Use the following information to calculate a Hubbart Room Rate Formula: A given hotel has 225 rooms. Operating expenses run about $1,110,000 annually. Depreciation is scheduled at $445,000 per year. Additional costs (taxes, insurance, etc.) are expected to be about $135,000 for the year. The owners require a reasonable return of $850,000 per year for their investment. Net loss from other operated departments is projected to be $400,000 annually. Calculate the rate required assuming a 65% annual occupancy rate:

Question

Quizplus · Accepted Answer

The Hubbart Room Rate Formula calculates the required room rate by considering total costs and desired return, divided by the number of rooms sold. Total costs are $1,110,000 (operating) + $445,000 (depreciation) + $135,000 (additional) + $850,000 (return) + $400,000 (net loss) = $2,940,000. With 225 rooms and 65% occupancy, rooms sold annually = 225 * 365 * 0.65 = 53,362.5. Required rate = $2,940,000 / 53,362.5 = $55.08.

Use the Following Information to Calculate a Hubbart Room Rate