Rack rate meaning in hospitality

Rack rate is the highest price you charge for a room or service in your business. It’s the rate you’d charge a walk-in guest with no reservation or special deal. Think of it as the 'sticker price' for your rooms or services.

Rack rates are crucial to revenue management for hotels, restaurants and other hospitality businesses. They’re the base rate for your pricing strategy so you can offer discounts or special rates and still make a profit. By setting a higher rack rate you have room for promotions and loyalty programs without eating into your margin.

Imagine this: You’re the front desk manager at a boutique hotel. A couple walk in without a reservation on a busy Saturday night. You check your system and see you have one room left. You quote them the rack rate of £200 per night. They book and you’ve just made the most revenue for that room. Later that day when you review your daily report you see most rooms were sold at various discounted rates but that full rack rate sale lifted your average daily rate.'