What is the meaning / definition of Markup in the ?

Within in the industry Markup is used to refer to the amount an increases your net room rate, to set the sell rate.

OTA that work with a merchant model work with hotels on the basis of . This means a hotel gives the OTA a rate, and the OTA will mark it up (increase) to set a sell rate.

For instance the hotel gives the OTA a rate of €80, and the OTA marks it up with €20, to sell at €100. In this case the mark-up % is 25%.

So the formula of Markup is:

Markup = Selling Price – Net Room Rate

Markup % = Markup / Net Room Rate

A common mistake made in the hotel industry is to confuse markup with . This is because OTA working with a net rate model also use a commission in the or distribution agreement with hotels. If we take the example above with a markup of €20 and a final sell rate of €100, the margin in this case would be 20% (while the markup is 25%).

Here some more formulas to put this in perspective:

  • Net Rate = Sell Rate / (1 + Markup) >>> €100 / 1.25 = €80
  • Net Rate = Sell Rate x (1 – Margin) >>> €100 x 0.8 = €80
  • Sell Rate = Net Rate x (1 + Markup) >>> €80 x 1.25 = €100
  • Sell Rate = Net Rate / (1- Margin) >>> €80 / (1 – 0.2) = €80 / 0.8 = €80

It is just math ,-) , and simply depends where you start your calculation … at the sell rate or the net rate.

See also:

Synonyms

  • Mark-up

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