Pricing a management fee model

Start with what the fee has to cover

Before choosing a percentage, list what you actually do for a property in a normal month, and what you do in an abnormal one. The normal list is usually short: pricing and calendar management, guest messaging, coordinating turnovers, handling one or two small issues, and closing the month. The abnormal list is where margin goes: a boiler failure, a damage claim, a difficult guest, a mid-tenancy owner change of plan, a listing that needs rebuilding after a bad review.

Write both lists down. Then mark each item as in-fee, chargeable, or "we do not do this". That third category is the one most operators never write down, and it is the reason scope creeps.

Work out your cost to serve

You cannot price a fee without a per-property cost. Build it from time, not from feel. For one month, log the minutes: messaging, cleaner coordination, calendar work, supplier chasing, the close. Multiply by a loaded hourly rate — the rate that includes employer costs, software, insurance, and the time you spend on the business rather than in it.

Then add the costs that are not time: the share of software per property, the cost of carrying a float for supplier payments, and an allowance for the abnormal month. If you have no history for the abnormal month, treat it explicitly as an assumption and revisit it after a year rather than pretending it is zero.

Now you have a floor. A property whose fee does not clear that number is being carried by the rest of the portfolio, and you should know which ones they are by name. Costs and analytics in HostHQ.

The three shapes, and how each one backfires

Percentage of revenue

The default, and the easiest to sell: your interests and the owner’s point the same way, and nothing is owed in a month with no bookings. It also means your income tracks seasonality exactly, including the months where the work does not fall.

How it backfires: a quiet winter costs the same to service as a busy August but pays a fraction. Low-ADR properties in high-turnover locations generate the most work per pound of revenue, so a flat percentage systematically overcharges your best properties and undercharges your most demanding ones. It also punishes you for dropping rates to fill a gap, which is exactly the moment you want to be free to do it.

Flat monthly fee

Predictable for both sides, trivial to invoice, and it prices the work rather than the outcome. Owners with strong-performing properties like it. It also removes any incentive for you to push revenue, which sophisticated owners notice.

How it backfires: in a bad month the owner is paying you out of a smaller pot, and that is when the fee feels expensive and the relationship gets tested. A flat fee needs a clear, written statement of what is included, or scope creep eats the margin quietly.

Tiered or hybrid

A floor plus a percentage above it: the floor covers your cost to serve, the percentage keeps the incentive aligned. Or a percentage that steps down as revenue rises, which rewards owners whose properties are easy to run.

How it backfires: complexity. Every band is a clause you have to explain, a calculation the owner has to trust, and an edge case at the boundary. Two tiers is usually the most a portfolio can carry without generating a query every month. If you cannot express the model in one sentence on a statement line, it is too complicated.

What to charge for separately

The fee should cover the normal month. Some things are better handled as their own charge, because bundling them either inflates the headline fee or quietly destroys margin:

• Onboarding a new property — photography, listing build, inventory, key handling. It is real, one-off work, and it is the first thing a departing owner disputes if it is hidden in the monthly fee.
• Project work — a refurbishment, a furniture replacement programme, a change of use. Charge on time or a fixed quote, agreed in writing before it starts.
• Out-of-hours callouts beyond an agreed number, where you are paying someone else to attend.
• Supplier coordination on large works, where the coordination itself is a significant cost.

Whatever sits outside the fee needs to appear in the agreement with a rate, not just a promise to discuss it. "Charged at cost plus a coordination fee" with the percentage named is enough.

Changing a fee on an existing portfolio

Repricing is where portfolios are lost. A few things make it survivable.

1. 1Give more notice than the contract requires. Notice costs you nothing and buys goodwill you will need.
2. 2Change one variable at a time. A new rate and a new scope in the same letter reads as a rewrite.
3. 3Lead with what changes for them, not with your costs. An owner is not moved by your wage bill; they are moved by what they get.
4. 4Show the effect on a real month of their own numbers, not on an example. Vague increases feel larger than they are.
5. 5Offer a version that keeps their current rate in exchange for something you want — a longer term, a direct debit, or a reduced scope.

Expect to lose some properties. The ones that leave over a modest, well-explained increase are usually the ones nearest your cost floor, which is information rather than a loss.

Before you publish a fee