Reliance on the British Automobile Association (AA) or the American counterpart the (AAA) for hotel grading and classification without consideration for local peculiarities that impact on the qualities of hotel is boomeranging. Many countries are now looking for alternative grading and classification system notable amongst them are the Caribbean and Iran. Despite the paradigm shift, Nigerian Tourism Development Corporation (NTDC) released a new hotel grading and classification system in 2002 along the line of the “star” system which provoke vitriolic ballyhoos necessitating an urgent need to develop a homegrown system or reinforced the existing “star” system. Hotel Effectiveness Index (HEI) is herein developed which has taken into cognizance customers’ perception of services being rendered by the hotels and could be adopted by Tourism Boards to bolster their current classification and grading system. In order to achieve this, data were collected from hotels’ customers in addition to physical assessment of hotel structures and system operations in Metropolitan Lagos. Stratified sampling technique was used in selecting the samples while Kothari’s formula was used to determine the sample size. Data analysis was executed using descriptive statistics, Spearman Correlation analysis and relative importance index. The resulting Hotel Effective Index (HEI) developed has taken into cognizance customers’ perception of services being rendered by the hotels and may be regarded as a cracker-barrel instrument that could be adopted by Tourism Boards to bolster the current classification and grading system thus, removing any misgiving associated with the “star” system.