Everything you need to know about hotel distribution channels

Guests book through OTAs, direct websites, GDS platforms and even social media, depending on their needs. As such, a narrow focus risks missing potential customers who favor alternative channels.

Of course, over-reliance on OTAs can erode profits – as we go on to discuss – but many hotels report that more than 50% of their bookings come from these third-party channels.

This paradox underscores the importance of a balanced distribution strategy – blending reach, profitability and flexibility – to remain competitive in the fragmented travel landscape, and this is what we explore in detail in this extended blog post.

Hotel distribution channels 101: What are they? And why do they matter?

Distribution channels are the platforms and methods hotels use to sell their rooms to travelers. These include direct channels like a hotel’s website (a.k.a. Brand.com) and indirect channels such as online travel agents (OTAs), global distribution systems (GDS), tour operators, wholesalers and metasearch.

Understanding how each channel works is crucial for hoteliers to strategically manage bookings, maximize revenue and maintain rate parity.

Distribution channels are vital because they help expand a hotel’s reach, drive bookings, and boost brand visibility. OTAs, for instance, provide exposure to a global audience, while direct channels help establish a stronger brand connection with potential guests.

By leveraging the right mix of channels, hoteliers can target specific markets, optimize pricing strategies, and ultimately improve occupancy and profitability. Balancing these channels effectively ensures better control over revenue, smoother hotel management and an edge over your competitors.

5 distribution channels every hotelier should know

There are five distribution channels that, with very few exceptions, every successful revenue manager and distribution manager in the hospitality industry should not only be familiar with, but have active strategies for. In doing so, they can navigate this often complex and interconnected landscape and keep a handle on their acquisition costs.

We’ll look at each in turn.

1. Online travel agencies

One of the dominant forces in hotel searching and booking, and defined in our hotel revenue management glossary, OTAs are simply reservation systems supported by websites on which guests can find and reserve rooms (and travel). The key benefit they offer consumers is the ability to quickly compare the market based on selected criteria.

Unlike wholesalers (see below), OTAs don’t buy inventory to sell on; they take a cut negotiated with hotels and chains whose rooms they promote and take bookings for. This is the essential trade-off: increased reach and likely revenue in exchange for lower profit.

High-profile examples include Expedia and Booking.com, who operate something approaching a duopoly, but there are many others in this space, including Hotels.com and Priceline.

2. Metasearch

Metasearch engines present the results of aggregate searches in one place, using the inventory from countless other sources. Typically, a user will either go directly to their preferred metasearch website to perform their search or be drawn on to whichever has the best SEO, having searched first on a generic search engine, such as Google.

Once on the aggregator site, they can view their full results before being directed to an OTA or Brand.com site to complete their booking once they’ve made a decision.

While OTAs generally take cuts on bookings, metasearch operators are as likely to generate revenue through click-based advertising and subscriptions, and it’s worth investigating your options on how to exploit them as part of your marketing mix.

Market leaders include Tripadvisor, Trivago, Kayak and Google Hotels (also see Google hotel ads), as well as Expedia, which is an OTA too.

3. Global distribution systems

Largely separate from and predating the worldwide web, global distribution systems – of which there are four major players – are computerized networks owned or operated by a third-party company that enable transactions between services in the travel and hotel industry.

Originally built for aviation, they’re now also very common in hospitality, providing one of the ways to bridge the gap between travel agents and hotels, and providing real-time access to room availability, rates and booking capabilities.

The basic way they work is: for hotels to upload their inventory, rates and room details to the GDS through a channel manager or property system; travel agents or corporate booking systems to search for accommodations that meet clients' needs, with the GDS presenting a list of options; once a booking is made, for the GDS to update the hotel's systems to ensure the inventory reflects real-time availability; and travel agents to take a commission on bookings.

Examples include Amadeus, which is one of the largest GDS providers, offering a wide range of services for hotels, airlines, and other travel sectors, and Sabre, a popular GDS platform that helps hoteliers connect with travel agencies and enhance their visibility in corporate and leisure markets.

4. Direct booking

Take a guess at what direct booking is and you’d be right: it’s the practice of taking bookings that avoid any transactions with third parties.

The advantages are clear: you needn’t share your revenue with anyone, so your profit margins are higher. But the downside is your reach is reduced, something that would only be a problem if a) you only used this distribution channel and b) there weren’t strategies to boost direct bookings, which you can read about in our blog on the hotel marketing mix and which we’ll touch on below..

But first, what of the mechanics?

In the past, these bookings could be made on the day or in advance, and in person as walk-ins, over the phone or in writing (by physical mail if you go back far enough in time). But these days, most are done online via booking engines.

Often supplied by third-party software vendors, booking engine technology enables guests to make reservations on a hotel or chain’s own website. As shorthand and used by Lighthouse et al, the generic term for these websites is ‘Brand.com’.

So how do you entice travelers to book direct when the OTAs you partner with work hard to run attractive promotions and loyalty programs?

Here are our top tips:

• For the same price, throw in extras; for example, offer freebies like drinks, activities, amenities, shuttle pick-ups and drop-offs to drive more direct revenue and provide the best value offering to prospective guests.

• Ask for email addresses and reviews when OTA guests leave your property, so that you can send them promotions that will entice them to book direct next time around.

• As we discuss above, make sure you have an online booking engine on your site to make the booking process as convenient as possible. The booking engine should cater to international guests as well, allowing for currency and language conversion.

• It should be able to integrate with your rate shopping tool so that you can monitor all of your room rates in one place. Having that data in one central location means that you can pick up on any violations of rate parity, and update your rates accordingly – all in real time.

• Update your cancellation policy to be more flexible. For example, you could allow people to cancel up to 48 hours before the booking.

Remember: while working with external booking sites and intermediaries is necessary, you can’t totally rely on them – it’s far too risky.

If they have too much of the pie, it gives them leverage to increase their commission fees – or if they go bust, then you’ve lost your customer base. This is why you need to invest in your own website.

5. Wholesalers

Wholesalers are third-party organizations that sell hotel room nights on behalf of hotels with whom they have a contract. Buying rooms in bulk – but at a discount – to guarantee hoteliers a certain level of occupancy, they then sell them on to OTAs and travel agents.

Wholesalers are B2B operators, so they don’t sell directly to members of the public.

It’s important to keep an eye on rate parity, both from the point of view of both revenue protection and for reputation management, when dealing with wholesalers, but they provide a useful way of hedging your bets when facing periods of low demand.

Examples include Hotelbeds, a leading global bedbank, which provides hotels with access to a vast network of travel buyers, including travel agencies, tour operators and OTAs, and offers inventory in over 180 countries. And GTA (now part of Hotelbeds Group), which specializes in connecting hotels with the global travel trade, and provides a platform for distributing hotel rooms to travel agents and operators worldwide.

A distribution strategy is essential for successful channel management

Essentially, a well-designed and implemented distribution strategy is a structured approach to managing and optimizing your hotel’s presence across multiple distribution and booking channels. It should ensure that listings are accurate, up-to-date and strategically aligned with your revenue goals.

This includes balancing direct bookings, OTAs, GDS platforms, and wholesalers to reach your target audience effectively. A well-planned strategy will not only help your hotel maintain control over your inventory and room rates but also enhance your competitive edge in the market.

Taking a strategic approach to hotel distribution offers significant advantages. It ensures that your hotel is visible to the right travelers, at the right time and on the most effective channels.

By prioritizing key markets and leveraging high-performing booking channels, you can drive bookings, maximize occupancy and increase revenue.

Additionally, a cohesive strategy enables better cost management by reducing over-reliance on high-commission platforms and encouraging direct bookings.

Effective distribution strategies rely heavily on software tools that streamline channel management. Advanced platforms, such as channel managers and revenue management systems, improve visibility across multiple channels, provide real-time data insights and reduce manual errors.

These tools allow hoteliers to analyze performance metrics, identify opportunities and adjust pricing or inventory allocation quickly, ensuring maximum profitability and efficiency.

How to create a strong hotel distribution strategy

A strong hotel distribution strategy is dependent on a number of key ingredients – understanding your audience, channel selection and data-driven decisions – all of which should be periodically reviewed and honed for future recipe perfection.

Let’s dig deeper.

Understand your audience and how they make travel plans

Before taking action, analyze the available data, using it to determine who you’re trying to target, where you should be targeting them and when.

Ask yourself:

• What demographics are we looking to target? Where do my target guests live and how old are they?

• What is their reason for traveling? Leisure or business?

• How do they book accommodation? What channels do they use? Do they book in the travel agent’s office or online?

• How long before their stay do they book accommodation? What is their booking window?

• How long do they stay with you? What is their average length of stay (LOS)?

• What days of the week do they tend to book? Weekdays or weekends?

Then group your ideal guests into different segments depending on their motivations for traveling, their needs and their buying habits.

Identify the best channels for your hotel

Choosing partnerships can be tricky. Start by examining each distribution channel’s customer mix so you can see if it matches the guest segment that you’re looking to attract to your hotel. You might consider:

• Regions that they have access to (eg. MakeMyTrip for India)

• Age groups that they have access to (e.g. Hostelworld for millennials and Gen Z)

• Behavioral niches that they have access to (e.g. HotelTonight for last-minute hotel bookings)

Then, consider the cost versus profit potential of each distribution channel. Typically, this refers to the amount of commission being charged per booking. In doing this, you have to remember that OTAs charge high commissions because they know that they can expand your reach to markets that you simply wouldn’t be able to gain access to on your own.

Consider metasearch sites for a more affordable option – not only do they have the cost-per-click model, but TripAdvisor and Google charge a lower commission for hotel bookings made on their site. They also offer a cost-per-click model, which could be beneficial for your property.

So, how do you make the ultimate choice? Should you just pick the giants and leave it at that?

Unfortunately, even if that were a sensible strategy, this route doesn’t stop lesser-known booking sites from buying your inventory at a wholesale price from a reseller, and selling your rooms anyway, undercutting you along the way.

This is why hoteliers are turning to tools like Lighthouse, which can help you monitor and enforce rate parity by allowing you to uncover such discrepancies.

Make sense of your performance across channels

Your property management system (PMS) is the one source of truth. Guest and reservation data is recorded automatically via the connection with your channel manager, or manually by your reservations and front office teams.

Don’t hold back on applying strict data guidelines here. A PMS containing clean and correct data is key if you’re looking to make strategic decisions.

If you don’t look to your data to draw conclusions, you won’t be able to make decisions with confidence.

For example, should you hold a few rooms for your corporate business – who are willing to book at a higher rate, but often with a shorter booking window – or give it to the leisure traveler who is paying less, but with a longer lead time?

You need to have the data to back you up to know that you’re making the right decision. You have several levers available to you, such as:

• Length of stay (LOS): How many room nights does each channel normally generate?

• Day of week: Which ones are your booking channels driving business in? This will tell you which ones send you business as opposed to leisure travelers.

• Country: Which countries and sorts of lead-times will channels drive?

• Room types: Which room types do your channels usually book out? Is there a pattern?

• Lead times: How far in advance do your guests book and via which channel?

The most powerful thing that your data will do is give you the information you need to make a decision with confidence.

Continue to test and adjust your strategy

Optimizing your distribution channel mix is not a ‘set and forget’ activity, which is why you need to keep a pulse on market fluctuations. New business opportunities will arise, and source markets can change year after year.

Look at your main KPIs – occupancy rate, average daily rate (ADR), and revenue per available room (RevPAR) – and let those be your benchmarks.

Use a business intelligence tool to monitor your key business drivers and get insights in performance quickly. Otherwise you will be wasting valuable time – doing this manually is inefficient. By the time you’ve exported all your reports from your PMS, and compiled and cross-checked the key drivers, they may already be out of date.

Optimize your distribution strategy with real-time data insights

As our various discussions above illustrate, data is at the heart of successful distribution. Accessing it and analyzing it will give you an infinitely better understanding of your performance and more actionable insights on how to improve it.

But it’s not just about the data itself, it’s about the tools that capture and help you make sense of it. Lighthouse provides robust software solutions for uncovering and making sense of distribution-related data. Not least is the issue of parity.

Maintaining it can be difficult when you have dozens of distribution channels to manage. This is why hoteliers are turning to parity analytics tools such as Parity Insight, which can help you monitor and enforce rate parity by allowing you to uncover discrepancies across your channels.

For example, many lesser-known booking sites can (and do) buy hotel inventory at a wholesale price from a reseller, and undercut the hotel when they resell the rooms. Metasearch sites such as Trivago or Tripadvisor pick these rates up and display them alongside your own website and OTA rates. Without a tech tool, it would be difficult to discover, manage and tackle such rate disparities.

Learn how Lighthouse can help you take your distribution strategy to the next level

In today’s competitive travel environment, it’s crucial to ensure the seamless running and optimization of your distribution performance.

To fully optimize your hotel distribution strategy, look no further than Distribution Insight.

Distribution insight gives you visibility of distribution processes to drive channel partner optimization, minimize booking friction and maximize conversions.

Offering real-time intelligence to enhance distribution performance. Distribution Insight helps you:

• Easily track the effectiveness of your distribution strategy in real-time

• Drive conversions and booking success rates by identifying ‘booking friction’

• Optimize your mix of distribution partners

• Ensure healthy partner connectivity

Take a demo today and see how Distribution Insight can upgrade your distribution strategy.