Minimum stays on booking-site reservations
Whether a hotel or guesthouse should set a minimum stay on rooms sold through booking sites, and how to see what those stays earn after commission.
By Achekam · · 5 min read · For Hospitality businesses in South Africa, Nigeria, Kenya
A one-night booking through a big booking site looks like good news on the reservations screen. The room is filled, the guest arrives, and the night's rate goes into the revenue figures. But by the time the site has taken its commission and housekeeping has stripped and remade the room, a single night can earn far less than the rate suggested, and on a busy weekend it may have displaced a guest who wanted to stay longer.
That is why some hotels and guesthouses set a minimum stay on rooms sold through booking sites. This article looks at the reasoning, shows how to work out what a booking-site stay really earns, and explains how to set up the books in Achekam so the comparison between direct and booking-site guests is visible rather than guessed.
Why minimum stays exist on third-party bookings
Investopedia notes that some hotels require a minimum stay when rooms are booked through a third-party booking site, to compensate for the fees they pay that booking company. The logic is simple: commission is charged on every booking, but much of the cost of a stay, especially cleaning and laundry, falls on the changeover day. A longer stay spreads that fixed changeover cost over more paid nights.
Whether a minimum stay suits your property depends on your guests. A business hotel near an airport in Lagos or Nairobi may depend on one-night stays; a game lodge or a coastal guesthouse may already see mostly longer ones. The decision should come from your own figures, not from a rule of thumb.
Net room revenue: what a stay actually earns
RevPAR, revenue per available room, is a familiar hotel measure, but Investopedia cautions that an increase in RevPAR does not necessarily mean higher profits, because RevPAR measures revenue only and ignores expenses and the size of the hotel. A booking-site stay and a direct stay at the same rate look identical in RevPAR, even though one carries commission and the other does not.
Investopedia describes a refinement, adjusted revenue per available room (ARPAR), which takes the average daily rate, subtracts variable costs per occupied room such as cleaning, utilities and supplies, and adds additional revenue per occupied room such as room service. The same thinking can be applied to booking-site stays specifically.
A worked example in words. For a one-night booking-site stay, take the room rate, subtract the booking site's commission on it, subtract the cost of cleaning and preparing the room for the next guest, and subtract the room's utilities and supplies for the night. Add anything the guest spent on food and drink. Then do the same for a three-night booking-site stay, where the commission applies to all three nights but the changeover cost is incurred once. The difference between the two results is the case for, or against, a minimum stay. The Investopedia explanation of RevPAR covers RevPAR, its limits and the adjusted measure, including its note on minimum stays for third-party bookings.
Recording commission so it can be seen
That calculation only works if commission is visible in the books, not netted off against room revenue or buried in general expenses.
On Achekam, each business has its own double-entry ledger with a standard chart of accounts, and accounts can be added, renamed or switched off. Add an expense account for booking-site commission, and if you use more than one site, consider one account per site. Then record each site's commission statement as a supplier bill. A business records supplier bills line by line with VAT; a bill without a purchase order waits for approval before it posts, and it can be paid in full or in parts from a chosen bank account. How to read and record those commission statements is covered in recording the commission booking sites charge.
If room revenue from booking sites is also recorded in its own income account, separate from direct bookings, the books then show both sides of the comparison: what booking-site guests paid, and what it cost to get them.
Comparing direct and booking-site stays
Achekam's management accounts show an income statement for a chosen period beside the period before, and a balance sheet at period end, both added up from the business's own journals and exportable as PDF or CSV. One detail: the year-to-date preset starts on 1 January, not on the business's own year start.
With separate accounts in place, the income statement shows booking-site room revenue, direct room revenue and booking-site commission as separate lines. Set the season you care about as the period and compare it with the same season before. If booking-site revenue is rising but commission is rising faster, a minimum stay, or a push towards direct bookings, deserves a closer look. Measuring RevPAR from the books themselves is covered in working out RevPAR from the room revenue in your books.
Deciding when a minimum stay makes sense
Investopedia notes that comparing RevPAR with other hotels can be difficult, because their revenue and occupancy data may not be readily available, so management should be prepared to set internal targets. The same goes for minimum stays: compare against your own past performance, not a competitor's policy.
Questions to answer before setting one:
- Which nights? A minimum stay on peak weekends, public holidays and event dates protects the nights most likely to be in demand. On quiet weeknights, a one-night booking may be better than an empty room.
- Which seasons? In high season, a short booking can block a longer, more valuable one. In low season, it may be the only booking available.
- Which rooms? Larger suites with heavier cleaning costs may justify a longer minimum than standard rooms.
- Which channels? You can apply a minimum stay to booking-site sales only, leaving direct bookings flexible as a reason for guests to book direct.
Try it on one season
Pick your busiest coming season. Set up the commission and revenue accounts if you have not already, apply a minimum stay to booking-site sales on peak nights only, and compare that season's results with the same season last year. The figures will tell you whether to keep it, extend it or drop it.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
