A hotel can earn more from the same room at the same price when the cost of acquiring the booking changes. That makes channel mix a useful maths problem, but also a useful test of judgment: a saving on commission is only valuable if the hotel keeps the booking and does not spend more replacing it.
I would calculate the channel benefit first, then test what it costs to achieve. Work through this illustrative case before reading the answer.
The hotel has changed where bookings come from
A property sells 100 room-nights at £100 each in both periods. A room-night means one room occupied for one night. The supplied variable costs include serving the room and the channel charges shown; any new campaign spending is separate.
| Booking channel | Earlier room-nights | Current room-nights | Variable cost per room-night |
|---|---|---|---|
| Direct | 60 | 80 | £20 |
| Booking platform | 40 | 20 | £35 |
| Total | 100 | 100 |
The manager asks: How much contribution did the channel shift add, and should we spend more on direct bookings?
Pause here and calculate the contribution difference. You should be able to reach the answer through both a full comparison and a shorter route.
Calculate what a booking leaves after its variable costs
Each direct room-night contributes £100 − £20 = £80. Each platform room-night contributes £100 − £35 = £65.
Earlier contribution was:
60 × £80 + 40 × £65 = £4,800 + £2,600 = £7,400.
Current contribution is:
80 × £80 + 20 × £65 = £6,400 + £1,300 = £7,700.
The shift adds £300 per 100 sold room-nights, an increase of about 4.1% relative to the previous £7,400.
Revenue remains £10,000 in both periods. The improvement comes from a lower cost of generating and serving the booking, within the cost boundary supplied. Average contribution rises from £74 to £77 per sold room-night.
Quick Case Math Drill
An escape-room venue sells an identical group session through an experiences marketplace and its own website, and has persuaded some regular bookers to book direct.
- Session price
- £100 through either channel
- Sessions moved monthly
- 15, from marketplace to website
| Channel | Staff and props per session | Booking cost per session |
|---|---|---|
| Marketplace | £30 | £25 |
| Own website | £30 | £3 |
How much more monthly contribution do the moved sessions now generate?
Check the result with the twenty bookings that moved
Twenty room-nights shifted from the platform to the direct channel. Each leaves £15 more contribution: £80 − £65.
20 × £15 = £300.
This shorter calculation is a useful independent check because price and sold volume are unchanged. If either also changed, you would need to account for those effects rather than assigning the entire difference to channel mix.
A clear spoken answer would be:
“The mix shift adds £300 of contribution on the same £10,000 of room revenue. Twenty bookings now contribute £15 more each, so average contribution rises by £3 per sold room-night.”
You have quantified the finding and explained its cause without reciting the table.
Set a ceiling on the spending needed to create the shift
Suppose an additional campaign created these twenty direct bookings by moving customers who would otherwise have booked through the platform. How much can the hotel spend on that campaign before the benefit disappears?
The ceiling is £300 in total, or £15 per switched room-night. Spending £200 leaves £100 of incremental operating benefit if no other costs change. Spending £400 makes the hotel £100 worse off despite its higher direct-booking share.
The £15 ceiling applies to migrated bookings. A genuinely additional direct booking for an otherwise empty room has a different value: £80 contribution before new acquisition spending, under this example's economics.
Distinguish those groups before multiplying a campaign's attributed bookings by £80. A customer who would have booked anyway does not create an entire extra room-night of contribution merely by clicking an advertisement.
Quick Case Math Drill
A ferry operator ran a spring campaign on sailings with spare car space, steering bookings to its own website instead of commission-earning travel agents.
- Switched from agents
- 40 bookings
- New travellers
- 10 bookings, would not otherwise have travelled
| Channel | Contribution per car booking |
|---|---|
| Travel agent | £40 |
| Own website | £52 |
What is the most the campaign could cost before it stops adding profit?
Test whether the platform bookings can actually be replaced
The manager suggests cutting platform availability to force customers to book directly. The table does not establish that customers will comply.
Suppose direct bookings reach 80, but platform bookings fall to 15 rather than 20. The property now sells only 95 room-nights. Contribution becomes:
80 × £80 + 15 × £65 = £7,375.
That is £25 below the original £7,400, before any campaign cost. Losing five platform bookings has more than erased the benefit of shifting twenty others to direct.
Make this explicit in the recommendation: distribution affects access to demand as well as its cost. Manage channel choices, pricing and availability together. Do not assume every intermediary booking can become a direct one.
Check the room and guest mix before extending the result
The worked calculation deliberately holds the room price constant. In another case, direct guests may book different room types, travel on different dates, stay longer or receive discounts.
Then compare like-for-like bookings or include those differences explicitly. A cheaper channel with a £20 lower room price could have lower contribution. Likewise, a booking that displaces a higher-paying guest on a sold-out night needs a different comparison from one filling an empty room.
Ask for the information that settles the action under discussion: acquisition spending, displaced bookings, room prices and available capacity. You do not need an exhaustive hospitality checklist to decide whether this particular £300 gain justifies the next campaign.
Give the manager a spending recommendation
A useful answer is:
“The observed shift improves contribution by £300 per 100 room-nights. I would expand the direct campaign only where incremental spending stays below £15 per migrated booking and total sold room-nights are preserved. I would keep platform distribution where it brings demand we cannot replace economically.”
For practice, change the campaign cost to £250. The net benefit is £50. Then remove one platform room-night: another £65 of contribution disappears, taking the proposal £15 below the original result. Small changes matter when the initial cushion is small.
Try the delivery-channel mix drill to apply the same contribution logic in a different business. Separate volume, mix and acquisition cost before choosing the better channel strategy.
Case math drill
Can you talk an MBB interviewer through the numbers?
Profit Difference from Third-Party Delivery Mix
Solve a case calculation and explain your workings aloud. Get feedback on your method, arithmetic and what the result means.
Frequently asked questions
Working out channel contribution
Why does a direct booking earn more when the room price is the same?
It costs less to deliver. Both channels sell at £100, but a direct room-night carries £20 of variable cost and a platform room-night carries £35, including channel charges. That leaves £80 contribution for direct and £65 for platform. The difference is £15 per room-night before any campaign spending.
What is included in the variable cost per room-night?
The supplied costs cover serving the room and the channel charges shown. Any new campaign spending is separate and should be tested afterwards. Keeping it out of the per-booking cost avoids counting marketing twice: once in the contribution figures and again when you set a ceiling on the campaign.
How much does moving from a 60/40 to an 80/20 channel split add to contribution?
It adds £300 per 100 sold room-nights. Earlier contribution is 60 × £80 plus 40 × £65, or £7,400. Current contribution is 80 × £80 plus 20 × £65, or £7,700. That is an increase of about 4.1%, with price and sold volume both unchanged.
Is there a faster way to check the £300?
Yes. Look only at the bookings that moved. Twenty room-nights switched from platform to direct, and each leaves £15 more contribution, so 20 × £15 gives £300. Matching the full calculation with this shortcut is a useful independent check. Saying both aloud shows the interviewer that you are verifying your answer.
What if price or sold volume also changed between the periods?
Then the shortcut no longer isolates channel mix, and you should not credit the whole difference to it. Account for the price and volume effects first, then attribute the remainder to mix. The twenty-booking check works here only because the hotel sold 100 room-nights at £100 in both periods.
Setting a budget for direct bookings
How much can the hotel spend on a campaign to win direct bookings?
No more than £300 in total, or £15 per room-night switched from the platform, if no other costs change. Spending £200 would leave £100 of incremental operating benefit. Above the ceiling, the campaign costs more than the commission saving it creates, so the hotel would be better off without it.
How do I practise with different campaign costs?
Subtract each campaign cost from the £300 benefit. The article's practice case uses a cost of £250, which leaves a net benefit of £50. At the other extreme, spending £400 leaves the hotel £100 worse off. Repeating this quickly builds the habit of comparing spending with the incremental gain.
Does the £15 ceiling still apply if the campaign reaches guests who would have booked direct anyway?
No. The ceiling assumes the campaign moves customers who would otherwise have booked through the platform. A guest who was already going to book direct produces no commission saving. Money spent attracting that guest uses up benefit without creating any. Measure spending per genuinely migrated booking, not per direct booking.
Risks to check before scaling the shift
Should the hotel cut platform availability to push guests to book direct?
Only if those guests actually switch, and the table does not establish that they will. Suppose direct bookings reach 80 but platform bookings fall to 15 rather than 20. The hotel then sells 95 room-nights. Contribution becomes £7,375, which is £25 below the original £7,400 before any campaign cost.
Why can a few lost bookings wipe out the gain?
Losing a booking costs far more than switching one gains. Each switch adds only £15, but each lost platform room-night removes its full £65 contribution. In the example, five lost bookings cost £325, which outweighs the £300 gain from the shift. Preserving total sold room-nights matters more than the channel split.
Does the result hold if direct guests book different rooms or get discounts?
Not automatically, because the calculation holds the room price constant. Direct guests may book different room types, travel on different dates, stay longer or receive discounts. In that case, compare like-for-like bookings or include those differences explicitly. For instance, a direct room sold £20 cheaper would contribute £60, below the platform's £65.
What changes on a sold-out night?
On a sold-out night, a booking can displace another guest. If a direct booking takes a room that a higher-paying guest would otherwise have filled, the simple per-booking comparison misses that lost revenue. That night needs its own calculation rather than an extension of the worked example.
What should I recommend to the hotel manager?
Recommend expanding the direct campaign only where incremental spending stays below £15 per migrated booking and total sold room-nights are preserved. Keep platform distribution where it brings demand the hotel cannot replace economically. The observed shift is worth £300 per 100 room-nights, so frame the recommendation around protecting that margin.