A net rate (often called a wholesale rate, non-commissionable rate, or merchant rate) is the base, heavily discounted price that a travel supplier (e.g., a hotel, airline, or tour operator) offers to a third party distributor. Unlike a conventional rate that is meant to make money for the agent, a net rate is the unadulterated, wholesale price of the inventory that the intermediary marks up before selling it to the end user.
Net rates are the financial powerhouse behind the merchant model of travel distribution (used extensively by online travel agencies (OTAs), bedbanks, and traditional tour operators).
The flow works like this:
It is important to differentiate between net rates and the old, traditional model of commission.
Net rates introduce a constant source of friction in the travel industry in the form of rate parity — the agreement for a hotel’s room to have the same price regardless of which website the consumer used.
Because the intermediaries control the markup in the net rate, they can decide to reduce their margin to undercut the hotel. If an OTA is paid $70 as their net rate, they may only mark up to $85 in a slow period. If the hotel is selling that same room on its direct website for $100, then the OTA wins the booking, infuriating the hotel and violating parity.
They are strictly B2B (business-to-business). They are sold to high-volume distributors such as bedbanks (e.g., Hotelbeds), major OTAs (such as Expedia or Agoda), and wholesale tour operators who package the hotel with flights. They are not offered to the general public.
Historically, net rates were static (e.g., a flat $80 all year long, negotiated by paper contract). Today, most are dynamic, which means they float as a fixed percentage off the hotel’s Best Available Rate (e.g., always 20% off the public price), automatically adjusting as the revenue management systems raise or lower prices.
Leakage is when a deeply discounted B2B net rate (which is only supposed to be sold as part of an opaque package such as a flight+hotel bundle) accidentally leaks onto a public metasearch such as Trivago or Kayak as a standalone room-only price, shooting a hole in the supplier’s direct pricing strategy.
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