Diego Acosta, Director of Alliances at Flex Pay and member of the HSMAI Revenue Optimization Advisory Board
When we talk about hotel distribution, it's common to compare only the commissions paid to OTAs with the cost of direct bookings. But that perspective can lead to incorrect conclusions.
That was one of the main points discussed recently by the HSMAI Revenue Optimization Advisory Board. The group debated how to more accurately measure the true cost of acquiring a reserve and how that analysis can lead to much smarter business decisions.
The main conclusion was clear: a direct booking is not always the most profitable.
The cost of the reservation goes far beyond the commission
For many years, the industry compared distribution channels almost exclusively based on commission percentages. Today, that logic is no longer sufficient.
A booking made through the hotel's website can involve various investments that don't always appear in traditional analyses, such as:
digital media campaigns
marketing agency fees
conversion tools and booking engines
loyalty programs
technology
payroll of the Marketing, Sales and Reservations teams
customer acquisition costs
When all these elements are taken into account, the true cost of direct selling can be significantly higher than imagined.
As one of the participants in the discussion pointed out, investing to increase direct bookings does not necessarily mean keeping a larger share of the revenue.
Measure better to decide better
Another important discussion was about the level of detail needed to calculate distribution costs.
Some hotel groups already use Business Intelligence platforms capable of consolidating data from various sources and bringing the analysis closer to the level of each reservation.
Although that level of accuracy still presents an operational challenge, the consensus was that seeking more comprehensive information is essential to improving business decisions.
At the same time, some participants warned about the risk of turning that search into an overly complex exercise.
More important than finding an absolutely perfect number is developing consistent indicators that allow for reliable comparison of channels over time.
Net RevPAR doesn't tell the whole story
Net RevPAR (Net Revenue Per Available Room) has become an important indicator for evaluating distribution performance.
However, several participants pointed out that it also has limitations.
Depending on the establishment's profile, especially in long-stay hotels, other metrics may better represent the real profitability of each channel.
The consensus was that no single indicator can fully reflect the efficiency of the distribution.
Invisible costs are also part of distribution
Another frequently overlooked issue is indirect costs, which rarely appear in distribution analyses.
These include:
benefits offered by loyalty programs
upgrades
Breakfast included
Commercial costs associated with relationship programs
Structure of the sales teams responsible for groups and events
When these investments are left out of the analysis, it becomes much more difficult to accurately compare profitability between channels.
As one of the Advisory Board members summarized, ignoring the costs of loyalty programs means failing to analyze an important part of the equation.
The growth of automated campaigns
Another point discussed was the evolution of Google's automated campaigns, especially Performance Max (PMax), based on artificial intelligence, which allows you to promote a hotel across all Google channels (Search, YouTube, Display, Gmail, Discover and Maps) from a single campaign.
The tool allows you to reach potential guests at different stages of the buying process using artificial intelligence to optimize campaigns.
Although it does not eliminate competition from OTAs, it can help strengthen the direct sales strategy when used in a planned way.
For many hotels, understanding this type of tool has gone from being a competitive advantage to a necessity.
Distribution should be analyzed as an investment
The big takeaway from the discussion is that distribution should not be analyzed solely as a commission cost.
It represents a set of investments in technology, marketing, relationship building, sales, and customer acquisition.
The better a hotel understands these costs, the greater its ability to decide where to invest and which channels actually generate the highest returns.
Ultimately, the goal is not simply to increase direct bookings, but to understand which channels generate the greatest return for the business.
Questions for your team
Does your company know the total acquisition cost of each distribution channel?
What indirect costs are not yet part of that analysis?
Is direct booking really the most profitable channel for your hotel, or is that perception based solely on commissions?
Do the indicators used today help measure profitability or only revenue?
How can Marketing, Revenue Management, and Sales work together to improve distribution profitability?
