Which online distribution channel has become the best contributor to hotel revenue growth and profitability?

Question

BlackTom AI · Accepted Answer

To address the question, we first identify what each distribution channel traditionally implies for hotel revenue growth and profitability.
Option 1: the B2C model. In a business-to-consumer (B2C) setup, hotels sell directly to guests through their own platforms (brand websites, direct apps). This channel often reduces intermediary fees, affords greater control over pricing, promotions, and guest data, and can lead to higher margins and more repeat bookings, which collectively contribute to revenue growth and profitability.
Option 2: the merchant model. In a merchant model, the online travel agency (OTA) buys rooms at a wholesale rate and resells them to consumers. While it can increase volume, it typically involves higher distribution costs and margin sharing, which can compress profitability compared to direct channels.
Option 3: the agency model. Under agency (or commission-based) distribution, the hotel pays commissions to intermediaries only when a booking occurs. Although this can boost reach and bookings, the reliance on commissions reduces net revenue per booking and often increases the total cost of distribution, potentially hurting overall profitability if not managed carefully.
Option 4: the opaque model. Opaque channels offer anonymous brands and lower visible rates, attracting price-sensitive segments. While they can fill capacity and drive top-line revenue, they generally yield lower ADR (average daily rate) and tighter profit margins due to discounting and reduced brand control, limiting long-term profitability.
In summary, each option has trade-offs between reach, pricing power, and costs. The B2C model stands out because it typically delivers the strongest combination of direct control over pricing and guest data, reduced distribution costs, and higher potential margins, which align closely with sustained revenue growth and profitability.

BUS-480-01 Quiz 11 (Ch. 11)

Which online distribution channel has become the best contributor to hotel revenue growth and profitability?

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