Pricing, Distribution, and Channel Management
Pricing strategy
Pricing balances rate integrity with demand capture. Rate fencing (advance purchase, non-refundable, LOS restrictions) lets you offer lower rates without cannibalizing high-rate segments. Dynamic pricing adjusts rates to demand; best available rate (BAR) serves as the public anchor. Understand price elasticity - how demand responds to rate changes - and willingness to pay by segment.
Distribution channels
Channels include direct (brand.com, voice, walk-in), OTAs, GDS, metasearch, and wholesalers. Each carries a cost of acquisition: commission, transaction fees, and loyalty costs. Net rate = gross rate minus channel cost; always compare channels on net contribution, not headline rate. Rate parity clauses require consistent public rates across channels; rate fencing is how you legally differentiate.
Channel management
Channel mix management aims to grow direct and high-margin channels while using OTAs for reach and new-customer acquisition. Billboard effect describes the awareness OTAs generate that can drive direct bookings later.
Traps
- Comparing channels on gross rate - always net of commission and fees.
- Confusing rate parity (consistency) with rate fencing (segmentation).
- Assuming direct is always cheapest - loyalty redemption and technology costs can erode the advantage.
- Ignoring cancellation and no-show costs when evaluating OTA value.
Rule of thumb
A channel is worth its cost if its net contribution per room-night (rate minus commission, fees, and expected cancellation loss) exceeds the next-best alternative, adjusted for the customer lifetime value it brings.