Distribution Cost: The 15% Illusion
Booking.com and Expedia charge 15-18%, but factoring in virtual card fees and wholesale discounts, the real number is much higher.
Distribution strategy is a delicate balance between visibility and profitability. Online Travel Agencies (OTAs) like Booking.com and Expedia provide necessary market reach, but their standard 15% to 18% commission rates are only the baseline cost of acquisition. The true effective commission rate is often much higher.
Virtual Credit Cards (VCCs)
When an OTA collects payment from the guest and issues a Virtual Credit Card to the hotel, the merchant processing fee can jump from a standard 2.5% to as high as 3.5% or 4% due to the card's corporate/reward classification. This fee is paid by the hotel on the *gross* amount, further eroding net revenue.
Wholesale and Loyalty Discounts
To participate in programs like Expedia Rewards or Booking.com Genius, hotels are often required to offer an additional 10% discount on top of the commission. When stacked, a $200 ADR can yield less than $140 in net revenue.
Calculating Effective Commission
Use our Effective Commission Calculator to strip away the illusions. Input your gross ADR, base commission, and VCC processing fees to calculate the true percentage of revenue being surrendered to your distribution partners.