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What is the Hubbart formula?
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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.
Hotel managers have to be very careful when setting prices. Unlike managers in many other businesses, they cannot manipulate supply. All they can do to make the optimal profit is to set prices in such a way that they fill as many rooms as possible every night while making the greatest amount of money. They do not want to set prices so high that people will not buy, but they do not want to set them too low because that would result in a loss of potential revenue.
The Hubbart Formula is used to help with setting prices. It can be expressed as a formula:
[(Operating expenses + Desired return on investment) – other income]/projected room nights = room rate.
The Hubbart Formula, then, takes into account how much income is needed from each room to get the level of return that is desired. It can therefore be used to help determine the average rate to charge for a night’s stay in a room in a given hotel.
Posted by pohnpei397 on April 16, 2013 at 1:18 PM (Answer #1)
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