What is referred to by the term 'rack rate' in the hospitality industry?

In the hospitality industry, the term 'rack rate' refers to the highest price that a hotel advertises for its rooms. This price serves as the standard rate that hotels ideally wish to charge; however, it's not always the price guests actually pay. Many hotels offer various discounts, promotions, or packages that can bring the actual price down significantly from the rack rate. Understanding the rack rate is important for both customers and travel agents, as it sets the baseline for negotiating rates and assessing the value of deals that may be offered.

The rack rate is commonly used as a reference point for comparison when evaluating pricing strategies and promotional offers. It helps hotels in their marketing efforts by positioning them within the market, while guests can use it as a benchmark against which they can measure any discounts they might receive.