating Average Rate Hubbart Formula

    Uploaded by

    Joseph Ntambara
    The document discusses the Hubbart Formula, which is used in hotel management to determine the proper average room rate for a hotel. It considers factors like desired profit, taxes, fixed costs, operating expenses, and revenue from other departments to calculate the required income from room sales. This required income is then used to calculate the average daily room rate by dividing it by the expected number of rooms sold. The formula provides a systematic way for hotels to set room prices that allow them to meet financial goals while accounting for costs.

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    Download as PDF, TXT or read online from Scribd

    Calculating Average Rate Hubbart Formula

    Uploaded by

    Joseph Ntambara
    234 views3 pages
    The document discusses the Hubbart Formula, which is used in hotel management to determine the proper average room rate for a hotel. It considers factors like desired profit, taxes, fixed costs, operating expenses, and revenue from other departments to calculate the required income from room sales. This required income is then used to calculate the average daily room rate by dividing it by the expected number of rooms sold. The formula provides a systematic way for hotels to set room prices that allow them to meet financial goals while accounting for costs.

    Original Description:

    PROCEDURES FOR CALCULATING HOTEL AVERAGE RATE

    Original Title

    Calculating average rate Hubbart Formula

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    The document discusses the Hubbart Formula, which is used in hotel management to determine the proper average room rate for a hotel. It considers factors like desired profit, taxes, fixed costs, operating expenses, and revenue from other departments to calculate the required income from room sales. This required income is then used to calculate the average daily room rate by dividing it by the expected number of rooms sold. The formula provides a systematic way for hotels to set room prices that allow them to meet financial goals while accounting for costs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    234 views3 pages

    Calculating Average Rate Hubbart Formula

    Uploaded by

    Joseph Ntambara
    The document discusses the Hubbart Formula, which is used in hotel management to determine the proper average room rate for a hotel. It considers factors like desired profit, taxes, fixed costs, operating expenses, and revenue from other departments to calculate the required income from room sales. This required income is then used to calculate the average daily room rate by dividing it by the expected number of rooms sold. The formula provides a systematic way for hotels to set room prices that allow them to meet financial goals while accounting for costs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    1/16/22, 1:01 PM Hubbart Formula – hmhub: Perfect 🖥 hub for 120k+ 😍 hospitality 👩🏻‍🎓 students

    hmhub
    India’s largest hospitality education website

    Printed on 16 January 2022

    Hubbart Formula
    https://hmhub.in/hubbart-formula/
    September 3, 2020
    Categories: 2nd Sem Front Office Notes

    The Hubbart Formula is a formula that can be used in hotel management.  It is used to determine the proper
    average rate to set for rooms in a given hotel. The Hubbart Formula is used to help with setting prices. 
    https://hmhub.in/?print-my-blog=1&post-type=post&statuses%5B0%5D=publish&rendering_wait=2000&columns=1&font_size=large&image_size=large&links=parens&show_site_title=1&show_site_tagli… 1/3
    1/16/22, 1:01 PM Hubbart Formula – hmhub: Perfect 🖥 hub for 120k+ 😍 hospitality 👩🏻‍🎓 students

    It can be expressed as a formula:

    /projected room nights = room rate.

    As hotels see a constant increase in competition, they are forced to try and compete with other big name
    companies by providing better quality rooms or lower prices. In order to offer these lower prices, the Hubbart
    Formula is often used to deduce these prices.

    Advantages of Hubbart Formula


    1. Systematic method of determining optimal average room rate.
    2. Forecast the desired return for any period of time.
    3. It takes into account the revenue accrued from non-room departments.
    4. Allows the manager to price in things like non-operating expenses.

    CALCULATING ROOM RATES USING THE HUBBART FORMULA


    Calculate desired profit: Desired Profit = Owner’s Investment X ROI
    Calculate pre-tax profits: Pretax Profit= Net Income / 1 – Tax Rate
    Calculate fixed charges and management fees: Depreciation+ Interest Expense+Property Taxes+Insurance+
    Building Mortgage+ Land+ Rent+ Management Fees
    Calculate undistributed operating expenses: Administrative+Information technology+Human
    resources+Transportation+Marketing+Property +Operation+maintenance+ energy costs
    Estimate non-room operated department profit / loss : Food & Beverage Costs and Income+ Telephone
    Income
    Calculate required rooms department income: The sum of pretax profits (Step 2), fixed charges and
    management fees (Step 3), undistributed operating expenses (Step 4), and other operated department
    income (Step 5) equals the required rooms department income.

    https://hmhub.in/?print-my-blog=1&post-type=post&statuses%5B0%5D=publish&rendering_wait=2000&columns=1&font_size=large&image_size=large&links=parens&show_site_title=1&show_site_tagli… 2/3
    1/16/22, 1:01 PM Hubbart Formula – hmhub: Perfect 🖥 hub for 120k+ 😍 hospitality 👩🏻‍🎓 students

    Determine rooms department revenue: Required rooms department income + rooms department direct
    expenses of payroll and related expenses+other direct operating expenses
    Calculate average daily rate (ADR): Divide Rooms Department Revenue by the Expected Rooms Sold to
    calculate ADR.

    Hotel Revenue Management - How to Calculate Room Cost

    🎦 https://youtube.com/watch?v=EjyLcwUyNtE

    https://hmhub.in/?print-my-blog=1&post-type=post&statuses%5B0%5D=publish&rendering_wait=2000&columns=1&font_size=large&image_size=large&links=parens&show_site_title=1&show_site_tagli… 3/3

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