Net rate: what it means, and how it differs from a sell rate

Expedia's help for hotels sets out three kinds of rate:

• Sell rate: the room rate including taxes and Expedia's commission, which it calls compensation. It is the total cost to the guest, and it is the amount on bookings where the hotel collects the payment.
• Net rate: the room rate without taxes and without Expedia's commission. It is what the hotel receives, and the amount on bookings where Expedia collects the payment.
• Price: the room rate including Expedia's commission but before tax, which is what guests see on the listing before tax is added.

A commissionable rate is the other way of working: the hotel sets the price the guest pays and pays the seller a commission on it afterwards. A net rate leaves the seller to add its own margin.

• Expedia: on Expedia Collect, guests pay when they book, the booking notice shows the net rate, and the hotel is paid after the stay, by a virtual card it can charge on the day of check-in or by a payment request within 365 days of check-out. On Hotel Collect, the notice shows the sell rate and Expedia invoices its commission.
• Agoda: its partner help says its compensation is either a percentage of the reference sell rate or a margin added to the rate the hotel loads, and that a hotel can see its level under “Finance” and “Contracted compensation” in the Partner Portal.
• MakeMyTrip and Goibibo: in the InGo-MMT extranet's “Rates & Inventory” tab, ticking “Show Nett Rate” shows the nett rates beside the sell rates you enter for each occupancy.

OneHorizyn's guides to Expedia Partner Central, Agoda YCS and InGoMMT walk through each back office.

1. 1Start from the price before tax that you want guests to see.
2. 2Take off the seller's commission, at your contract's rate.
3. 3Take off any promotion you agreed to, such as a member discount.
4. 4What is left is the net rate: what you receive for the night.

Expedia gives the conversion as: net rate equals the sell rate divided by one plus the tax, times one less the commission, times one less the promotion.

Net rates are also how hotels sell to wholesalers, which resell rooms to travel agents and other websites, and to tour operators, which sell them in packages. Amadeus, for one, says it contracts directly with hotels to distribute net rates to other businesses and to guests, in its Amadeus Value Hotels model.

With a net rate, the seller sets the price the guest sees. Expedia says hotels have told it the wholesale market is inefficient and expensive, with rate violations among the costs, and that it sends the rates for its own business-to-business network as sell rates, to give the hotel more control of its prices and avoid misuse.

• Agree in writing who may sell the rate, on which sites, and whether it may be shown to guests on its own or only inside a package.
• Set net rates with the seller's margin in mind, so the price guests see doesn't fall below your website's.
• Check the booking sites as a guest on your busy dates: a room on sale below your own price can be a net rate resold on its own.

• Which model each site uses for you, net or sell, and who collects the guest's payment.
• That you load each price in the right field: a net rate typed where a sell rate is expected sells the room too cheaply.
• That your channel manager knows which model each site uses.
• That the amount on each booking and each payout matches your contract.
• That no site shows your room below your own website's price for the same room and terms.