What is the meaning / definition of Derived Rates in the hospitality industry?
A rate that allows owners, managers and/or revenue managers to update the hotels rate(s) by adding or subtracting a total sum or percentage from the base rate, rather than adjusting the rate each time it needs to be adjusted. For example, if a hotel wants to include a special breakfast rate to their rack rate, they would add a derived rate of £15 on top of their rack rate. This rate would then only be sold and used by a guest if they request to include breakfast in their room price, other than that, the rack rate would not change.
Besides the convenience of adjusting the price of rates, this is done so that discounts or special rates can be applied easily when a new coupon, package or rate is introduced. Through this rate, hotels have the option to control and set the max or minimum amount a discount is given out by staff and managers in rooms and/or outlets. For example, a hotel owner may set the maximum discount for their hotels restaurant at 50% if a guest complains about their food. This is done so that the discount total is not decided by individual manger or employee on duty.
In property management systems, there is always an option to add Derived Rates to a current rate. The mechanics of doing this depends on the type and company of the PMS.
- Rack Rate
- Property Management System