What is the definition of “Rack rate” in the hospitality industry?
When it comes to setting prices for rooms, establishing the Rack rate is very important. The Rack Rate, is the standard price that the hotel assigns to a room type for the year or season. All other rates that are offered are based on a calculation from the Rack rate. For example, a group of 20 rooms might be offered at a Group rate of 20% off the Rack rate. New Years eve might be set at a 100% premium on top of the Rack rate.
So when you hear hoteliers talking about Rack Rate, you’ll know that is normally just the benchmark rate they have set for the specific room type.
Also see: Broad Rate Parity