A net rate is a hotel room rate quoted with no commission included, so the agency adds its own margin or service fee before billing the client.
How does a net rate work in a group booking?
A hotel can answer a group RFP with two kinds of rate. A commissionable rate has a commission inside it, and the hotel pays that commission out after the stay. Marriott's agency policy, for example, pays commission only on reservations "booked at commissionable rates" (Marriott). A net rate carries no commission. The agency marks the rate up or bills its fee separately.
You feel the difference when a hotel chain changes its commission levels. In 2018 Marriott cut group commissions for intermediaries from 10 to 7 percent, and many independent planners "watched their revenues suddenly drop by a third" (PCMA). MPI then urged third parties to move toward "a transparent fee-based model billed directly to your end-user clients" (MPI). Those figures come from North America, and we found no European equivalent.
What should you check before accepting a rate?
In our view, the main risk with commissionable rates is visibility. The commission sits inside the rate and can go to parties other than the agency, "often undisclosed to the attendee paying for the room" (Velvet Chainsaw). The same mechanism lets site selection companies offer their service free to clients, because the property pays the commission (Skift Meetings). If a commissionable offer beats a net one, ask who receives the commission. We cover this in ghost commissions in group hotel bookings.
Write the rate type and any commission recipient into the contract. Meetings Today warns that without an agreement on how a third party is paid, "the group may be ultimately liable for payment" (Meetings Today). Compare offers net against net, then check which rate the attrition clause uses.
Sources
- Marriott Commissions Policy, Marriott International
- How to Survive, Thrive After Commission Omission, PCMA (Professional Convention Management Association)
- A Roadmap for Third Parties Following Marriott's Commission Cut, MPI (Meeting Professionals International)
- The Market Shifts That Led to Commission Cuts, Velvet Chainsaw (adapted from PCMA's Convene)
- What is a Site Selection Company?, Skift Meetings
- Take 10: Contracts, Meetings Today
Related terms
Related reading
- Hotel RFP software vs spreadsheets: when spreadsheets stop workingSpreadsheets cope with a few group RFPs a year. In our view they break near 20 bookings a year, once offer, contract and rooming list deadlines overlap.
- Group rooming lists: how to build, submit and manage changesPull the deadlines from your contract, submit the rooming list before cut-off, then log every add, drop and name change against the room block.
- Hotel attrition clauses explained, with a worked penalty exampleAn attrition clause sets the minimum rooms or revenue a group must use. The charge is shortfall below the minimum × rate × damages %. Worked 50 room example.
- Ghost commissions in group hotel bookings: what platforms take and what agencies payA ghost commission is a hotel-paid cut to a booking platform, hidden in the group rate your agency pays. How to spot one and keep it out of your rates.