The Hubbart Formula

CALCULATING ROOM RATES USING THE HUBBART FORMULA

1.         Calculate desired profit:

DESIRED RATE OF RETURN X OWNER’S INVESTMENT

2.         Calculate pre-tax profits:

DESIRED PROFIT

1 - HOTELS TAX RATE

3.         Calculate fixed charges and management fees:

Estimated:

DEPRECIATION

+          INTEREST EXPENSE

+          PROPERTY TAXES

+          INSURANCE

+          AMORTIZATION

+          BUILDING MORTGAGE

+          LAND

+          RENT

+          MANAGEMENT FEES

4.         Calculate undistributed operating expenses:

Estimated:

ADMINISTRATIVE AND GENERAL

+          DATA PROCESSING

+          HUMAN RESOURCES

+          TRANSPORTATION

+          MARKETING

+          PROPERTY OPERATION

+          MAINTENANCE

+          ENERGY COSTS

5.         Estimate non-room operated department profit / loss :

FOOD & BEVERAGE

+          TELEPHONE...ETC.

6.         Calculate required rooms department income:

STEP   2 + STEP 3 + STEP 4 + STEP 5

7.         Determine rooms department revenue

STEP 6

+          ROOMS PAYROLL & RELATED EXPENSES

+          OTHER ROOMS DIRECT OPERATING EXPENSES

8.         Calculate average room rate

STEP 7

EXPECTED ROOMS SOLD