In today’s competitive hospitality landscape, increased profits are hard to find. Revenues have been growing only slightly, and average rates are generally flat. Labor, energy and insurance costs are outpacing revenue growth by a wide margin. So, what is left that we can cut? Commissions and fees.
Distribution channel optimization must help deliver the right guest, at the right price, through the right channel, at the right acquisition cost. This process is key to driving profitability, as these fees could be cut as follows:
Move one guest out of every 10 from 15% commission to direct, with no commission, and at a $200 room rate, you save $30. With a 100-unit hotel at 70% occupancy, you would save $210 per day or $76,650 per year. How can you do it?
Optimize channel performance
Hotels must continuously refine their presence across all channels and determine how to shift to more direct bookings.
Key actions for optimization:
- Competitive pricing: Use dynamic pricing and advanced rate shopping tools to adjust room rates based on demand, competition and market trends.
- Property visibility: High-quality images, compelling descriptions and accurate information significantly influence booking decisions. Include value-added services to personalize the guest experience.
- Targeted marketing: Use guest data to craft promotions that resonate with specific segments.
- Guest reviews: Track feedback across review sites and booking platforms. Promptly address negative reviews* and encourage satisfied guests to share their experiences. These reviews can directly impact conversion rates.
*Personal note: You can always use AI for review responses, but do not do it for negative reviews. These require a personal connection, and I always make it easy to communicate directly with me as an owner.
Monitor or adjust your channel mix
The difference in acquisition cost between online travel agencies and direct bookings is significant. Actions for monitoring and adjustment include:
- Conduct regular performance reviews: Use analytics tools, channel managers and property management systems (PMS) to track channel performance monthly. Market intelligence can benchmark your performance against your competitive set.
- Test and experiment: Trial new pricing models, booking incentives or promotional strategies to discover what resonates with your audience. A/B testing can reveal insights into guest behavior.
- Stay flexible: The hospitality industry is dynamic. Be prepared to adjust your strategy* in response to new channels, technologies or changes in traveler expectations. Flexibility ensures your hotel remains competitive and responsive.
*Personal note: I have not found a better firm than Kalibri Labs to assist with data and strategy. They help shift the room night demand from OTAs to direct bookings
Data-driven future
Hotels must analyze and execute on forward-looking insights. Data-driven decision making empowers hoteliers to fine-tune marketing efforts, personalize guest experiences and anticipate future trends. By continuously optimizing and adjusting your channel strategy, you ensure your property remains relevant and profitable.
Consider your direct channels:
- Hotel website: Your website should be the anchor of your direct booking strategy. Offer best rates and perks (complimentary Wi-Fi, breakfast, loyalty points) to incentivize direct bookings. Invest in SEO*, mobile optimization and intuitive booking engines.
- Metasearch platforms: Sites like Google Hotel Ads, Trivago, Kayak and TripAdvisor aggregate booking options and redirect traffic to your site, boosting visibility and direct revenue.
*Personal note: Based on current trends, it is clear that more than half of travelers will do their travel research on AI. This does not mean that SEO is no longer valid; it’s just shifting from Google to AI. Generative Engine Optimization (GEO) is quickly becoming one of the most important new topics in search.As large language models (LLMs) change how users discover brands and make decisions, GEO helps ensure your content and brand show up in AI-generated answers — not just in traditional search results.
Next, think about your indirect channels:
- OTAs (online travel agencies): Platforms like Expedia and Booking.com help reach global audiences, especially international travelers or those unfamiliar with your property.
- GDS (global distribution systems): Tools like Sabre, Amadeus and Travelport connect hotels to corporate travelers and travel agents. GDS offers high ADR, low cancellation rates and year-round occupancy.
Independent hotels
Independents must balance OTA exposure with strong direct channels to control acquisition costs. Typically, OTAs have a cost between 11% and 23%. Marriott and Hilton are closer to 11% while other brands are a bit higher. Independent hotels can pay as much as 23%. That is highway robbery.
Recommendations:
- Optimize your website for direct bookings with SEO, mobile design and loyalty incentives.
Partner with OTAs and metasearch engines to reach broader audiences.
Use GDS to connect with travel agents and corporate markets.
- Collaborate with local tourism boards for destination marketing.
A well-balanced channel mix — rooted in guest insights and tailored to hotel type — drives sustainable revenue and long-term growth. Prioritize direct bookings, strategically leverage indirect channels and continuously monitor acquisition costs to protect margins.
Robert Rauch, CHA, has been an owner-operator of hotels for several decades and is founding chairman of Brick Hospitality, owner of R. A. Rauch & Associates, Inc.
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