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Revenue Management and Commission

In the competitive landscape of hotel sales, effective revenue management is not just about setting prices—it’s about making strategic decisions that maximize profitability while staying compliant with hotel partner agreements. One key tool at your disposal is the margin parameter within the rates endpoint, which allows you to dynamically adjust your commission on each booking.

However, with this flexibility comes responsibility. Understanding the suggested selling price (SSP) hotels provide is crucial, as selling below the SSP in public domains can lead to rate violations. These violations can harm your relationships with hotel partners and limit your access to future rates. To avoid these pitfalls, it’s essential to consider whether your sales channel should operate as a public-facing platform or as a closed user group.

This guide will help you navigate these considerations by exploring how to use margins effectively while also adhering to SSP guidelines and avoiding rate violations. You’ll learn how to balance competitive pricing with compliance, leveraging closed user groups when necessary to offer lower rates without risking penalties.

Key Concepts

Rate Violations: Rate violations occur when a seller offers a hotel room at a price lower than the suggested selling price (SSP) in a public forum. Hotels establish SSPs to protect their brand integrity and ensure price consistency across different sales channels. Violating these pricing guidelines can lead to penalties, strained relationships with hotel partners, or even loss of access to future rates. It’s essential to respect SSPs to maintain trust and ongoing collaboration with hotels.

Closed User Groups (CUGs): Closed User Groups (CUGs) allow you to offer discounted rates below the SSP without risking rate violations. You can maintain compliance with hotel pricing rules by limiting access to these lower rates to members of a specific group, such as app users or logged-in customers. CUGs allow you to provide attractive offers to loyal customers or specific segments while keeping these special rates out of the public eye, thereby protecting your revenue strategy and partnership agreements.

Who is the Merchant of Record?

LiteAPI as the Merchant of Record: When you use LiteAPI as the merchant of record through our payment SDK, you streamline the booking process by allowing us to handle the payment transactions on your behalf. In this scenario, you can dynamically adjust your commission by setting the “margin” parameter, which directly impacts the final selling price to the customer. This method is particularly advantageous for sellers looking to maintain flexibility in their pricing strategy while ensuring compliance with hotel rate guidelines. By letting LiteAPI manage the payment process, you benefit from reduced administrative overhead and can focus on optimizing your revenue through strategic margin management.

You as the Merchant of Record: Alternatively, if you choose to be the merchant of record, you gain full control over the pricing and bundling of your services. In this setup, you work with net rates (”margin”: 0), applying your commission via an alternate payment method, such as through a separate service fee or by bundling the room with other travel-related services like tours or car rentals. This approach allows for greater customization and the opportunity to create unique value propositions for your customers. However, it also requires you to manage the payment process and ensure that your overall pricing strategy remains competitive and compliant with any SSP requirements from hotel partners.

Earning Money with LiteAPI

Earning commission with LiteAPI is straightforward and flexible, designed to empower you to maximize your revenue without any fees cutting into your profits. Our model lets you earn money from the margin you set using the margin parameter or directly by adding your own revenue model on top of net rates. This means you have complete control over how much you make on each booking—whether you opt for a modest commission or a more substantial one, the decision is entirely yours. With LiteAPI, there are no hidden fees or complicated calculations—just clear, transparent earnings based on the margin you define. We pay out commissions on confirmed bookings every week.

Booking Confirmation

A booking is confirmed when a guest completes their stay and checks out of the hotel. Once this happens, your commission will be locked in and included in the next weekly payout. This straightforward process ensures that you receive your earnings promptly, providing financial consistency and reliability.

Using the "Margin" Parameter in the Rates Endpoint

The "margin" parameter in the rates endpoint allows sellers (you) to specify a commission percentage they wish to earn on each booking. Let's look at how to effectively use this parameter, as well as insights on the suggestedSellingPrice (SSP) returned by the API.

What It Does:

The "margin" parameter is an integer value representing the percentage commission that the seller earns on each booking. When no value is passed, the default is 10%, but you can change this value in your account settings.

Example: A margin of 0 returns a net rate, meaning no commission is earned. A margin of 15 adds 15% to the rate, which the seller then earns as a commission.

How to Use It:

Setting the Margin (15% Commission): Include the "margin" parameter in your API request to specify the desired commission. 

{
  "occupancies": [
    {
      "adults": 2
    }
  ],
  "currency": "USD",
  "guestNationality": "US",
  "checkin": "2024-12-30",
  "checkout": "2024-12-31",
  "hotelIds": [
    "lp1897"
  ],
  "margin": 15
}

Net Rate (No Commission): Set the margin to 0 if you want to offer the rate without any added commission.

{
  "occupancies": [
    {
      "adults": 2
    }
  ],
  "currency": "USD",
  "guestNationality": "US",
  "checkin": "2024-12-30",
  "checkout": "2024-12-31",
  "hotelIds": [
    "lp1897"
  ],
  "margin": 0
}

Why It’s Useful:

This flexibility allows sellers to control their pricing strategy, either using net rates with other monetization strategies or adding a competitive margin to generate revenue.

Understanding the suggestedSellingPrice (SSP)

What Is SSP?

The suggestedSellingPrice (SSP) is the rate provided by the hotel as the recommended minimum selling price. This acts as a benchmark for sellers.
Purpose: The SSP is essentially the hotel's guidance on the minimum rate they expect the room to be sold at.
Pricing Strategies:
Selling at or Above SSP: You can freely sell at the SSP or above it in any public-facing platform, such as a website or public app.
Selling Below SSP: If you choose to sell below the SSP, this must not be done in a public-facing way. This could include:

  • Offering lower rates on a mobile app where users must download the app.
  • Providing discounts to logged-in users only, ensuring that these lower rates are not accessible to the general public.
  • Bundling these rates with other goods and services, like airfares or tours.

Key Considerations:

Compliance: Always ensure that your selling practices align with the SSP guidelines to avoid potential issues with hotel partners.
Flexibility: The ability to adjust pricing while considering the SSP allows you to optimize your revenue while remaining competitive.

Practical Example

Suppose a room has a base rate of $100 (retailRate:total) and an SSP of $115 for a hotel room. Here’s how you might use the "margin" parameter:

Net Rate (No Commission):

  • Request: { "margin": 0 }
  • Result: You sell the room at $100, earning no commission. Usually, net rates are used when you are the merchant of record, applying commission via an alternate method or bundling the room with other services.

Discounted Rate (5% Commission):

  • Request: { "margin": 5 }
  • Result: You sell the room at $105, earning a $5 commission. This might be used for a CUG where members get discounted bookings.

Suggested Rate (15% Commission):

  • Request: { "margin": 15 }
  • Result: The selling price becomes $115. You earn $15 as a commission. This rate can be sold publicly on a website.

⭐️ Note: If you offer a room below SSP, ensure that this rate is not publicly accessible (e.g., behind a login wall or in an exclusive app).

Conclusion

The "margin" parameter offers control over your pricing strategy, allowing you to set commissions while adhering to the hotel's SSP guidelines. Understanding how to use this feature effectively allows you to maximize your revenue opportunities and maintain strong relationships with hotel partners.

Updated 3 months ago