Buzz
A rack rate is the set price that a hotel charges for a typical room. Often referred to as the 'walk-in price,' this rate is sometimes posted inside hotel rooms (usually on the back of the door). It is also the rate quoted to customers who either call the hotel or show up at the front desk without a reservation. But why is this rack rate so high, sometimes hundreds of dollars more than the price you'd likely actually pay for the room?
In the hospitality industry, the rack rate represents the highest price a hotel typically charges for a room when demand is at its peak. It’s similar to the asking price of a house or car, and hotels anticipate that guests will inquire about and utilize available discounts.
Although the U.S. federal government doesn’t regulate rack rates, some states and counties require hotels to display the rack rate prominently. For instance, California’s Civil Code Section 1863 mandates that all hotels display the nightly rate (or rate range) in each guestroom, and prevents hotels from charging more than the posted price. Displaying the rack rate benefits customers by preventing overcharging, fraud, and discrimination. With the 'ceiling' price visible, customers won’t overpay for a room, and hotel clerks can’t unfairly charge different rates based on race, religion, or gender.
Since most travelers now turn to websites to compare hotel prices (rather than simply walking up to the front desk without a reservation), rack rates are becoming less relevant. Jeff Doane, Vice President of Sales & Marketing for FRHI Hotels & Resorts in the Americas, shared with mental_floss that Fairmont Hotels have adapted by making their rate structure more flexible: 'We now set daily rates based on demand, rather than sticking with static prices that remain unchanged over time.'
Some hotel chains now use the term 'Best Available Rate' instead of rack rate in order to discourage guests from seeking discounts. According to Doane, the best way to find the lowest price at his hotel is directly through the hotel's website, which offers a 'daily rate' along with a 'Best Rate Guarantee,' ensuring that customers 'won’t find a better rate anywhere else.' So, while the rack rate represents the highest price, you'll likely pay much less for your room.
