Hotel distribution: OTAs, channel managers and acquisition costs

Different jobs for OTAs and direct sales

OTAs bring visibility, access to certain markets and a booking platform. Direct sales offer more control of the relationship and selling conditions, but require a functioning website, booking engine, marketing reach and sometimes staff time. The useful mix changes between a soft weekday and a compressed event night.

A channel is how a booking reaches the hotel; a segment describes the customer according to hotel rules; a rate plan combines price, inclusions and conditions. A business traveller may book direct or through an OTA under different plans. Analyse all three separately.

Place distribution in the commercial review

What a channel manager does — and does not do

Subject to each integration, a channel manager sends supported rates, availability and rules to connected channels and receives booking creations, changes and cancellations. The PMS holds the operational guest records; the website booking engine handles direct reservations. Never assume every restriction or supplement travels over every connection.

Before opening a channel or plan, check room-type, occupancy and rate-plan mapping and verify reservation return to the PMS using the hotel’s approved test process. After a change, inspect transmission status and search like a guest through the booking summary. A rate visible in the PMS but closed online is not properly on sale.

Keep acquisition costs in separate buckets

Start from room revenue before tax for the same stay period. Separate commissions, payment charges, booking-engine fees, attributable marketing spend and fixed charges allocated under a documented rule. Check whether commission applies to pre- or post-tax value and whether it covers extras. Do not deduct a discount already removed from revenue or a commission already withheld from net settlement twice.

Revenue after these distribution costs is neither full contribution nor profit: stay-service costs and other expenses remain. A promotion or group decision needs a like-for-like contribution comparison on the same dates.

See how NetRevPAR uses a stated cost scope

Fictional example: the same €180 room night

Assume two comparable bookings with the same room type and conditions, each producing €180 in room revenue before tax. The fictional direct cost of 6% consists of 3% attributable marketing, 2% booking-engine fee and 1% payment fee. The fictional OTA cost of 18% consists of 16% commission on that pre-tax room base and 2% payment fee. These non-overlapping items are included in the totals once only; they are not market averages or real contracts. Direct leaves €21.60 more after these costs alone.

This compares two completed sales. It does not establish that a given OTA guest would otherwise have booked direct.

Two dates can call for different channel choices

On a soft Tuesday with 25 rooms forecast in a 60-room hotel, retaining an OTA may make sense if it brings incremental demand and the resulting revenue covers relevant stay costs. Check restrictions, offer presentation and direct-site conversion before lowering the public rate.

On a trade-fair Saturday with 55 rooms already on the books and strong demand still expected, the hotel may reduce a low-contribution promotion or limit inventory on selected channels, subject to contracts and applicable parity rules. Cancellations, groups, stay length and expected guest value can reverse that judgement.

Follow a trade-fair commercial decision

A monthly channel review with a measurable next step

For an actual monthly review, start with room nights stayed in the month, their room revenue before tax and linked distribution costs; keep cancellations and associated fees apart from occupied room nights. Track bookings on the books separately for future-date decisions. Cross-tab channel, segment and rate plan. A rising OTA share may reflect more leisure demand rather than a failing direct site.

Choose one measurable intervention — fix a restriction, improve the direct path or revise a promotion — and record its expected effect on mix and revenue after acquisition. Check again at the next snapshot; a single week may be too noisy.