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May I Do #30: Distribution Costs

By May 30, 2020 August 19th, 2020 No Comments

We can’t stress it enough – the aim is not the total revenue, but it is the bottom line profits in your P&L. And one of the elements you can control is your distribution costs

Distribution Costs

Distribution Costs

  • For long, hotels have not been focusing on Distribution Costs but only looked at metrics like RevPAR. With the increase use of the multiple distribution platforms, it is key to know the real value of each distribution platform
  • Start by listing all distribution platforms used (cf tip Day 9: Analyse your Segmentation) – ideally if your rates are also defined based on the distribution that could help calculating the costs faster
  • List all the costs attached to each distribution platform: you will have commission based, but also fixed costs, contract costs, pass through fees, etc.
  • Once you get that, you should be able to calculate the “true value” of each booking on a per night basis. But don’t compare blindly the rates, make sure you also look at them based on patterns. Overall OTAs look more expensive than GDS? It does not mean you need to reduce OTAs – they may have very different patterns! The analysis needs to be done by Day Of Week and Seasons
  • If you want to go further, you should also add the costs of sales of your team and systems: how much effort does it take to get this business?

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