Cost of Distribution
Cost of Distribution (also called cost of sale or acquisition cost) is the total amount a hotel spends to acquire its bookings, expressed either in absolute terms or as a percentage of room revenue. It aggregates every channel-related cost: OTA commissions, wholesale margins, GDS and switch fees, channel manager and booking engine fees, metasearch and paid search spend, loyalty program costs, and travel agent commissions. Measuring it per channel is what makes true channel profitability comparisons possible — a "cheap" direct booking that required heavy Google Ads spend may cost more than an OTA booking at 15% commission.
Formula
Cost of Distribution % = Total distribution costs ÷ Gross room revenue × 100
Per channel: Channel cost % = (commissions + transaction fees + attributable marketing spend for that channel) ÷ channel room revenue × 100
Example
A hotel earns €2,000,000 in room revenue. It pays €280,000 in OTA commissions, €30,000 in GDS/switch and channel manager fees, €50,000 in metasearch and brand search advertising, and €20,000 in loyalty and agent commissions. Total distribution cost = €380,000, so cost of distribution = 19%. If the direct channel produced €600,000 of that revenue against €70,000 of attributable spend, direct cost of sale is ~11.7% — cheaper than OTA, but not free.
Why it matters
Industry benchmarks put distribution among a hotel's largest cost lines after payroll. Because commissions are deducted before revenue hits many P&Ls, the true figure is often invisible in standard reporting — which is exactly why NRevPAR exists. Tracking cost of distribution by channel turns "book direct" from a slogan into a testable economic claim, and gives revenue managers a defensible basis for channel mix decisions, commission negotiations, and metasearch bidding limits.
Related
See NRevPAR (Net Revenue per Available Room) for the net-of-cost performance metric, CPA (Cost per Acquisition) for the marketing-side equivalent, and Channel Mix and Direct Bookings for the levers this metric informs.