I have a confession that will sound strange coming from someone who runs an SEO and AEO shop for hotels: the single most useful spreadsheet I have ever built for a client had almost nothing to do with rankings. It was a net-ADR-by-channel model. And once we built it together, the conversation about where to invest in marketing basically answered itself.
So this post is me walking you through that exact model. No theory for theory’s sake. By the end you will be able to sit down with your own numbers and figure out what each booking actually earns you after everyone else takes their slice. Because here is the uncomfortable thing most independent hoteliers do: they look at gross revenue, see a fat ADR, feel good, and never notice that two rooms sold at the same headline rate can land in the bank account hundreds of dollars apart.
Why gross ADR lies to you
ADR, average daily rate, is the number everyone quotes. It is on every report. It is what you brag about at the regional hotelier meetup. And on its own it is close to useless for deciding strategy, because it tells you what the guest paid, not what you kept.
Think about it like this. A booking at 220 dollars a night sold through a high-commission OTA and a booking at 205 dollars a night sold through your own website are not the same booking. The 220 one might net you less. If you make decisions, where you spend marketing money, which channels you feed, how aggressively you chase direct, based on gross ADR, you are optimizing for a number that does not survive contact with your bank account.
What you actually want is net ADR by channel: the rate that remains after you peel off every cost that is attached to that specific channel. That is the number that tells you the truth.
Gross ADR measures what the guest paid. Net ADR by channel measures what you kept. Strategy should be built on the second number, and almost nobody builds it on the second number.
The costs that ride along with every booking
Before we build anything, you need to know what to subtract. There are three buckets, and they vary a lot by channel.
1. Channel commission. This is the big one for OTA bookings. Commissions in this industry commonly run in the 15 to 25 percent range depending on the platform, your market, and whether you are buying into preferred-partner or visibility programs that bump the rate higher. A direct booking on your own site has zero commission. That gap is the entire reason this exercise exists.
2. Payment processing. When you take the card yourself, direct or sometimes via metasearch, you pay a processing fee. It is usually small relative to commission, but it is real and it is not zero. With merchant-of-record OTA models the platform often handles the card and you do not see a separate processing line, the cost is baked into the commission instead. Track it where it applies so you are comparing apples to apples.
3. Per-booking and incidental fees. Channel manager fees spread across bookings, connectivity costs, loyalty or referral costs, occasionally a fixed transaction fee. Individually small. Collectively they shave a point or two off margin, and on a thin booking that matters.
There is a fourth thing I want you to think about even though it is harder to put a clean number on: variable servicing cost. Cancellations, no-shows, re-bookings, the support load a channel generates. I keep that qualitative in most models so the math stays honest, but I note it, because a channel that books cheap and cancels constantly is not as cheap as it looks.
The model, step by step
Here is the whole thing. Five steps. You can do it in a spreadsheet in an afternoon.
Step 1: Pull your channels and gross rates
List every channel you book through. Typical independent setup: your direct website, your phone/walk-in, two or three OTAs, metasearch (if you are running it), maybe a wholesaler or corporate account. For each one, pull the gross room revenue and the room nights over a fixed window. I like a trailing 90 days so seasonality does not whipsaw you.
Step 2: Attach the cost rate to each channel
For every channel, write down its effective commission percentage, its payment processing percentage (if you eat it), and any per-booking fee. Use your actual contracted rates, not what you think they are. Go look at an invoice. People are routinely wrong about their own commission tiers, especially if they opted into a visibility booster and forgot.
Step 3: Calculate contribution per channel
For each channel, the formula is simple:
Net contribution = Gross revenue − commission − payment cost − per-booking fees
Then:
Net ADR = Net contribution ÷ room nights
That is it. That is the whole trick. You now have a rate per channel that reflects what you actually keep.
Step 4: Build the comparison table
Lay it side by side. Here is an illustrative example, the numbers are made up to show the shape of the thing, not a real property:
| Channel | Gross ADR | Effective cost | Net ADR | Net vs direct |
|---|---|---|---|---|
| Direct website | 205 | ~3% (processing) | ~199 | baseline |
| Metasearch (book on site) | 198 | ~3% + bid cost | ~188 | −11 |
| OTA A | 220 | ~18% | ~180 | −19 |
| OTA B (preferred tier) | 225 | ~25% | ~169 | −30 |
| Corporate/negotiated | 175 | ~2% | ~172 | −27 |
Look at what happens. The OTA B booking has the highest gross ADR of the lot at 225, and the second-lowest net ADR. The direct booking has a lower headline rate and keeps far more money. If you were running this hotel off gross ADR, you would think OTA B was your premium channel. It is your most expensive one.
Step 5: Weight it by volume
Net ADR per channel tells you the unit economics. To make decisions you also need the mix, how many nights each channel actually drives. A channel with great net ADR but four bookings a quarter is not where you focus. A channel with mediocre net ADR but huge volume might still be your bread and butter, and a small improvement there moves real money.
Multiply net ADR by room nights to get net contribution per channel, then sort. Now you can see, in dollars, which channels are carrying the business and which are quietly draining margin.
What the model actually tells you to do
This is where it stops being a spreadsheet and starts being a strategy.
When you see the direct-versus-OTA gap in hard net-ADR terms, the question reframes itself. It is no longer should I care about direct bookings. It is how much is it worth to me to shift one night per day from my worst-net channel to my best-net one. Run that number. For most independents it is startling, and it is the business case that justifies investing in the things I actually do for a living.
A few moves the model tends to surface:
- The direct gap funds your own marketing. The difference between net-direct and net-OTA on each shifted booking is your budget. If direct nets you 30 dollars more per night than your worst OTA tier, every night you move is 30 dollars that can pay for SEO, your book-direct CRO work, or your Google Business Profile effort, and still leave you ahead.
- Metasearch deserves a second look. When guests book on your own site via metasearch, you keep close to direct economics minus the bid cost. That is a very different profile from a full OTA commission. If you have written it off, the net-ADR view might change your mind. I dug into this in metasearch for independent hotels.
- Your brand-name searches are the cheapest direct demand you have. People searching your hotel by name are already sold. If an OTA is intercepting that traffic and you are paying commission on a guest who wanted you specifically, that is the most expensive money you spend. That dynamic is exactly what I unpack in why your hotel ranks below OTAs for your name and more broadly in how OTAs steal search.
The OTAs are not the enemy. They are a reach channel, and a powerful one. The goal is never to escape them, it is to stop overpaying for demand you already own, and to make every channel decision on contribution margin instead of a vanity rate.
A note on honesty, because the model only works if it is honest
Two ways people fool themselves with this exercise.
First, they use optimistic commission rates. If you signed up for a preferred-partner program, your effective rate is higher than the base tier, use the real one. Pull an actual statement and back into the percentage. Do not model the rate you wish you had.
Second, they ignore the demand the OTA generates that they would not otherwise capture. This is real. Some OTA bookings are genuinely incremental, guests who would never have found you. A net-ADR model is not an argument for cutting OTAs to zero. It is an argument for understanding the price of each channel so you can decide, deliberately, how much of your mix you want flowing through the expensive ones versus the cheap ones you control. Reducing OTA dependence is the aim. Healthier mix, not scorched earth.
Where this connects to what I do
I am an SEO and AEO person, so here is the honest throughline. Everything I build for hotels, organic rankings, local SEO and Google Business Profile, AI visibility across AEO and GEO, content and reputation, exists to grow the cheapest, highest-net channels in this exact table. Direct. Brand. The demand you keep almost all of.
The net-ADR model is what turns that work from a vague good idea into a number on a page. When a hotelier can see that shifting their channel mix a few points toward direct is worth real money per night, the investment in being findable, on Google and increasingly in the AI answers people now trust, stops being a cost and starts being the obvious play. If you want the foundational version of the search side, my hotel SEO 2026 starter guide and the underlying hotel SEO service are where I would start.
Build the model first. Let the numbers make the argument. Then go capture more of the demand you already own.
If you want a hand building your own net-ADR-by-channel model, or you want to turn the direct-booking gap it reveals into an actual growth plan, book a call with me and we will run your real numbers together.