The rack rate is the full published price of a room before any discount, package or negotiated rate. The name comes from the physical rack at old front desks where room cards and prices were displayed.
Today few room nights are actually sold at rack: most business comes through dynamic BAR (Best Available Rate), corporate, group, package and OTA rates. Rack still matters as the anchor that discounts are calculated from and as the reference price for contracts and packages.
In practice: keep the rack rate credible. If it is set so high that nobody ever pays it, every "discount" off it loses meaning, and corporate or wholesale contracts based on a percentage off rack end up misaligned with the market.
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