Let the 7 colors be red, orange, yellow, green, blue, white, and violet.
The first color can be any one of 7.
The second color can be any one of 6.
The third color can be any one of 5.
Write 7×6×5 equal to 42×5 or 21×10 or 210 possible color permutations for the three rooms. Note that, in a permutation, selections of red-blue-orange, red-orange-blue, blue-red-orange, blue-orange-red, orange-red-blue, & orange-blue-red are all counted as possible outcomes of a selection of 3 out of 7 colors even though all 6 outcomes have the same three colors in different orders.
The number of permutations is also obtained by writing 7P3 which translates to 7!/(7−3)! or (7×6×5×4×3×2×1)÷(4×3×2×1) or 210 as above.
In a count of combinations, however, all but one of these 6 outcomes would be discarded so that one would calculate (7×6×5) − (7×5×5) equal to (7×5) times (6 − 5) or 35 in order to find the number of possible combinations of 3 colors chosen (without replacement in the "hat") from 7 colors.
This is also obtained by writing 7C3 which translates to 7!/(3!(7-3)!) or (7×6×5×4×3×2×1)÷(3×2×1)÷(4×3×2×1)
which reduces to (7×6×5)÷(3×2×1) or 35 combinations as above.