OTA commissions & distribution economics
Effective cost of distribution: how to compare every booking channel on the same basis
WebRešenje PR / DirectBalkan ·
Short answer
The effective cost of distribution is what it really costs you to win a booking through a channel, counting every attributable cost, not only the commission rate. To compare channels fairly, calculate it the same way for each one:
- effective cost per booking = attributable channel costs ÷ completed bookings from that channel;
- effective distribution cost (%) = attributable channel costs ÷ revenue from that channel × 100.
Use one reporting period, one rule for cancellations and no-shows, and allocate fixed costs instead of ignoring them. The cheapest channel on paper is not always the cheapest per booking, and the most expensive one may be the only one bringing guests you could not otherwise reach.
Why a headline rate is not enough
Channels charge in different ways. Some take a percentage of each booking, some charge per click, some charge a fixed subscription, and a direct channel has no single fee at all, just a collection of software, payment and marketing costs. Comparing a percentage with a monthly fee with a cost per click tells you nothing until all of them are turned into the same two numbers: cost per booking and cost as a share of revenue.
Booking.com commission vs direct bookings sets out this method for two channels. This article extends it to every channel a property uses.
How each type of channel charges
| Channel type | How it usually charges | What to add to its attributable cost |
|---|---|---|
| Booking.com and similar OTAs | A commission as a percentage of the booking amount, set by your agreement | Commission actually charged; extra commission for visibility programmes; discounts you funded; payment fees under your agreement |
| Airbnb | A host service fee as a percentage of your nightly price and the fees you charge; under Airbnb's single-fee structure the whole fee is deducted from the host's payout | The host fee actually deducted; discounts you funded |
| Google free booking links | No fee from Google for the links or for clicks on them | The booking engine or connectivity provider that puts your rates on Google, and payment fees on the resulting direct bookings |
| Google Hotel Ads and other paid metasearch | Mainly per click or bid-based; commission options have been reduced | Ad spend in the period, plus the direct-channel costs of the bookings it produces |
| Your own website | No per-booking fee from a platform | Booking engine, website, payment processing, advertising and other acquisition spend |
| Subscription platforms | A fixed fee per month or year | The fee's share of the period, plus any payment fees |
| Agents, tour operators, local partners | A commission or net rate agreed with each partner | The commission or the difference between your rate and the net rate |
These are the usual structures, not anyone's current rates. Platform fees differ by agreement, country and property type, and change over time, so take every figure from your own statements and current terms. Airbnb, for example, is moving hosts from a split fee (part paid by the guest, part by the host) to a single fee deducted from the host's payout; check which applies to your listing.
Fixed costs and variable costs
Every channel cost is one of two kinds, and they behave differently:
- Variable costs grow with each booking or with each booking's value: commission, per-booking software fees, card fees. Paid clicks vary too, but with clicks rather than bookings, so count the period's ad spend.
- Fixed costs are paid whatever the volume: subscriptions, website hosting, a channel manager's monthly fee.
Allocate fixed costs to the period you measure (a season's share of an annual fee, for example), then divide by that period's bookings. Fixed costs make a channel look expensive per booking when volume is low and cheaper when volume is high. How a fixed fee compares with a percentage at different volumes is the subject of Subscription vs commission.
Shared costs. A channel manager or property management system serves every channel at once. Either spread it over all channels in proportion to bookings, or keep it as a separate overhead line and leave it out of the per-channel comparison. Both are reasonable; mixing them between periods is not.
The worksheet for all channels
| Channel | Completed bookings | Revenue | Attributable costs | Cost per booking | Cost % of revenue |
|---|---|---|---|---|---|
| Booking.com | (records) | (records) | (statements) | costs ÷ bookings | costs ÷ revenue × 100 |
| Airbnb | (records) | (records) | (statements) | costs ÷ bookings | costs ÷ revenue × 100 |
| Own website | (records) | (records) | (invoices, fixed costs allocated) | costs ÷ bookings | costs ÷ revenue × 100 |
| Phone, email, returning guests | (records) | (records) | (payment fees, any attributable costs) | costs ÷ bookings | costs ÷ revenue × 100 |
| Other channels | (records) | (records) | (statements) | costs ÷ bookings | costs ÷ revenue × 100 |
Count bookings the same way as in Direct booking share: completed stays, one date rule, the same period for every channel. The Commission Calculator helps estimate the commission side for your own revenue and an assumed rate; the other costs come from your records.
Reading the comparison
- Cost is only half the comparison. A channel with a higher cost per booking can still be worth it if it brings guests you wouldn't otherwise reach. A cheap channel that only re-sells guests who already know you isn't creating demand.
- Average is not the next booking. The worksheet gives the average cost per booking. The cost of one more booking can be very different: often little more than the payment fee on a website whose fixed costs are already paid, the full commission on an OTA.
- Look by season. The same channel can be cheap per booking in peak months and expensive in low season, when fixed costs are spread over fewer bookings. See Seasonality and channel mix.
- Owner time. If you value the time spent handling direct enquiries, use one internal rate consistently, or note that the comparison excludes it.
Common mistakes
- Comparing a direct channel with zero. Direct bookings carry technology, payment and acquisition costs.
- Using the advertised rate instead of the charged amount. Visibility programmes, funded discounts and payment fees change what a channel actually costs.
- Leaving out fixed costs. A subscription or website that exists for one channel belongs to that channel.
- Mixing periods. Costs for a year and bookings for a season produce a meaningless result.
Summary: Turn every channel’s charges into the same two numbers, cost per completed booking and cost as a share of revenue, over one period, with fixed costs allocated. Then weigh the cost against the demand each channel actually brings.
