The owner who is 40% of my revenue wants to renegotiate down to 12%

Question

Eleven listings under management at 18% of net rental revenue. Portfolio does about $1.1M in bookings, so the fee line is roughly $198k. One owner holds four of those units, about $420k of the gross, which is $75k of my fee revenue and 38% of the business.

He wants 12%, and he wants to contract his own cleaners directly instead of going through my crew. That's a $25k cut on its own, and losing the cleaning coordination takes away the piece that keeps my review scores where they are.

Complicating it, the city just moved to a registration cap with no new permits issued. His four are all permitted. So my supply of replacement doors in this market is basically frozen, and he knows it.

I've thought about a tiered fee by door count, a per unit monthly floor, and unbundling services so 12% buys less. What I can't tell is which of those he'll actually accept and which one wrecks my operation.

Rena Expert · Accepted Answer

Price the loss of cleaning control before you price the percentage, because that's the expensive concession and it's the one he framed as a side detail. Turnover quality drives review scores, review scores drive placement and rate, and your rate performance is the entire argument for 18%. If his cleaners are scheduled by him and one of them misses a same-day flip, the one star review lands on the listing you manage and the revenue drop shows up in your next fee statement. If you concede cleaners, concede them with a written standard, a checklist, photo verification on every turn, and a clause that removes your performance guarantee when a turn isn't done to standard.

On structure, a volume tier is the cleanest thing to offer because it gives him a real reason and it's defensible to your other seven owners, who will find out. Something like 18% on the first two units for an owner and 14% on units three and up gets you to about $63k on his four rather than $50k, and it doesn't reset the whole book to 12%. Pair it with a monthly per-unit floor, maybe $250, so a soft February doesn't hand you a $900 month on four properties.

The permit cap cuts differently than you're reading it. Frozen supply raises the value of every existing permitted door, which means his four are worth more and your contract on them is worth more, and it also means your seven other owners can't be replaced by new entrants either. Your book got scarcer at the same time his did. That's leverage you actually have, provided your agreement has a term and a notice period rather than month to month.

The thing I'd check tonight is whether the cap ties the permit to the owner or to the property on transfer, since that varies by ordinance and it determines what happens if he sells. Read the ordinance text, and have a local attorney read it if the language is ambiguous.

karen_whitfield · Answer

Anyone with 38% of your revenue in one hand is going to renegotiate again in two years. Whatever you agree to, the real work is the seven other owners plus finding a door somewhere the cap doesn't apply.

priya_n21 · Answer

The unbundling option sounds appealing until you have two service levels to remember. 12% buying less means someone tracks what he did and didn't buy, every month, and that someone is you. I'd rather take the volume tier and keep one operating standard.

megan_doyle15 · Answer

Why does he want his own cleaners? If it's cost, and the guest pays the cleaning fee anyway, he isn't saving anything. If he thinks your crew is doing a bad job, then the 12% is a pretext and the conversation is really about the last complaint he got.

luis_carrera · Answer

rigging's question is the one I'd ask first. There's a third possibility though, which is that a competitor quoted him 12% all-in and he's shopping. Worth finding out who, because if someone is pricing at 12% in a capped market they either have scale you don't or they're about to learn why the band starts higher.

The owner who is 40% of my revenue wants to renegotiate down to 12%

5 replies