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Business
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| Number of pages / Number of words: |
10 / 2747 |
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These systems start from an idea of what the customer is prepared to pay and use this as a starting point. Then the hotel tries to tailor its costs so that it achieves a reasonable rate of return on that basis (Abbott and Lewry, 1999).
Different approaches under cost based pricing are The 1:1000 rule, The Hubbart formula and Marginal or contribution pricing...
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It also works in other currencies. So if the room cost ?25000 to build, the room rate should be ?25 per night. It is very old system but it still reflects the fundamental importance of fixed costs in determining a hotel’s profitability (Abbott and Lewry, 1999).
Cost based pricing is ‘rule of thumb’ approach...
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