Margin
What is the meaning / definition of Margin in the hospitality industry?
Within revenue management in the hotel industry, Margin is often used to refer to the commission or fee OTA are making on your room rate.
Here an example on how we can calculate the margin or commission fee a 3rd party travel agency website makes on the price of your hotel room:ย A room sells for 100โฌ per night, and a guest books a one night stay on a OTA website the hotel works with. The total amount collected from the guest is 100โฌ.ย The OTA charges a 15% commission, which means you will have to pay him โฌ15 and you will be left with โฌ85.
In case an OTA work on a commissionoable model, the guest will pay the hotel directly, and a commission is charged by the OTA to the hotel upon completion of the stay.
The Formula for the calculation OTA Margin is:
- Margin in โฌ/$ = Room Rate x % Commission
- 100โฌ x 15% = 15โฌ
Note: Hotels should be aware that on cancelation or no-show fees they have to be careful to pay commission only over the fee charged to the guest and not the complete stay.
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See also:
Synonyms
- Margin
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About the Author:
As CEO and Founder of XOTELS, Patrick Landman has made it his mission to turn hotels and resorts into local market leaders. XOTELSยด diverse expertise and deep-knowledge across revenue management consulting, hotel management, and hotel consulting, enables us to drive results for independent boutique hotels, luxury resorts, and innovative lodging concepts. Below you will find opinion articles written by Patrick Landman.