Distribution channels are many and varied
Independent small and medium-sized accommodations exist in a broad array, using various distribution channels to attract as many actual bookings as possible, at the lowest possible cost. The level of control exercised over each channel differs. The required costs/upfront investments, the associated risks, and the potential effectiveness of the channel are also different. The most common distribution models are tour operators, OTAs and the direct channel.
A tour operator assumes the entire distribution risk from the accommodation and provides the accommodation with guaranteed revenue, though at a lower pre-season level. In contrast, a customer booking through the accommodation’s own channel delivers full potential revenue value; however, the accommodation carries the entire inventory risk in this case. Moreover, reach is limited to a certain extent covered by its own marketing efforts, which is typically limited for a single and especially smaller-sized accommodation, given budgetary constraints.
An in-between model that may be the solution for OTAs is the agency commission model. The inventory risk remains with the accommodation owner; however, the marketing efforts and reach are provided to the accommodation via a third-party platform and are risk- and cost-free. The accommodations only pay a commission over actual bookings, which occur through this third-party platform. However, it also quite often happens that consumers still go back to a direct platform to make their booking. In that case, the OTA functioned as a marketing channel without receiving any of the benefits, and the accommodation has not incurred any of the associated costs.