Commissionable Rates & NET Rates for Hotels

Types of Rates Wholesalers Provide to Travel agents and tour operators

Travel agents and tour operators have the option of choosing between commissionable rates & NET rates from hotels. Commissionable rate applies to scenarios where hotels provide the travel agents with the option to sell their rooms for a fixed sum decided by the hotels, for which the travel agents receive a set % as commission. The disadvantage of this method is that travel agents will not be able to mark-up their margins as they are unable to increase the price on rooms. Plus the travel agents will be sort of handicapped especially on seasonal times when they will be able to get bulk orders from customers through promotional offers, but instead feel restricted as the prices and percentage of commissions are fixed by the hotels.

On the other hand NET rate applies to situations where the hotels provide the option of selling their rooms for a fixed price but on which travel agents have the flexibility to mark-up their margins and re-sell to clients for a bigger sum. While it is beneficial for the travel agents by being able to decide on the selling price as well as control their margins, the disadvantages are also notable. Setbacks include hotels not being able to exactly know the prices on their rooms sold through the travel agents as well as the travel agents requiring to have payment gateway which is a tedious and costly process to get and maintain.

Many leading hotels in USA use NET rates for contracting with travel companies, wholesalers and OTAs, as it is simpler to work within their present model. In many NET rate business models, travel companies collect the payments from customers, then settle the hotels when guests check in or after they checkout. In scenarios where they collect the booking sum in full, they can pay the supplier later enabling them to earn interest on the money or float. Also notable is the fact that in certain situations, tour operators are required to keep deposits with travel wholesalers when they opt for NET rate, whereas such conditions do not apply for the option of commissionable rate.