Home » WHAT IS THE MARK UP OR NET PRICE MARGIN IN THE HOTEL SECTOR?
WHAT IS THE MARK UP OR NET PRICE MARGIN IN THE HOTEL SECTOR?

WHAT IS THE MARK UP OR NET PRICE MARGIN IN THE HOTEL SECTOR?

The markup or net price margin in the hospitality industry refers to the additional percentage that is added to the cost of products or services to determine their selling price to the customer. It is a key measure for calculating the profitability of a business in the hospitality industry. Not to be confused with Hotel […]

The markup or net price margin in the hospitality industry refers to the additional percentage that is added to the cost of products or services to determine their selling price to the customer. It is a key measure for calculating the profitability of a business in the hospitality industry.

Not to be confused with Hotel Revenue Margin. Markup is calculated using the following formula:

Markup=(Selling Price-Cost)×100

In simple terms, this markup is the difference between the selling price and the cost, expressed as a percentage of the cost. This additional percentage helps to cover overheads such as salaries, rent, utilities, advertising and other operating costs, as well as to generate profits for the business.

It is important to note that the markup may vary depending on the type of product or service, the competition in the market, the location of the business and other factors. In addition, markup should not be confused with profit margin, which is calculated as a percentage of the selling price and is expressed as:

Profit Margin=(Selling Price-Cost)×100

Both concepts are important for business owners in the hospitality industry to ensure effective financial management and adequate profitability as well as other definitions such as the foc of a hotel.

 

DMC or DESTINATION MANAGEMENT COMPANY

A company specialising in destination management is known as a DMC or Destination Management Company.

These companies are experts in providing local and logistical services to visitors and tourists travelling to a particular location. The responsibilities of a DMC may include:

  • Event Planning: Organising and coordinating events, conferences, meetings and special programmes.
  • Transportation: Manage transportation services, including airport transfers, car rental and local transportation services.
  • Accommodation: Book and manage accommodation for tour groups, conferences or events.
  • Activities and Excursions: Coordinate and offer tourist activities, excursions and local experiences.
  • Local Advice: Provide detailed information on destinations, tourist attractions and local cultural aspects.
  • Logistics Management: Manage logistical aspects such as permits, translators, catering services, among others.

DMCs are valuable for travel and event companies, as they have specialised knowledge of the region in which they operate, allowing them to offer customised services tailored to the specific needs of clients.

These companies act as intermediaries between local service providers and event or travel organisers, facilitating a more pleasant and efficient experience for visitors as well as a possible fam trip.

 

WHAT IS CTD or CLOSURE TO DEPARTURE?

CTD stands for Closed to Departure and represents a specific set of days during which guests cannot make reservations with the corresponding check-out date. This practice is common in the hotel and lodging industry, and its implementation aims to effectively manage room availability and optimise operational planning.

The concept of “Closed to Departure” is based on the idea of blocking certain days for outbound bookings, which can be strategic for a number of reasons. One of the main reasons is to allow housekeeping and maintenance staff to perform essential tasks without the pressure of having to prepare rooms for new guests immediately after others have checked out.

This strategic approach helps accommodation establishments maintain high standards of cleanliness and ensure that rooms are in the best possible condition for new guests.

It also provides flexibility to carry out scheduled repairs or renovations without affecting the guest experience. By closing bookings for certain days, staff can concentrate on maintaining and improving the quality of the facilities, which contributes to overall guest satisfaction.

Another key benefit of the Closure to Departure practice is the efficient management of demand and supply. By limiting availability in certain periods, hotels and establishments can create a sense of urgency and exclusivity, thus encouraging early booking and planning by guests.

The importance of CTD

This strategy is particularly effective during periods of high demand, special events or tourist seasons, allowing hotels to maximise revenue and ensure optimal occupancy.

It is also useful for managing capacity and avoiding oversaturation situations. If a hotel anticipates an exceptionally high flow of guests on certain days, closing reservations for check-out on those specific dates will help maintain an appropriate balance between supply and demand, avoiding potential inconvenience to guests and improving operational efficiency.

This practice in the hotel industry is therefore a valuable strategy to ensure service quality, maintain infrastructure and effectively manage demand and supply.

Although with a short-sighted approach you may tend to think that you are losing money, lowering your mark up. By blocking certain days for outbound bookings, properties will optimise their operations, delivering exceptional guest experiences and maintaining strategic control over occupancy and revenue.

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