The economics of channels: 100 euros isn't always 100 euros
Wednesday afternoon. Adam, Hotel Peaqplus City’s general manager, and Esther, the marketing manager, sit over the monthly close. At first the numbers look pleasing: a strong month, healthy occupancy, room revenue in order. Then Adam stops on one line: the commission paid to the OTAs (online travel agencies, e.g. Booking) is larger than their entire year’s marketing budget.
“Hold on,” he says. “Two guests bought the same Superior room for 120 euros for the same night. One on our website, the other on Booking. In the books both are 120 euros of revenue. But the hotel didn’t keep the same amount from each.”
This lesson is about exactly that. A booking’s gross price doesn’t yet tell you how much you earn on it. A leader has to learn to look behind the booking: what it cost for that 120 euros to arrive at all — and how much of it stays with the hotel.
The gross price and the net that stays
Every channel has a price. The OTA gives convenience and visibility, and in return takes a commission on the volume — typically 15-18% of the room rate. The direct booking (your own website or phone) pays no commission, but isn’t free either: it needs a website, a booking engine, advertising, and every transaction carries a payment (card) fee.
The key leadership concept here is net ADR (net average rate), and more broadly net RevPAR: not what the guest pays, but what stays with the hotel after distribution costs are deducted. Two hotels with the same ADR (Average Daily Rate — the average rate) can sit at very different net ADRs, purely because of where their guests come from.
The channels are tied together by a channel manager (channel-management software) that links the booking engine with the OTAs — in our case D-Edge keeps the rate and the available capacity in sync across every surface. Technically this makes it easy for a guest to book from many places; the leader’s job, though, is to see economically too how much each “place” costs.
The same 120 euros, three different outcomes
Take a Superior room at Hotel Peaqplus City, at 120 EUR BAR (Best Available Rate — the public, standard rate). Let’s see what stays from it channel by channel.
| Channel | Gross price | Distribution cost | Net that stays |
|---|---|---|---|
| Direct (website) | 120 EUR | payment fee 1.5% (1.80) + advertising/CAC ~3.20 = 5.00 EUR | 115.00 EUR |
| OTA (15% commission) | 120 EUR | 120 × 15% = 18.00 EUR | 102.00 EUR |
| OTA (18% commission) | 120 EUR | 120 × 18% = 21.60 EUR | 98.40 EUR |
The same room, the same 120 euros at booking — but the hotel keeps 115, 102 or 98.40 euros, depending on the channel. Between direct and the pricier OTA the difference is 16.60 euros per room: that’s nearly 14% of the 120-euro price. So the “100 euros”, depending on the channel, is really a net of somewhere between 95.30 and 82 euros — never 100.
An important nuance that the enthusiastic “let’s steer everyone to direct” campaigns forget: direct isn’t free either. In the table we counted 3.20 euros of advertising/CAC (customer acquisition cost — the cost of winning one booking). If you “buy” a direct booking with 15 euros of advertising, your net is already only 103.20 euros — barely above the OTA. Direct wins when the acquisition cost stays low: a returning guest, a loyalty member, a booker who arrives by searching for the brand.
Why the mix is the leadership question, not the single booking
On a single booking the 16-euro difference is tiny. The leader watches it because it accumulates. Take a month at Hotel Peaqplus City: 1,600 room nights sold, of which 45% arrive via OTA, at a 15% average commission and a 120 EUR average rate.
OTA bookings: 1,600 × 45% = 720 room nights Commission cost: 720 × 120 EUR × 15% = 720 × 18 EUR = 12,960 EUR / month
A single month’s OTA commission is nearly 13,000 euros — and just over 155,000 euros a year that the hotel pays for visibility. This isn’t a “bad” number: the OTA brings real demand, including guests who would never find the hotel on their own. But at a stake this size, shifting the mix is serious money.
Suppose we steer 10 percentage points of the 720 OTA room nights (160 room nights) toward direct — with a loyalty programme, a better website, by reaching out to returning guests. The gain per room is the net ADR difference: 115 − 102 = 13 EUR.
160 room nights × 13 EUR = 2,080 EUR / month, about 24,960 EUR a year
The same number of guests, the same building, the same gross price — only the point of entry is different, and in the end nearly 25,000 euros more stays with the hotel. This does take marketing spend (which is why the full 24,960 isn’t pure profit), but the order of magnitude shows why it matters where the booking comes from.
But avoid one trap, because many leaders overshoot here. Not every OTA guest can be moved to direct. A significant share of OTA bookers found you right there — they didn’t even know the hotel itself, they were just browsing the listing. Winning them is the true value of the commission: a guest like that you’d hardly bring in under your own steam, through advertising, for the same money. So the realistic goal is not to “steer everyone to direct”, but to move the layer that is your guest anyway — the returning one, the one searching for your brand, the loyalty member — since paying for them twice (first commission, then again) is pure loss. Leave the OTA as the engine for new guests.
The leader’s read: net ADR, not gross ADR
The lesson is not that “the OTA is bad, direct is good”. In a good guest mix both have a place: the OTA is the engine of visibility and new guests, direct is the engine of margin and the guest relationship. The lesson is the point of view: the leader should look not at gross revenue, but at what stays from it.
Three reflexes that should be in place from this lesson on:
- When the team reports a “120-euro booking”, ask: on which channel, and how much stayed from it?
- When someone proposes an OTA commission increase or a new sales partner, the question isn’t “will it bring bookings”, but “at what net ADR does it bring them, and won’t it displace a pricier guest?”
- Treat distribution cost as a deliberate line on the P&L (Profit & Loss — the income statement), not an “incidental” trifle — 155,000 euros a year is no trifle.
Back to Adam and Esther
Adam and Esther don’t ban the OTA — they know that most of the 45% OTA traffic is real demand that can’t be won elsewhere. Instead they set one goal: to steer the returning guests (who would come anyway) gradually toward direct with a simple loyalty offer, while leaving the OTA to acquire new guests.
From now on Esther measures her campaigns not in “booking count”, but in net ADR and the shift in the channel mix. And Adam asks for a new line in the monthly close: distribution cost as a percentage of revenue. “I’m not interested in how many bookings came in,” he closes the meeting. “I’m interested in how much of it stayed with us.”
The day-to-day, revenue-manager handling of distribution cost and per-channel net ADR is covered from Daniel’s angle by the RM Academy’s Channels and distribution basics and Distribution costs and net ADR lessons.
Key takeaways
- The gross price is not your revenue. The same 120-euro booking means a net ADR of 115, 102 or 98.40 euros depending on the channel — the “100 euros” is never exactly 100.
- Direct isn’t free either. It pays no commission, but carries a website, a booking engine, advertising and a payment fee; it only wins when the acquisition cost (CAC) stays low.
- The mix is the leadership stake, not the single booking. A single strong month’s OTA commission is ~13,000 EUR; a 10-point mix shift toward direct can bring back ~25,000 EUR a year.
- Look at net ADR, not gross ADR. Distribution cost is a deliberate line on the P&L, not an incidental trifle.
- The OTA is not the enemy. It brings visibility and new guests; the goal is deliberate balance, not the eradication of one channel.
Click an answer — you see immediately whether it is right.
Answer all of them and the lesson counts as complete — and toward your progress.
Net ADR = gross × (1 − cost%). Direct is typically 1-3% (payment + marketing only).
See the full definitions in the glossary.
Do you know your own hotel's channel mix and the net ADR of each channel — or do you see only the gross revenue? If you could target a single mix shift tomorrow, from which channel to which would you steer, and what would it be worth? And does your marketing team measure success today in booking count or in net ADR — what would change in their decisions if the net value of the bookings they bring were the yardstick?