Hotel Revenue Glossary · Pricing

Rack Rate

The maximum published rate for a room type, historically displayed on a physical "rack" behind the front desk. In modern practice, rack rate serves as the ceiling rate and is rarely the actual selling price. It is the starting point from which discounts are applied.

Why it matters: While rack rate is rarely charged, it serves as the reference point for calculating discount percentages on corporate, promotional, and group rates. It also has legal and regulatory significance in some jurisdictions for advertising and rate transparency.

Worked example: Rack on a king room is A$420. The corporate agreement is written as 45% off rack, which is A$231. Two years later dynamic pricing has BAR sitting between A$189 and A$275 midweek, so the contract rate now lands above BAR on roughly half the nights the account books. The discount looked generous on paper; against the rate that account can see on any OTA, on those nights it is not a discount at all.

Common mistake: Leaving rack unchanged for years while BAR moves daily, then writing contracts as a percentage off it. Rack drifts out of relation to what you sell, and a fixed percentage off a stale ceiling produces a rate that is generous in low season and above BAR in shoulder. Anchor negotiated rates to BAR, or to a figure you review.

All glossary terms BAR (Best Available Rate) Corporate Rate ADR (Average Daily Rate)