Setting a Floor Rate You Never Go Below

A floor rate is not the price you hope to get. It's the price below which a booking costs you more than the empty night it filled.

Last updated: October 3, 2026

Hosts who drop a rate to fill a quiet week are usually guessing at where the floor is. A floor rate isn't a guess and it isn't a target; it's the rate below which a booking leaves you worse off than the empty night it replaced. Work it out once from your own costs, and it becomes the line every discount and every low-season rate has to clear.

Key Takeaways

• A floor measures cost, not ambition. It's the point where filling a night stops being worth more than leaving it empty.
• It's built from two costs. The fixed cost each available night carries, plus the variable cost each stay adds.
• Commission changes where the floor sits. A channel's cut is taken before your payout, so the floor belongs on the gross rate, not the net.
• A floor is a boundary, not a public rate. It caps how low a discount can go; it isn't the rate you advertise.
• Costs move, so the floor moves. Review it when cleaning, utilities or subscriptions change, not only once a year.

What a floor rate actually measures

A floor rate answers one narrow question: at what rate does a stay stop contributing anything toward the costs that run whether or not anyone books?

Every property has costs that arrive with the month regardless of occupancy. Insurance, standing utility charges, a broadband line, any licence fee that repeats, and software subscriptions. Divide the monthly total by the nights you could realistically sell, and each available night carries a share of that. An empty night carries its share just as a booked one does. That's the quiet cost a low rate fails to cover.

Then there's the cost a stay adds. A turnover's cleaning and laundry, the consumables a guest uses, and the channel's commission on the booking. These only appear when a night sells, but they appear every time.

The floor is the rate at which the second group still leaves enough to cover the first. Sell above it and the night contributes. Sell below it and the booking has cost you money to fill a night you would have been better off leaving empty. That's the whole idea, and it's why a floor is a cost, not a wish.

It helps to separate the floor from two numbers it gets confused with. Your target rate is what you aim to sell most nights at. The market rate is what nearby listings happen to be asking. The floor sits below both, and it doesn't move when they do. A weak week can pull your selling rate down toward the floor, but it shouldn't push the floor down with it.

How to work out your own floor

The arithmetic is short, and most of the work is in collecting the right costs rather than in the division itself.

Start with the fixed monthly total. List everything that's charged whether or not anyone stays: insurance, standing utilities, broadband, any repeating local licence fee, and software. LOCALSBNB comes in two price tiers — $4.5 per room per month billed yearly, or $7 per room per month billed monthly — and whichever tier you use, that line belongs in this list like any other fixed cost.

Decide how many nights a month you can honestly sell. Not your best month; a normal one. Seasonal properties should use a low-season figure rather than a peak one, because the floor has to hold in the week you're tempted to discount.

Divide the fixed total by those nights. That gives you the fixed cost each available night carries. It's often smaller than hosts expect, which is useful to see, and it's the number a low rate has to beat before it counts as profit.

Then add the cost each stay brings. A turnover's cleaning and laundry, consumables, and the channel's commission. Commission is the awkward one, because it's usually a share of the rate rather than a flat amount, so it shrinks whatever you charge. The practical move is to treat the floor as a gross figure: the rate a guest pays, out of which commission, variable costs and the night's share of fixed costs all have to fit. Set it that way and you don't need to redo the arithmetic every time a commission arrangement changes.

Add the variable cost to each night's share of fixed cost, then check the result against the gross rate you'd need so that what's left after commission still covers both. The answer is your floor. It won't be a round number, and it shouldn't be. A round number usually means someone picked the rate first and worked backwards.

Where a floor rate belongs in your setup

A floor is only useful if it's in the place where rates get set, not written in a notebook beside one.

Put it at the bottom of your rate range for each property. Everything above that line is yours to price by demand; everything below it stays out of bounds, however quiet the week looks. That single line turns a vague rule of thumb into a boundary the rest of your pricing can respect.

Then let it govern discounts. A last-minute reduction, a long-stay discount or a low-season rate are all ways of moving your selling rate down, and the floor is the point past which none of them may go. When a discount would cross the floor, the honest answer is that the night is better left empty, because filling it at that rate simply moves the loss from one column to another.

Keep the floor consistent across the channels you sell on. If one channel can go below it and another can't, the same night is being sold at two different economics, and the cheap one quietly sets your real floor. LOCALSBNB's calendar shows each connected channel's source price and status, so a rate that has slipped below the line on one channel is visible before it becomes the rate you're known for.

Finally, keep the figures behind the floor somewhere you can reach them. A floor is only as good as the costs it was built from, and those costs are easier to update when they sit in one place rather than across three statements.

Reviewing the floor when costs move

A floor isn't a permanent number. It's a snapshot of your costs, and it goes stale the moment those costs change.

Review it when a cost changes, not only on a calendar. A new cleaning rate, a utility price rise, an insurance renewal or a change in the software tier you're on all move the arithmetic. Rebuilding the floor takes a few minutes, and it's worth doing at the moment the cost moves, while you still remember what changed.

Review it before each low season too. The variable side of a floor often shifts with the season, and the nights-you-can-sell figure is at its most honest in a quiet month. Setting the floor in a busy week and then selling into a quiet one is how hosts end up filling nights they would have been better off leaving empty.

Then check the floor against what you actually sold. If you've been selling below it for a while, either the floor is wrong or the pricing is, and both are worth knowing. localsbnb.com shows each connected channel's source price against the nights it produced, so a run of sub-floor nights is something you can see rather than infer.

FAQ

Is the floor rate the same as my lowest rate?

They're close but not identical. Your lowest rate is the number you set in a channel as the cheapest night. Your floor is the number the maths produces. Use the floor to set the lowest rate, and the lowest rate should never sit below the floor. If it does, the channel is selling nights you'd rather leave empty.

Should the floor be the same for every property?

No. Each property carries its own fixed costs, its own variable costs and its own realistic number of sellable nights, so each one has its own floor. A shared floor across a portfolio will be too high for the cheap property and too low for the expensive one.

What if a booking below the floor protects a good review?

It rarely does. A guest paying below your floor is paying for a stay whose costs aren't covered, and the review that follows is about the stay, not the discount. Protecting occupancy with sub-floor nights trades a small, known cost for a larger, quieter one. Decide the floor once and let it hold.

A floor rate is the least glamorous number in pricing and one of the most useful, because it's the one you can defend with your own figures. localsbnb.com keeps availability, the four connected channels' source prices and the numbers behind them together, so the floor you set is visible next to the nights that stayed above or fell below it.

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This article is general guidance for hosts rather than financial advice. Costs, commission and local rules differ by place and change over time; check your own figures and the current terms of each platform you use.