A Distribution Channel is a method or platform through which a hotel makes its rooms available to potential guests and receives reservations. Distribution channels can be direct, such as the hotel’s website and reservations team, or indirect, such as online travel agencies (OTAs), travel agents, and tour operators.
How It Works
Hotels use multiple distribution channels to reach different customer segments and increase their market exposure. Each channel can have different costs, booking conditions, customer profiles, and revenue potential.
Revenue managers evaluate channel performance by considering booking volume, average daily rate (ADR), acquisition costs, cancellation patterns, and net contribution.
Practical Example
A hotel receives 100 reservations during a particular period:
- Direct website: 40 reservations
- Online travel agencies (OTAs): 45 reservations
- Corporate and travel agency bookings: 15 reservations
The hotel’s total reservation volume is distributed across three channel categories. If the hotel wants to assess profitability, it should also compare the revenue and acquisition costs associated with each channel.
How to Interpret Distribution Channel
A balanced distribution strategy helps hotels reach different markets while managing distribution costs and maintaining control over pricing and availability.
The channel generating the highest number of reservations is not necessarily the most profitable. Revenue managers should evaluate each channel based on net contribution, demand patterns, guest acquisition costs, and the hotel’s commercial objectives.
Related Terms
Direct Booking · OTA · Channel Manager · Rate Parity · Net RevPAR · Market Segmentation · Contribution Margin