The core confusion: A commission model charges you after the sale. A net rate model charges you before it - by letting the OTA pocket the difference. Same room. Same guest. Completely different P&L exposure.
The hotel sets and publishes its own retail rate. The OTA or agent sells that rate to the guest and collects a commission (typically 15–25%) from the hotel after the stay. The guest pays the hotel directly - or the OTA collects and remits minus commission.
The hotel provides a deeply discounted "net" rate - usually 20–30% below BAR - to the third party. The OTA or wholesaler marks it up and sells at whatever price they choose. The hotel never sees the guest-facing price. Revenue received = net rate only.
In the commission model, the hotel controls its published rate - channel cost is transparent and post-sale. In the net rate model, the hotel surrenders rate control entirely. The third party sets the retail price, captures the margin, and remits only what was agreed - regardless of what the guest paid.
The $13.13 gap per room night compounds fast. At 50% occupancy on a 100-room property running a 30% wholesale mix, that's ~$71,700 in annual margin leakage - before accounting for rate parity damage to your direct channel. The net rate model isn't just cheaper-looking distribution; it's a structural revenue ceiling.
| Metric | Commission Model | Net Rate / Merchant | Verdict |
|---|---|---|---|
| Reported ADR | Full BAR rate ($300) hits your PMS as revenue - ADR is unaffected before the commission deduction | Only the net rate ($225) books to your PMS. ADR is structurally suppressed for every wholesale room night | Net Rate Hurts ADR |
| RevPAR | RevPAR reflects true market rate - commission is an expense, not a revenue reducer in standard calculations | RevPAR is directly pulled down. Segment blending with BAR rooms hides the damage in aggregate reports | Net Rate Hurts RevPAR |
| Rate Parity Risk | Low - hotel controls its published rate. OTAs must sell at or near BAR | High - wholesalers resell to sub-agents who surface rates on Kayak, Google Hotel Ads, undercutting your direct channel | Net Rate Riskier |
| Channel Cost Visibility | Transparent - commission is a known line item, post-sale and auditable | Opaque - effective cost only visible when comparing net contracted rate to what guests actually paid (you often can't see this) | Commission Cleaner |
| Owner / Lender Reporting | Revenue reported at gross - management fee, incentive fee calculations use higher base | Revenue reported at net - management fees calculated on deflated revenue base, reducing operator income | Commission Favors Operators |
| Comp Set STR Impact | Your rate counts at published BAR in STR data, protecting your competitive index | Opaque/merchant bookings may not appear at true rate in STR data - can skew MPI/ARI benchmarks | Context Dependent |
"Hoteliers often think they're comparing the same cost because 20% commission looks equal to a 20% net discount. They're not. One is a percentage of retail. The other is a floor under which your revenue cannot climb - regardless of demand."
If you're weighing commission vs. net rate distribution for your property, I'd welcome the conversation.
Get in touchFor illustrative purposes. Commission rates, processing fees, and net rate discounts vary by property, contract, and OTA. All figures are representative industry benchmarks. Consult your distribution and revenue management team for property-specific analysis. May 2025