Hotel Room Rate Calculator (Hubbart Formula)
Minimum Average Daily Rate (ADR) Required:
$0.00
Based on 365 operating days per year.
Understanding the Room Rate Calculation
Setting the right price for your hotel or short-term rental is critical for long-term sustainability. The Room Rate Calculator uses a simplified version of the Hubbart Formula. This bottom-up approach starts with your required net income and works backward to determine what you must charge per room to cover all costs and reach your profit goals.
Key Factors in Setting Room Rates
While the calculator provides a mathematical baseline, several external factors should influence your final pricing strategy:
- Operating Expenses: These include fixed costs like property taxes, insurance, and salaries, as well as variable costs like utilities and cleaning supplies.
- Target Occupancy: No hotel stays 100% full year-round. A realistic occupancy rate (usually between 60% and 80% for healthy businesses) ensures your rate covers the days when rooms are empty.
- Competitor Benchmarking: Check what similar properties in your area are charging to ensure your calculated rate is competitive.
- Seasonality: Most properties adjust rates based on peak seasons, holidays, and local events.
Example Calculation:
If your annual expenses are $400,000 and you want $100,000 in profit, you need $500,000 in total annual revenue.
If you have 20 rooms and expect 70% occupancy, you will sell approximately 5,110 room nights per year (20 rooms × 365 days × 0.70).
Required ADR: $500,000 / 5,110 = $97.85 per night.
If your annual expenses are $400,000 and you want $100,000 in profit, you need $500,000 in total annual revenue.
If you have 20 rooms and expect 70% occupancy, you will sell approximately 5,110 room nights per year (20 rooms × 365 days × 0.70).
Required ADR: $500,000 / 5,110 = $97.85 per night.
How to Use This Calculator
1. Enter your total estimated annual costs including mortgage/rent, staff, maintenance, and marketing.
2. Define your desired profit after all bills are paid.
3. Input the total number of rooms available for rent in your property.
4. Estimate your average occupancy rate across the entire year. Be conservative here to ensure you don't underprice.