Financials glossary
This article helps you understand important industry-specific terms related to pricing, fees, revenue, and financial management in the rental property space.
Warning: Please note that this article is designed specifically for hosts. If you are a guest seeking assistance, we recommend visiting support.huswell.com/stay for the most relevant information.
Advance payment: a portion of the total rental amount that a guest pays before their stay.
Advertised price: the price per night a revenue manager publicises to potential customers.
Amenity fee: an added fee for using and accessing certain amenities.
Average Daily Rate (ADR): a metric that represents the average rental income per occupied room in a specified period of time. It is calculated by dividing the average total revenue earned by the number of occupied properties.
Average Rate Index (ARI): a metric that compares a property’s average daily rate with that of competing properties over a certain time period. This ranking indicates to property managers whether they should change or maintain their current rates.
Average room rate: another term for average daily rate (ADR).
Bartered services: services property managers receive in exchange for a stay at their property rather than a payment.
Best Available Rate (BAR): the lowest rate available to guests and can fluctuate throughout a week or even a day.
Best rate guarantee: the promise that the rate advertised is the lowest rate available.
Booking curve: a visual map of the increase or decrease in bookings over a certain period of time, indicating to property owners and managers when and how to adjust rates and availability to maximise bookings.
Booking fee: a charge for using a platform to make a booking.
Booking policy: the terms and conditions surrounding a reservation pertaining to payment requirements, cancellations, and damage deposits.
Break-even formula: securing enough bookings per month to break even on your mortgage payments.
Break-even point: the point at which monthly rental income is enough to cover all the operating expenses and bills associated with ownership and maintenance of the property.
Channel fee: the amount hosts must pay to an online booking channel in exchange for listing their properties on that channel.
Cleaning fee: an additional fee guests pay to cover cleaning expenses accrued due to their stay.
Comparative market analysis (CMA): a look at the pricing of similar properties in the area that helps property managers or owners measure the validity of their pricing.
Competitive set: a collection of similar rentals that property managers compare to their properties for indicators about their offering, pricing, and overall performance.
Custom fees: host-mandated fees beyond those that are traditionally required.
Damage deposit (also called security deposit): a specific sum of money paid by the guest and held by the host to be used in the event of damage to the property, and to be returned to the guest if no damage is caused.
Damage waiver fee: the less-expensive, non-refundable version of a damage deposit, charged by some hosts along with the basic reservation fee to cover costs incurred by accidental damage.
Default rate: the base rate for a property when it isn't raised on account of a holiday or event.
Deposit refund: the process of returning the deposit a guest has paid.
Down payment: a percentage of the total reservation fee that is paid by the guest at the time of the initial booking.
Dynamic pricing: the concept of changing a property's nightly rate based on fluctuations in demand, in order to maximise revenue and occupancy.
Escrow Account: an account managed by a trusted third party that holds payments during a transaction between two or more parties.
Fair Market Value (FMV): the price that an informed consumer would consent to pay for a property, given the average rates of similar properties on the market.
Fixed-rate/Fixed-term mortgage: a mortgage with an interest rate that remains static for a specified period of time.
Gross booking revenue: the total revenue earned from bookings, including the portions that will later be deducted for taxes and other charges.
Guest fee: a general term to refer to charges beyond that of the primary booking fee, such as cleaning or service fees.
Homeowner’s insurance: a policy that protects homeowners in the event of loss or damage to their homes or properties.
Investment property loan: a loan to finance the renovation of a property that will be sold or rented out.
Length of Stay Pricing: a pricing strategy that accounts for the number of nights reserved and usually decreases the nightly rate for each night added.
Low season: a time of year during which travel is less popular, resulting in fewer bookings for property managers and generally prompting them to lower their prices to stay competitive.
Markup: a price increase, usually made to compensate for OTA fees or to yield more revenue when demand is high.
Merchant of record: the entity that is authorised to process guest transactions.
Net rate: the total revenue a property manager earns per booking, once commission has been deducted.
Non-refundable rates: pricing for reservations that cannot be refunded and are generally lower than refundable rates.
Online payment service: platforms that enable payments to be made instantly via the internet.
Owner revenue: the total earnings of the property owner once the property manager has been paid.
Payment method: the means through which the guest submits a payment to the host.
Payment Processor /Payment Gateway: a system that collects and processes payments.
Payment scheduling: the process of enabling a payment to be divided, and each segment to be paid at a specified time.
PCI compliance: the measures that must be taken to protect consumers' financial information.
Pet deposit: a payment required only of guests bringing pets along with them that is returned if the guest leaves the property damage-free.
Pet fee: a non-refundable extra fee imposed on guests arriving with pets.
Pool heating fee: an extra charge to guests who wish to heat the property pool or hot tub.
Portfolio financing: the practice of financing a property through the use of one's portfolio or a portion thereof as collateral.
Price per guest: a pricing strategy wherein prices increase or decrease according to the number of guests in the party.
Promotions: appealing discounts or add-ons offered by hosts to encourage bookings.
Property management cost: the total of all expenses involved in managing a rental property.
Qualified rate: a discounted rate given to guests that meet specific criteria.
Quote: the price for a reservation offered to a prospective guest.
Rack rate: the listed price of a property.
Rate parity: a legal agreement between a property manager and an OTA, requiring the former to list the same rates across all distribution channels.
Refundable booking: a reservation that qualifies for a refund under specific circumstances.
Rent: the sum of money a tenant must pay a landlord to reside on the property.
Rental Discount: a discount awarded to tenants who meet a specific deadline when paying rent.
Reservation deposit: a portion of the total reservation fee or an extra refundable fee that must be paid upon booking in order to confirm the reservation.
Return on investment (ROI): a measure of an investment's gains relative to its costs.
Revenue management: the process of utilising various measures to organise and maximise revenue.
Revenue: another word for income or how much money a business makes.
RevPAR: revenue per available room, a performance metric calculated by multiplying the average daily room rate (ADR) by its occupancy rate, or dividing the total amount of revenue by the number of available nights.
ROR: an acronym for rates, occupancy, and reviews, which are three elements a property manager must consider prior to making an investment.
Sales tax: a tax that must be collected from guests by property managers operating in most US states.
Scam: a fraudulent scheme carried out for monetary gain.
Seasonal rates: rates that vary according to the season and its level of demand.
Security deposit: a payment made by the guest to the host to cover costs of potential damages and refunded to the guest if no damages are incurred.
Sweat equity: contribution to a venture in labour rather than funding.
Travel insurance: insurance travellers can purchase to cover them in instances of illness, property loss, or other unfavourable circumstances that can occur during their travels.
Weekend pricing: rates that apply to weekend reservations and are generally higher due to increased demand.