Rack Rate vs Net Rate: How Travel Agencies Price
Rack rate, BAR, net rate, commissionable rate and markup explained for agency owners, with a worked example and a simple way to set margins per sales channel.
· 6 min read · Nodes Travels team
Ask three suppliers for the price of the same hotel room and you may get three different kinds of number: a published price, a net price and a commissionable price. They can look similar on a spreadsheet, but they mean very different things for your margin, your tax and who your customer is really buying from. Mixing them up is one of the most common reasons a small agency sells a room at a loss without noticing.
This guide defines the main rate types in plain terms, shows how each one turns into a selling price, and explains how to set markups so they stay consistent across your website, your agents and any partners using your API.
The rate types, in plain terms
Rack rate is the full published price a hotel would charge a guest who walks in with no booking, no membership and no deal. It is a reference point more than a real price; few guests ever pay it, and many hotels rarely quote it outside of official tariff cards.
BAR, or best available rate, is the lowest unrestricted price a hotel is offering to the public for a given date and room type. It moves with demand, so it can change several times a day. When a customer compares your price with the hotel's own website, BAR is usually what they are comparing against.
Net rate is the price a supplier charges you, with no margin for you built in. You add your own markup and decide the selling price. Wholesalers, bed banks and many hotel APIs work on net rates.
Commissionable rate is a public price that already includes a commission for you. You sell at the stated price, and the supplier pays you a percentage, either deducted when you settle or paid after the stay. Your earnings depend on the supplier actually paying that commission, so track it.
Markup is what you add on top of a net rate. It can be a percentage, a fixed amount per booking, or a combination of both, and it may differ by product, route, season or channel.
Worked example: one room night, three ways
The figures below are made up purely to illustrate the arithmetic. They are not real prices from any hotel or supplier.
| Net rate + markup | Commissionable rate | Rack rate (reference) | |
|---|---|---|---|
| Supplier price to you | 100 (net) | 120 (public price) | 150 (published) |
| Your margin | Markup of 12% = 12 | Commission of 10% = 12 | Not a selling basis |
| Customer pays | 112 | 120 | Rarely charged |
| When you are paid | At sale (customer pays you) | On settlement or after the stay | - |
| Who sets the final price | You | The supplier | The hotel |
Example only. Taxes, payment-gateway fees and currency conversion are left out to keep the arithmetic clear; in real life each one reduces your margin.
What the example tells you
In this example your margin is the same 12 in both models, but the customer pays less in the net-rate model, which makes you more competitive against the hotel's own website. In exchange you take the payment risk and handle the customer yourself. In the commissionable model the customer pays more, the supplier controls the price, and your margin arrives later.
Notice too that the rack rate is useless as a pricing basis. If you advertise savings against a rack rate nobody pays, customers who check BAR will see through it quickly. Compare against real, current prices or do not compare at all.
How to set a markup you can live with
- 1
Start from your real costs
Add up what a booking really costs you: payment-gateway fees, staff time for changes and questions, currency buffer if the supplier bills in another currency, and a share of software and marketing. Your markup has to cover these before it earns anything.
- 2
Choose percentage, fixed or both
A percentage scales with price, which suits hotels and packages. A fixed amount suits low-price products where a percentage would earn almost nothing. Many agencies use a percentage with a minimum fixed amount.
- 3
Set it per channel
Retail customers, sub-agents and API partners should not see the same price. Agents need room for their own margin, and API partners usually expect a wholesale level.
- 4
Check against the public price
Run real searches for your top destinations and compare your selling price with BAR on the hotel's own site. If you are consistently above it, lower the markup or change supplier for that market.
- 5
Review monthly
Look at which products sold, at what margin, and which searches did not convert. Adjust in small steps rather than big swings.
Channels: B2C, B2B and API
Once you sell through more than one channel, one markup for everything stops working. A retail customer on your website should pay your full retail price. A registered sub-agent selling to their own clients needs a lower price so they can add their own margin. A partner calling your API usually wants a net-like price and adds everything on their side.
Nodes Travels handles this with a markup engine that works per channel (B2C, B2B and API), with rules per vertical and per route. Approved agents automatically see the B2B channel price when they sign in, so you do not have to maintain a separate price list for them. For flights, the margin you add is shown openly to customers as a convenience fee in the fare breakup, next to the airline fare and taxes, rather than hidden inside the fare. See the B2B booking engine for how the agent channel works.
Pricing checklist
- Every supplier labelled in your notes as net or commissionable
- Commission payments tracked and reconciled, not assumed
- Markup covers gateway fees, currency buffer and staff time
- Different markups for retail, agents and API partners
- Selling prices spot-checked against current public prices
- No savings claims against rack rates that nobody pays
Common questions
Is net rate always cheaper than BAR?
Usually, but not always. During promotions a hotel's own public price can drop below what a wholesaler offers. That is why you should compare your selling price with live public prices regularly.
Should I show my markup to customers?
You are not obliged to break down a hotel margin, but the total the customer sees at search should be the total they pay, apart from clearly shown taxes and optional extras. For flights, showing a separate service or convenience fee is common and builds trust.
What is a sensible markup percentage?
There is no single right number. It depends on your costs, your market and how price-sensitive your customers are. Work out your cost per booking first, then test a markup and watch conversion.
Can I use different markups for different destinations?
Yes, and you often should. Competitive city-hotel markets may need a thin margin, while niche resorts or packages you know well can carry more.
Set prices per channel
See how B2C, agent and API markups work together in one admin.