๐Ÿ“š How The Hotel Rate Calculator Works

Understanding the math behind your rates - so you can trust the results

Jump to section:
๐Ÿ’ฐ Cost Calculation ๐Ÿท๏ธ Cost Per Room Night ๐Ÿ”„ Pricing Modes ๐Ÿ“Š Rate Markups ๐Ÿ“ˆ Projection Modes โš–๏ธ Break-Even Analysis ๐Ÿ’ฑ Currency Conversion

๐Ÿ’ฐ How Total Costs Are Calculated

The Formula:
Total Annual Costs = ฮฃ(Monthly Costs ร— 12) + ฮฃ(Yearly Costs)
Example:
Cost Item Amount Frequency Annual Total
Salaries 50,000 SCR Monthly 600,000 SCR
Insurance 150,000 SCR Yearly 150,000 SCR
Total Annual Costs 750,000 SCR
โœ… Why this matters:

This total forms the foundation for all your rate calculations. If your costs are wrong, your rates will be wrong too!

Try it yourself:

Add up your actual hotel costs (salaries, utilities, maintenance, insurance, marketing) and see if they match what you entered.

๐Ÿท๏ธ Cost Per Available Room Night (CPARN)

The Formula:
CPARN = Total Annual Costs รท (Total Rooms ร— 365)
Example (10 rooms):
Total Annual Costs: 600,000 SCR
Total Room Nights: 10 rooms ร— 365 = 3,650 nights
CPARN: 600,000 รท 3,650 = 164.38 SCR
With additional costs per room:

If a room type has additional costs (cleaning, amenities), we add them:

CPARN (specific room) = Base CPARN + Additional Costs
๐Ÿ’ก What this tells you:

This is your absolute minimum cost to operate one room for one night, even if it's empty!

๐Ÿงฎ Manual Test:

Total Annual Costs: ______ SCR
Total Rooms: ______ ร— 365 = ______ nights
CPARN = ______ SCR

Compare with what the calculator shows!

๐Ÿ”„ Understanding Pricing Modes

๐Ÿ’ฐ Cost-Based Pricing

Formula:

Net Rate = CPARN รท (1 - Profit Margin%)

Example:

  • CPARN: 164 SCR
  • Profit Margin: 20%
  • Net Rate: 164 รท (1 - 0.20) = 205 SCR

Then we add markups for each channel (BAR, DMC, TO, OTA, Public)

๐ŸŽฏ Market-Based Pricing

Formula:

Profit = Desired Rate - (CPARN ร— Markups)

Example:

  • Desired Rate: 350 EUR
  • CPARN: 164 SCR (โ‰ˆ 10 EUR)
  • After markups: ~280 EUR cost
  • Profit: 350 - 280 = 70 EUR (20%)
๐Ÿ”„ Compare Both

Shows you both approaches side-by-side:

  • Cost-Based: What you NEED to charge
  • Market-Based: What you WANT to charge
  • Comparison: Helps you decide if your target is realistic
If market rate < cost-based rate, you're losing money!

๐Ÿ“Š How Rate Markups Work

Starting from Net Rate:
Channel Markup Calculation Example (Net: 100โ‚ฌ)
Net Rate - Base rate before markups 100.00 โ‚ฌ
BAR +5% Net ร— (1 + 0.05) 105.00 โ‚ฌ
DMC +5% Net ร— (1 + 0.05) 105.00 โ‚ฌ
TO +25% Net ร— (1 + 0.25) 125.00 โ‚ฌ
OTA +10% Net ร— (1 + 0.10) 110.00 โ‚ฌ
Public +5% Net ร— (1 + 0.05) 105.00 โ‚ฌ
๐Ÿ’ก Why different markups?

Different sales channels charge different commissions:

  • BAR/Public: Direct bookings (lowest cost)
  • OTA: Booking.com, Expedia (10-20%)
  • TO: Tour operators (20-30%)

๐Ÿ“ˆ Projection Modes Explained

Auto Mode

Logic:

  1. For each room type, check if Market-Based rate exists
  2. If yes AND it meets profit target โ†’ use Market-Based
  3. Otherwise โ†’ use Cost-Based

Best for realistic projections

Always Cost-Based

Logic:

Force all projections to use Cost-Based rates regardless of settings.

Good for conservative estimates (what you NEED to charge)

Always Market-Based

Logic:

Force all projections to use Market-Based rates (where available).

Good for optimistic scenarios (what you WANT to charge)

โš–๏ธ Break-Even Analysis

The Formula:
Break-Even Nights = Total Annual Costs รท Average Rate
Break-Even Occupancy = Break-Even Nights รท Total Available Nights
Example:
Total Annual Costs: 600,000 SCR
Average Rate: 200 EUR = 3,329 SCR
Break-Even Nights: 600,000 รท 3,329 = 180 nights
Total Available: 10 rooms ร— 365 = 3,650 nights
Break-Even Occupancy: 180 รท 3,650 = 4.9%
๐Ÿ“ Manual Test:

Your Total Costs: ______
Your Average Rate: ______
Break-Even Nights: ______
Your Occupancy: ______%

Does this match what the calculator shows?

๐Ÿ’ฑ Currency Conversion

How it works:
  • Costs entered in: Base Currency (SCR, USD, EUR, GBP)
  • Rates displayed in: Revenue Currency (EUR, USD, GBP, SCR)
  • Conversion: Revenue Amount = Base Amount รท Exchange Rate
Example (SCR โ†’ EUR):
Cost in SCR: 500 SCR
Exchange Rate: 16.6447
Converted to EUR: 500 รท 16.6447 = 30.04 โ‚ฌ
๐ŸŒ Why dual currency?

Hotels in tourist destinations often have:

  • Local costs: Staff salaries, utilities (in local currency)
  • International rates: Charged to tourists (in EUR/USD/GBP)
โš ๏ธ Important:

Always update the exchange rate when currencies fluctuate! A 1% change affects your profit.

โœ… Trust But Verify

Quick Manual Verification Checklist:
  • ๐Ÿ“‹ Total annual costs match your budget
  • ๐Ÿงฎ CPARN calculation is correct
  • ๐Ÿท๏ธ Room rates cover your costs + profit
  • ๐Ÿ“Š Markups match your channel costs
  • โš–๏ธ Break-even occupancy seems realistic
  • ๐Ÿ’ฑ Currency conversion is accurate
Still unsure?

Try our example data and verify the results manually with a pocket calculator!

โ† Back to Calculator