Hubbart Formula Calculator
Find the average room rate your costs and target return demand, with every line of the Hubbart formula explained.
How to use the free Hubbart Formula Calculator
- Fill in your details in the fields above – hotel name, dates and the other details you need.
- Tap the button to create the document instantly. Edit any field and generate again.
- Copy, print or save the result and use it in your daily or monthly review.
This Hubbart Formula Calculator runs fully in your browser on mobile or desktop – no sign-up and nothing is uploaded. Free Hubbart formula calculator. Work out the ADR your hotel needs from operating costs, fixed charges, target return and other income, step by step.
What the Hubbart formula does
The Hubbart formula is a bottom-up method to find the average room rate a hotel must charge to cover all its costs and give owners a fair return. Instead of copying competitors, it starts from your own numbers. It is widely taught in hotel management courses and is useful when planning a new property, a renovation or a lease.
Each line explained
- Operating expenses – salaries, electricity, water, repairs, laundry, marketing, OTA commission, admin and rooms department costs for the year.
- Fixed charges – depreciation, loan interest, insurance, property tax and lease rent. These do not change with occupancy.
- Desired return – owners' investment × target return. Because return is earned after tax, it is grossed up: pre-tax return = after-tax return ÷ (1 − tax rate).
- Other department profit – profit from restaurant, banquets, spa or rentals reduces the amount rooms must earn. A loss-making restaurant increases it.
- Room nights sold – rooms × days open × expected occupancy.
Worked example
A 30-room hotel spends ₹90 lakh a year on operations and ₹35 lakh on fixed charges. Owners invested ₹6 crore and want 12% after tax at a 25% tax rate, so the pre-tax return is ₹72 lakh ÷ 0.75 = ₹96 lakh. F&B earns ₹25 lakh profit. Required room revenue = ₹90 + ₹35 + ₹96 − ₹25 lakh = ₹1.96 crore. At 65% occupancy the hotel sells 7,118 room nights, so the required ADR is about ₹2,754.
Limits of the formula
- It ignores what guests will pay; always compare the result with competitor rates and your hotel room rate calculator result.
- It gives one average rate, not prices for each room type or season.
- The occupancy assumption matters a lot – see the sensitivity table.
To test the whole investment, use the hotel ROI and payback calculator.
Frequently asked questions
What is the Hubbart formula in hotels?
It is a method to calculate the average room rate needed to cover operating expenses, fixed charges and a target return for owners, after deducting profit from other departments, divided by the room nights expected to be sold.
Why is the return on investment grossed up for tax?
Owners want their return after income tax. Dividing the after-tax return by one minus the tax rate gives the pre-tax profit the hotel must earn to deliver it.
Is the Hubbart ADR the rate I should charge?
Not directly. It is the minimum average rate your cost structure needs. Your actual rates must also match market demand and competitor prices, and vary by season and room type.
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