Distribution cost per booking: comparing channels by what the hotel keeps

Distribution cost per booking is the total the hotel gives up to win and serve one reservation through a channel: the fee written in the contract, payment and currency costs, marketing contributions, cancellations and staff time. Subtract it from gross room revenue to get net revenue per booking, then divide by room nights to compare channels fairly.

The monthly channel report shows one partner far ahead on room revenue, and the bank statement does not agree. Nothing is wrong with the report. It counts what guests paid, not what the hotel kept. This article shows how to build a distribution cost per booking sheet from your own contracts, payment statements and books, how to turn it into net revenue per stayed room night, and which decisions that ranking should change.

Why does gross revenue flatter the expensive channel?#

Gross revenue counts the room rate before the channel's contract costs and before the hotel's own cost of serving that booking. A channel can lead on revenue and trail on what the hotel keeps.

Define the two numbers once and use them throughout. Gross room revenue is the rate recorded on the reservation. Net revenue is what remains after every cost that exists only because the booking came through that channel.

Contract costs are built differently from each other: a percentage of the rate, a net rate the hotel sets while the channel adds its own margin, a fixed amount per booking, or a marketing contribution paid separately. Two channels with the same headline cost behave very differently at different rates and lengths of stay. The hotel's own costs also differ by channel: card and payment fees, currency conversion, staff minutes to key in or correct a reservation, cancellation handling, e-document issuance.

Per booking and per room night are different questions. A cost charged per booking is diluted by a longer stay; a cost charged as a share of the rate is not. The ranking usually flips when the denominator moves from bookings to stayed room nights, because channels differ in how much of what they book actually stays.

The decision rule: rank channels on net revenue per stayed room night, and keep net revenue per booking beside it as the second view. Reallocation is only possible if the same rooms feed every channel, which is the subject of one inventory across every channel.

Which cost lines belong in a distribution cost per booking?#

Every line comes from one of three places: the contract you signed, the payment provider's statement, or your own books and time records. If a line has no source, leave it out rather than guess.

From the contract: the fee clause, the marketing or co-operation contribution clause, the cancellation and no-show terms, the payment terms (when the hotel is paid and in which currency), and any minimum-volume or exclusivity condition. From the payment side: card processing fee, currency conversion spread, refund fees, chargeback handling. From your own books: staff minutes per booking by channel, rate loading and rate checking time, correction time, e-document and invoice handling.

Express every line in one of three units: a fixed amount per booking, a share of the rate, or an amount per room night. Convert everything to a single unit before comparing.

Ancillary spend belongs in the sheet as a separate line, so it can be shown or excluded: a channel that brings guests who use the restaurant is not the same as one that brings room-only bookings. Never use a market average or a remembered commission rate as an input. The sheet is only as good as the documents behind it, and your contract is the only authority on your contract.

Keep the source next to each number in the file: contract page, statement date, or a named person's time estimate. A sheet without sources cannot be defended at renewal. When you evaluate new technology for capturing these lines, the same discipline applies, as covered in questions to ask a channel manager before you sign.

What are the hidden costs that never appear on the channel invoice?#

The costs that hurt most are the ones no invoice shows: a cancelled booking that held a room, a reservation re-keyed by hand, a rate loaded wrongly and corrected twice.

Cancellations and no-shows leave a real trace. The room was held, staff worked, and the sale may never have happened. Record the handling cost even when revenue is zero, and record the room nights that came back too late to resell.

Re-keying is the quiet one. Reservations that arrive by email, by phone, or through a channel that does not connect to the hotel's system are typed in by a person. Count the minutes; they are a real cost per booking. Corrections follow the same logic: wrong rate, wrong board type, wrong guest name, duplicate booking. Each correction costs time and carries the risk of a guest arriving to a problem at the desk.

Overbooking and relocation, when a confirmed booking cannot be honored, carries an operational cost of an alternative and a reputational cost. This article states no legal rule on what a hotel must do in that situation; treat it as a cost line and confirm your own position with an adviser.

Payment timing and currency also cost money that never appears as a fee line: money that arrives after departure, or in another currency, carries a financing and conversion cost. Visibility spend paid for placement or a campaign is a distribution cost even when it is invoiced separately from the fee. Channel management time, rate loading, rate checks, extranet work and dispute handling, is paid in salaries, not in invoices.

How do you calculate net revenue per booking and per room night?#

Take gross room revenue for a period, subtract every distribution cost line for that channel, divide by stayed bookings, then divide again by stayed room nights so channels with different lengths of stay can be compared.

Step one: fix the period and the population. Count stayed bookings only; keep cancelled bookings in a separate block so they cannot distort the per-night figure. Step two: pull gross room revenue from the hotel's own system, not from the channel's report, so the same definition applies to every channel. Step three: convert every cost line to an amount using the actual rates in that period, then add them up. Step four: subtract the total from gross room revenue, divide by stayed bookings, then divide by stayed room nights. Step five: repeat for direct, for each travel agency or tour operator, and for each booking site you work with, all in one file, with the source of every input noted beside it.

A worked example with invented figures#

Every figure and the fee percentage below is invented for illustration. Nothing reflects any real contract or any market rate; the numbers exist only to show the arithmetic. Amounts are in an invented currency unit.

Read the result as a ranking of what the hotel keeps, not as a verdict on a partner: reach, guest quality and contract terms all sit outside the arithmetic.

Why do length of stay and cancellation behavior change the ranking?#

A fixed cost per booking is spread over more nights when guests stay longer, while a share-of-rate cost follows the rate. Channels also differ in how much of what they book actually stays.

A fixed fee per booking on a one-night stay is a large share of the room revenue; on a seven-night stay it is small. A share-of-rate fee does not dilute in the same way. So a fixed-fee channel tends to look expensive for short city stays and cheap for long resort stays, while a share-of-rate channel behaves differently as rates rise.

Cancellation behavior belongs in the same analysis. Count cancellations per channel, the room nights they released, and how late they were released. A channel with many late cancellations costs inventory and staff even when it produces no revenue.

Look inside each channel: the same partner may send long-stay leisure and short-stay corporate business, and the average hides both. Review by season, too. A channel can be the strongest in August and the weakest in February, and a single annual average will mislead both times.

What decisions should the sheet change?#

It should change where inventory goes, which contract terms you reopen at renewal, and how much you invest in the channels you control.

Inventory placement: give more availability to the channels that keep more per stayed room night, while keeping enough reach to fill the calendar. How much to commit to each partner is set out in allotment versus free sale.

Renegotiation list: at renewal, ask for the term that matches your weakness. A fixed fee if your rates are rising, a share-of-rate fee if your rates are low, a shorter cancellation window if late cancellations hurt, earlier payment if cash timing matters.

Direct channel: the sheet usually shows the direct booking keeping the most, but it also carries marketing cost that the sheet does not capture. Judge it with how to increase direct bookings on your hotel website in hand.

Technology: if the cost lines cannot be captured without a manual exercise, the sheet is rebuilt by hand each quarter and eventually stops. A channel manager and a property system that records the booking source turn it into a report. Reallocating rooms between channels is only safe when a single inventory feeds all of them, so no room is sold twice.

Cadence: rebuild quarterly and after every contract renewal, and compare year on year rather than month on month. What the sheet must not become is a ranking of partners to punish. It is a map of where the hotel's money goes, and the map is only useful if it is honest about its own estimates.

What to do next#

Build the sheet once, for one month, for three channels, using only your contracts, payment statements and books, and label every estimate as an estimate. The parts fit together in that order: gross revenue is the wrong question, cost lines come from documents, hidden costs come from your own operation, the arithmetic turns them into net revenue per stayed room night, and only then does the ranking deserve to change where your inventory goes.