The business of hotels has always been of selling rooms. Some of us might still remember a time hotel rooms had to be reserved through a travel agency, by phone or fax!
The arrival of OTAs, loyalty programmes, hotel mergers, etc. have changed the way guests book and also affected P&Ls through different commission structures.
Comparing operators’ charges is near impossible. Some operators charge a fixed amount per room per month and/or low commission percentage; others charge a high commission percentage but with no or zero fixed amount.
In this column, we will focus on a fixed amount per booking and a low percentage commission (when applicable) and consider the most common reservation channels to understand all-in associated costs. We start from the same price (best available rate, BAR) paid by a guest, AED100 (gross rate), which includes tourism taxes, municipality fees, VAT assumed at 25.5% rate, bringing the net rate down to AED79.68.
Scenario 1: Directly to the Hotel
Guests reserve directly: either online, by phone or walk-in. No third-party commissions to be paid apart from reservation management fees (RMA) to the operator (usually 2.5%) which equals AED1.99. For every stay, guests can collect loyalty points. Let’s assume $4 per each stay, equalling AED14.60. At check-out guests usually pay by credit card, this implies a final charge of 1.9% to the gross rate. As a result, double net rate becomes AED61.19.
Scenario 2: Brand Website
Guests reserve through the operator’s website. No third-party commissions, but the operator retains central reservation system fees (CRS) of usually US$6 (AED21.90). This fee is on top of the same fees, taxes, loyalty points and commissions of Scenario 1, bringing double net rate to AED39.29.
Scenario 3: Central Reservation
This is when guests reserve directly through the operator’s toll-free number or global reservation office. In this case operators charge US$9.5 (AED4.68). Guests are also eligible to accumulate loyalty points. Double net rate therefore results in AED26.51.
