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Simple Percentage Uplifts

Avoid this common pricing mistake on the channels or suffer the consequences!

The Issue with Simple Percentage Uplifts – small mistakes can mean BIG losses.

When listing properties on sales channels like Booking.com, it’s standard practice to add an uplift to the booking price to cover the commission charged by these platforms. However, a frequent oversight occurs when the uplift is set directly as the percentage commission charged by the sales channel. For example, if Booking.com charges a 15% commission, the tendency might be to increase the listing price by 15%. While this might seem intuitive, it actually results in receiving less commission than intended.

An example. 2.7% = 15% less commission

To illustrate, let’s consider a base booking price of £1,000 (the amount you wish to receive after deductions). If you simply price scale by 15% for the channel, the new listing price becomes £1,150. However, when Booking.com applies their 15% commission to £1,150, they deduct £172.50, leaving you with £977.50. This results in a shortfall of £22.50 from your intended £1,000.

Your agreed commission with the owner is, say, 15% or £150 in this case. The owner receives £850 as agreed, you receive the remaining £127.50. That’s 15% less commission than you expect for that booking. The actual uplift scale should be a minimum of 17.7% to maintain your intended commission of £150. The difference in the price scale is only 2.7%.

Consider what this does to your profit, then amplify the impact across multiple properties and bookings. Not so little eh?

Is it time for a Maths lesson?!

There is a formula you can use to calculate reverse percentages to adjust prices correctly when accounting for deductions like a commission or discount.

The wrong way: Channel Price = £1,000 + (£1,000 x 15%) = £1,150. ❌
The right way: Channel Price = £1,000 / (1 – 0.15) = £1,177.

And so your ‘scale up’ percentage = (Channel Price – £1,000) / £1,000 x 100 = 17.7%

This accounts for the fact that the sales channel deduction is a percentage of the final price, not a fixed amount, so increasing by exactly 15% wouldn’t suffice. Make sense?

Try an online calculator

There are online calculators available that can help you calculate reverse percentages for situations like adjusting prices to account for commissions or taxes. Here’s one example at the time of writing:

Percentage Tools: Reverse Percentage Calculator

How to calculate the scale uplift percentage

Online calculators are helpful, but when using a Property Management System like iPRO, you’ll need to set a percentage scale, per channel and sometimes per property, to increase your prices by. You can use the formula above of course, but we’ve also created this reference sheet here, to save you some time.

Download the Reverse Percentage Cheatsheet here.

Remember these are minimum uplifts. You may wish to add more to account for additional costs or simply to improve your margins. By adjusting your calculation method, you can safeguard your margins and ensure the profitability of your listings on sales channels.

Teach your team

As an experienced short-term lettings professional, this probably seems obvious. However it may not be obvious to your staff. We’ve seen these mistakes occur and they can have a nasty impact if they’re left unchecked for too long.

Sales channels like AirBnB, Vrbo, Booking.com are a great source of new guests and bookings but they don’t care about your profit. It’s your job to train your staff and ensure that your prices are correct across every platform. Share this article with any member of your team who manages your prices.

Related article. Monitor your prices across channels!

There are many nuisances between the different sales channels and we frequently hear of problems and price errors. This typically happens when agents assume too much and check too little. Read this article to learn how to stop unexpected pricing errors on the sales channels.

andy
Channel Manager Channel Manager
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