Distribution
Net rate
What Net rate means
Net rate is the base wholesale room price provided to third-party intermediaries, such as tour operators or wholesalers, excluding any distributor markups, commissions, or taxes that are ultimately added to form the final retail price paid by the guest.
Formula
Net Rate = Sell Rate - (Sell Rate × Commission Rate)
How it is used
Revenue managers use net rates to secure volume business from OTAs, bedbanks, and wholesale partners while establishing a guaranteed minimum yield per room night. Comparing net rate channels against direct retail channels allows operators to evaluate true channel profitability, account for customer acquisition costs, and maintain rate parity across distribution networks. Setting net rates too low risks diluting overall ADR, whereas setting them too high discourages third-party partners from promoting the property.
Worked example
A hotel agrees to a merchant model agreement with an OTA offering a 20% commission structure. If the agreed retail sell rate for a deluxe room is $200 per night, the calculated net rate remitted to the hotel is $160 ($200 - [$200 × 0.20]). The OTA retains the $40 difference as its margin.
Common mistake
Confusing net rate with net RevPAR, or failing to audit merchant-model OTAs to ensure they do not undercut your direct channels by discounting their own margins.
Related terms
Work it out
OTA Commission Calculator — See what channel commission actually costs you, and what a direct booking is worth.