Ask an operator what commission costs them and you will usually get an answer as a percentage of revenue. Fifteen per cent. Eighteen and a half. Whatever the blended number works out to once the guest fee, the host fee and the currency spread are all counted.
It is the right number in the wrong place.
Commission is charged against revenue, so we think about it against revenue. But nobody banks revenue. What an accommodation business actually keeps is what survives the consumables, the utilities, the rates, the insurance, the software and the staff. That number is much smaller — and it is the number every commission dollar is really taken from.
Which leads to a claim that sounds like an exaggeration and is not: a dollar of commission you stop paying is worth more to your bottom line than two dollars of new bookings — and for most operators, a great deal more than two.
This piece works through why, using one illustrative operator and one continuous set of figures, from gross booking revenue all the way down to net profit. Every table below derives from the same model, and the benchmark rates are the ones we already publish on our business case page.
An accommodation business can improve its profit in two broad ways.
It can sell more. More nights, higher rates, more properties, a better shoulder season. This is the route almost every operator thinks about first, because it is the one that feels like progress.
Or it can keep more of what it already sells. Same guests, same nights, same calendar — a larger share of each booking landing in the business.
Both add money. They do not add it in the same way, and the difference is the whole argument.
New revenue comes with luggage. Another booking means another turnover, another set of linen through the wash, another round of consumables, another slice of wear on the furniture, another guest to answer at nine on a Sunday evening — and, if it came through a platform, another commission. Whatever is left after all of that is what reaches the bottom line.
Commission saved comes with nothing. The guest was already coming. The night was already sold. The apartment was already going to be cleaned and the laundry was already going to be washed. Every one of those costs has been paid for by a booking that already exists. Take the commission off that booking and almost the entire amount drops straight through to profit.
New revenue arrives at your margin. Commission saved arrives at close to one hundred cents in the dollar.
That is the mechanism. The rest of this article puts numbers on it.
The operator we are going to follow
Meet an entirely hypothetical business: six self-catering apartments, run by an owner with one part-time assistant and a cleaning team. It is deliberately ordinary — big enough to have real costs, small enough that every line is recognisable.
Two assumptions before the numbers, because both matter. The apartments are owned outright: no rent, no bond, no mortgage against any of them. And cleaning and laundry are recovered from the guest through a $90 cleaning fee per stay, so they wash through rather than sitting in the accounts as a cost. Between them, those two assumptions produce an unusually healthy business — which is deliberate. It is the hardest case for the argument in this article to win, and we will come back to why that matters to you.
It sells 1,500 room-nights a year at an average of $200 a night, which is $300,000 of gross booking revenue across about 300 stays of five nights each. Today, every one of those bookings comes through a major platform, at a blended platform-related cost of 18.5% — the benchmark we use throughout the site.
Here is the full year.
| Line item | Amount | % of gross revenue |
|---|---|---|
| Revenue | ||
| Gross booking revenue (1,500 nights at $200) | $300,000 | 100.0% |
| Cost of sale | ||
| Platform commission at 18.5% | −$55,500 | 18.5% |
| Variable costs (300 stays) | ||
| Cleaning & laundry ($90 a turnover, recovered by a $90 guest cleaning fee) | $0 | — |
| Guest consumables & supplies ($25 a stay) | −$7,500 | 2.5% |
| Maintenance, wear & replacement ($20 a stay) | −$6,000 | 2.0% |
| Variable utilities ($12 an occupied night) | −$18,000 | 6.0% |
| Total variable costs | −$31,500 | 10.5% |
| Fixed costs | ||
| Rates, levies & insurance | −$18,000 | 6.0% |
| Base utilities, internet & waste | −$9,000 | 3.0% |
| Staff & guest support | −$42,000 | 14.0% |
| Marketing, photography & listing content | −$6,000 | 2.0% |
| Software, accounting & bank charges | −$6,000 | 2.0% |
| Total fixed costs | −$81,000 | 27.0% |
| Net profit | $132,000 | 44.0% |
Illustrative figures for a hypothetical business, chosen to be realistic rather than representative. The apartments are assumed to be owned outright, so no rent, bond or mortgage appears; cleaning and laundry are assumed to be recovered in full by a $90 guest cleaning fee. Your own ownership position, staffing and commission rate will differ — the method matters more than our numbers.
A hundred and thirty-two thousand dollars on three hundred thousand. A 44% net margin, and a business most operators would be pleased to own.
Now look at the cost of distribution sitting inside it. That business pays $55,500 in commission, the equivalent of 42% of its net profit. It is the single largest line in the accounts. Nothing else comes close.
Scenario A: grow gross revenue by 10%, then 15%
The operator decides next year is a growth year: 10% more revenue, then a stretch case of 15%.
| Line item | Revenue up 10% | Revenue up 15% |
|---|---|---|
| Additional gross booking revenue | +$30,000 | +$45,000 |
| Platform commission on it, at 18.5% | −$5,550 | −$8,325 |
| Guest consumables & supplies (30 / 45 extra stays) | −$750 | −$1,125 |
| Maintenance, wear & variable utilities | −$2,400 | −$3,600 |
| Fixed base grows with the business (capacity, staff hours, insurance, marketing, software) | −$8,100 | −$12,150 |
| Additional net profit | +$13,200 | +$19,800 |
| Net profit for the year | $145,200 | $151,800 |
Cleaning and laundry on the extra stays are covered by the guest cleaning fee, as in Table 1, so they do not appear here as a cost. The fixed base is assumed to grow in proportion to the business, which is what happens when growth of this size comes from more property, more guests and more hours rather than from filling nights that were already going spare.
Fifteen per cent more revenue. Forty-five extra stays to sell, clean, service and support. An extra $45,000 through the bank account.
And $19,800 more profit.
The operator finished the year running a noticeably bigger, busier company for a proportionally bigger profit, and paid $8,325 of fresh commission for the privilege.
Scenario B: keep the commission on bookings you already have
Now the other route. No growth at all. Same 1,500 nights, same 300 stays, same $300,000, same guests. The only change is how a slice of those bookings is taken.
The operator looks through a year of reservations and asks a single question of each one: did a platform actually sell this, or did it just process it?
- Repeat guests who have stayed before and came back on purpose — about 12% of revenue, or $36,000.
- Corporate and contract bookers travelling on predictable patterns — 8%, or $24,000.
- Referrals and word of mouth from previous guests — 5%, or $15,000.
- Peak dates offered to the customer list first, before the calendar opens everywhere else — 5%, or $15,000.
Thirty per cent of the year: $90,000 of booking value, moved from platform checkout to the operator’s own site. Not one new guest. Not one extra night. Not one extra cleaning turnover.
Direct is not free, so put the real costs in.
| Line item | Amount |
|---|---|
| Booking value moved to direct (30% of $300,000) | $90,000 |
| Platform commission no longer paid, at 18.5% | +$16,650 |
| Payment gateway fees on direct bookings, at 3% | −$2,700 |
| PrimePlaces.ai subscription ($39 × 12) | −$468 |
| Additional net profit | +$13,482 |
| Net profit for the year (on unchanged revenue of $300,000) | $145,482 |
The 3% gateway allowance and the $39 monthly subscription are the same figures used on our business case page, where moving roughly $252 of bookings a month already covers the subscription. This operator is moving about $7,500 a month.
Net profit goes from $132,000 to $145,482 and the net margin rises from 44.0% to 48.5% on exactly the same revenue, the same guests and the same amount of work. The business did not get bigger. It got better at keeping what it earns.
Side by side
Put the two routes next to each other. The interesting part is not which number is larger — it is what each number costs to get.
- 45 extra stays to win, clean and service
- $8,325 of new commission paid
- Costs and workload rise with the revenue
- Depends on demand you do not yet have
- No new guests and no new nights
- $16,650 of commission simply not paid
- Costs and workload essentially unchanged
- Worth the same as a 10% bigger year
- Depends only on bookings you already have
| Measure | Today | A: +10% revenue | A: +15% revenue | B: 30% direct |
|---|---|---|---|---|
| Gross booking revenue | $300,000 | $330,000 | $345,000 | $300,000 |
| Extra stays to sell and service | — | 30 | 45 | 0 |
| Commission paid | −$55,500 | −$61,050 | −$63,825 | −$38,850 |
| Additional net profit | — | +$13,200 | +$19,800 | +$13,482 |
| Net profit | $132,000 | $145,200 | $151,800 | $145,482 |
| Net margin | 44.0% | 44.0% | 44.0% | 48.5% |
Scenario A produces the larger number. It should: it is a 15% larger business. The honest comparison is not which figure is bigger, but what each one asks of you. So ask the question the other way round. How much growth would this operator need to match Scenario B by selling more?
Each additional dollar of gross revenue delivers 44 cents of profit. Scenario B produced $13,482. Divide one by the other and you need about $30,600 of additional gross booking revenue — taking the business from $300,000 to $330,600. Roughly 10% growth, in one year, from the same six apartments.
Or, put in operational terms: about 153 extra room-nights and 31 extra stays, each of them to be found, sold, cleaned, serviced and answered — against a decision to take a slice of the reservations you were already going to receive through your own checkout instead of someone else’s. One of those is a plan. The other is a switch.
The revenue-equivalence multiplier
That $30,600 figure is not a quirk of our example. It is a ratio you can calculate for your own business in about ten seconds, and it is worth knowing.
The arithmetic runs like this.
- A dollar of commission saved is a dollar of profit. Nothing new had to be bought to earn it, so nothing is deducted from it.
- A dollar of extra gross revenue is only worth your net margin in profit — 44 cents, in our debt-free operator’s case — because the rest is consumed by the costs that grew alongside it.
- So to produce $1 of profit through growth, you need $1 ÷ 0.44 = $2.27 of extra gross revenue.
Every dollar of commission this operator stops paying does the same work as more than two dollars of new sales.