Expedia-like accommodation booking apps have revolutionized the hospitality industry by bringing availability of listings from various hotels, homestays, apartments, hostels and B&Bs onto a single platform. Guests can browse through a catalog of options from all over the world and book their ideal stay with just a few clicks. These platforms act as intermediaries, connecting travelers directly with property owners and managers.
While they offer great convenience to guests, they also provide an efficient channel for hosts to reach a global customer base. However, like any middleman, the platforms do charge hosts a commission for each booking facilitated through their websites and apps. In this article, we delve into how commission structures work on Expedia-like accommodation booking platforms and the various factors that impact how much of each reservation fee ends up in the host’s pocket.
Commission Structure Overview
Most platforms follow either a percentage commission model or a nightly/per booking rate structure to determine the fees charged to hosts for each reservation.
Percentage Commission
The most common model is a percentage commission of the total reservation value or ‘gross bookings’. Standard commission rates range between 10-20% for well-known brands like Expedia, Airbnb, Booking.com etc.
For example, if a guest books a 5 night stay worth $100 per night on Booking.com, the total reservation value is $500. With a 15% commission rate applied, Booking.com would take $75 (15% of $500) as their fee, leaving the host with $425.
Nightly/Per Booking Rate
Some smaller platforms and channel managers opt for fixed nightly or per booking rates which provides more predictable earnings for hosts. For instance, a platform may charge $5 per night or $25 per booking, regardless of the reservation value.
Overall, percentage commission models are more common since it directly ties host benefits with platform efforts in driving higher bookings and rates. But nightly/flat rates offer easier calculation of expected earnings. Checkout: https://zipprr.com/expedia-clone/
Factors that Impact Commission Rates
While standard percentage commission rates serve as guidelines, several property-level factors actually influence how much hosts end up paying on a case-by-case basis:
Location
Premium destinations generally attract higher commissions of 15-20% compared to 10-15% for less popular areas. Platforms argue they must spend more on advertising desirable destinations.
Dates
Stays during peak booking windows like summer months or holidays are subject to elevated commissions of 18-22% since platforms face more competition to fill inventory. Off-season rates see lower commissions.
Booking Lead Time
Long-lead bookings made 3-6 months in advance enjoy 10-12% commission while last-minute bookings within the same week pay 18-20%. This encourages early bookings.
Property Type
Entire home/apartment rentals typically pay 12-15% commissions versus 18-20% charged on hotel rooms. This is because entire home listings involve more operational responsibilities for hosts.
Host Tier/Volume
Established hosts and management companies within a platform’s loyalty program may negotiate reduced commissions of 8-12% by bringing high booking volumes and direct customers.
By understanding these nuances, hosts can optimize rates, dates and property management to keep more of their reservation earnings. Platforms are also flexible to some adjustments based on business relationships.
Upfront Commission vs Monthly Payments
Different platforms adopt varying models to disburse the commission amount deducted from hosts’ gross bookings:
Upfront Commission:
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Expedia, Booking.com, Airbnb etc deduct commissions from the payment received from guests upfront at the time of booking.
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Pros: Platforms receive their fees instantly without waiting. Cons: Larger upfront cash outlay for hosts who then must wait 30 days for remaining balance.
Monthly Payouts:
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Smaller channels like VacationRentals.com, HomeToGo pay hosts’ net earnings after deducting commissions on a monthly schedule.
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Pros: Hosts retain use of full guest payments for 30 days with a steady monthly income. Cons: Platforms have to maintain cash flows for 1 month+ to pay hosts.
In general, established brands find upfront commissions simpler while newer startups offering monthly payouts help attract hosts. The model depends on platforms’ capital strengths too.
Additional Fees and Charges
Beyond the base commission percentage, hosts also need to factor in certain additional fees and charges applicable on some platforms:
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Service Fees (1-3%): Cover platform expenses for customer support, payment processing etc.
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Miscellaneous Charges: One-time joining fees, listing upgrade charges, taxes on commission earnings in some regions.
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Cleaning/Damage Fees: Amounts deducted from security deposits/payments if guests report issues. Strict terms apply.
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CRMs/Channel Managers: Extra 5-10% charged by third-party services that list properties across multiple sites.
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Special Events/Promos: Additional 10-15% charged on bookings from platform advertising campaigns.
Comprehensively accounting for these hidden costs brings hosts’ ‘net commissions’ closer to 25-30% of gross bookings in some cases rather than the advertised 10-20% rates. Advanced reconciliation is prudent.
Seasonal Adjustments
Except for destinations with steady year-round demand like big cities, most local hospitality markets follow distinct seasonal booking patterns:
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High Season (3-6 months annually): June-August in US/Europe; December-February in Australia/New Zealand etc.
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Shoulder Season: March-May and September-November usually see mixed occupancy levels.
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Low Season: January-February and October-November in colder markets see low traveler volumes.
To accord with these fluctuations, far-sighted platforms seasonally modulate commission rates charged to hosts:
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High Season usually carries highest rates of 18-22% as competition for filling rooms is intense.
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Shoulder Season sees rates of 15-18% to still encourage hosts to keep calendars open.
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Low Season enjoys lowest commissions of 10-12% to aid hosts in establishing minimum daily rates.
This enlightened strategy helps sustain host earnings while ensuring a reliable supply of properties remains listed throughout the year.
Loyalty and Volume Discounts
As with any other industry, accommodation booking channels employ a loyalty program structure that benefits hosts in scaling their business presence:
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Bronze Level: Entry-level hosts with few listings generally get 10-15% rates.
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Silver Level: Mid-tier hosts managing 5-30 rooms/properties upgraded to 12-18% rates.
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Gold Level: Established hosts over 30 rooms become eligible for negotiated 8-12% preferential rates.
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Elite Status: Top 1% hosts handling hundreds of rooms nationally may see bespoke 6-10% commissions.
Accumulating higher booking volumes over 6-24 months allows expediting to higher volume tiers with reduced rates. Some platforms also offer one-time credit incentives for bringing new partner properties onboard.
This strategy encourages hosts to gradually increase supply, rely more on platforms as their primary channel and benefit from the cost savings to reinvest in further expansion and customer satisfaction efforts. Win-win.
Local Taxes on Commission Earnings
An important but often neglected factor is the impact of applicable local, state and national taxes on hosts’ net commission incomes. Taxes vary greatly worldwide:
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USA: Federal self-employment tax is 15.3% on net earnings. State taxes from 0-13% additionally.
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Canada: Federal and provincial taxes combine to 32-47% depending on earnings level and province.
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Europe: Countries like France, Spain, Portugal, Italy levy 20-50% income taxes on individuals.
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Australia: Tax rates from 30-45% are deducted from host payouts by platforms monthly as withheld tax.
Failure to factor taxes can come as an unpleasant surprise at tax-filing deadlines. Hosts need to set aside 25-50% of gross commission earnings as tax provisions depending on geographic domicile. Forward tax planning optimizes post-tax payouts.
Payout Methods
Platform payout schedules and disbursement modes also hold importance for cash flow management:
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Direct Deposit: Preferred by most hosts. Funds seamlessly transferred to nominated bank accounts on scheduled dates by platforms.
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Paper Checks: Some smaller outlets still utilize checks which take 5-10 days to clear. Prone to delays, losses in transit.
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Alternative Payments: Options gaining adoption – PayPal, Skrill, local ewallets allow faster international money transfers at nominal charges.
Most platforms adopt monthly payout cycles on 15th-30th to streamline accounting. But some offer bi-weekly or semi-monthly disbursals for businesses with regular cash needs. Hosts clarify schedules upfront to maintain steady receivables.
Platform Commission Policies
Let’s explore common commission policies and structures adopted by some major booking platforms:
Airbnb:
- Standard 14-20% commissions depending on location, type of stay.
- 3% additional guest service fee.
Booking.com:
- Base commission of 15% for most property types worldwide.
- Rates vary from 10-18% depending on location, seasonality, booking lead times etc.
- Additional 1-3% in service fees per booking.
- Offers a loyalty program with reduced rates for high volume partners.
Expedia:
- Commissions of 10-20% for hotels, 12-18% for alternate accommodations.
- Service fee of 1-5% of booking subtotal.
- Loyalty tiers from Expedia Traveler Preferred to Expedia Traveler Elite.
VacationRentals.com:
- Standard rate of 15% for whole home rentals, 20% for hotels/resorts.
- Offers 12% rates for managers handling bulk bookings.
- Monthly commission disbursements instead of upfront deductions.
Tripping.com:
- Flat $5 nightly commission for homestays, B&Bs, hostels.
- $30 per booking at hotels/resorts.
- No additional service fees charged.
Agoda:
- Commissions of 12-18% depending on property type and booking value.
- Monthly payment schedules with lower processing fees.
- Volume discounts for high booking volume partners.
It’s advisable for hosts to thoroughly check policies of 2-3 preferred platforms and factor all applicable commissions, taxes and fees into their rate-setting calculations to deliver optimized post-tax incomes.
Negotiating Rates
While standard rates apply universally, it’s still possible for hosts managing premium, high occupancy properties or accounts with significant annual business volume to engage platforms in negotiating improved commission terms:
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Volume-based discounts: For consistent bookings over 500+ rooms/year bringing new demand.
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Direct booking incentives: Cash bonuses for shifting X% of reservations to direct bookings annually.
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Bundled property management: Concessions offered to hosts using platform services for virtual concierge, cleaning, key handling etc.
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Long-term agreements: 3-5 year contracts warranting 8-10% locked-in rates and first right to expand supply.
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New market incentives: Platforms keen on certain destinations may discount expansion hosts that on-board similar properties.
Negotiation requires hosts establish value propositions with quantifiable projections and willingness to commit long-term. Platform sales executives are empowered on customized arrangements in many cases.
Conclusion
To summarize, accommodation booking platforms have revolutionized the hospitality industry but they do deduct commissions ranging typically from 10-20% as their service fee. However, location, season, booking windows, property types, volumes, partners programs and negotiation capabilities influence the actual amount hosts retain from each reservation.
Comprehensively accounting for the myriad factors impacting take-home earnings enables property owners and managers to optimize rates, strategy and financial viability on these global distribution channels. With detailed understanding and planning, hosts can maximize their share of this digital transformation pie.