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What are the advantages of the Hubbart formula?

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sta112 | Teacher | Salutatorian

Posted April 16, 2013 at 9:37 AM via web

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What are the advantages of the Hubbart formula?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted April 16, 2013 at 1:42 PM (Answer #1)

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The major advantage of using the Hubbart formula is that it allows a hotel manager to determine the optimal average room rate while taking into account a large number of factors.  It gives managers a systematic way to think about all of these factors.

Setting the proper price is absolutely vital in running a hotel.  Hotel rooms are perishable; once you do not sell a hotel room on a given night, you can never sell that room for that night.  The supply of rooms in your hotel is also fixed.  You cannot adjust if for demand.  All you can do is set the right price.  Therefore, getting your price right is very important.

The Hubbart formula allows you to take numerous factors into account.  It allows you to think about what the overall desired return is for any given period of time.  It allows you to price in things like non-operating expenses.  It allows you to account for the revenues that you gain (or lose) from aspects of your operation (like food and drink, for example) other than the renting of rooms.  Taking into account all of these factors, it gives you an average room rate that can be explained and justified.

For these reasons, the use of the Hubbart formula is advantageous to a hotel manager. 

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