Net Rate

What is the definition of Net Rate in the hotel industry?

In hotel circulation we work with many price levels. Room record is sold via some third party distributors at prices that are subject to charge. Others confer a (sometimes lower) price with the hotel that does not comprise a commissions. Such a rate is called a Net Rate.

The Net Rate is the cost without the commission of the travel agent. The distributor can mark-up this price with the edge he wishes to make, or a quantity which is contractually decided. Hotel distribution partners which normally work with net room rates are:

  • Merchant Model OTA
  • Wholesalers
  • Tour Operators
  • FIT companies (aka Foreign Incoming Travel)
  • DMC’s – Destination Management Companies
  • Group bookers

From a hotel revenue management viewpoint you can also compute a Net Rate when subtracting the payment from a gross or sell rate. For instance if the rate paid was $100 (excl VAT) and the payment is 25%, the Net Rate would be $75. And with a payment of 15% the Net Rate would be $85.

These kind of calculations are used to decide the real income donation distribution channels. As well as a useful KPI called NREVPAR.