Skip to content

Loguers & Market

COA (Cost of Acquisition): The Invisible Indicator of Hotel Profitability
hotel sales tips

COA (Cost of Acquisition): The Invisible Indicator of Hotel Profitability

Loguers Team
Loguers Team
COA (Cost of Acquisition): The Invisible Indicator of Hotel Profitability
4:15

What is COA and where do profits “leak”?

Cost of Acquisition (COA) is the total cost required to generate a single confirmed room booking.

In hotel practice, it is not enough to measure revenue alone (for example, RevPAR).
The critical question is:

How much did these revenues actually cost us?

Simple COA calculation

COA (%) = (Total Marketing Costs + Commissions)
———————————————
Total Booking Revenue
× 100

premium_photo-1661772661721-b16346fe5b0f

The three cost levels per distribution channel

COA varies significantly by sales channel. Strategic success lies in increasing booking volume from channels with lower acquisition costs.

Sales Channel

Estimated COA

What the cost includes

Online Travel Agencies (OTA)

15% – 25%

Commissions (Booking.com, Expedia, etc.)

Direct Bookings

6% – 8%

Website costs, remarketing, booking engine fees

Google & Meta

5% – 9%

Cost-per-click (CPC) to compete with OTAs


Four direct strategies to reduce COA

The primary objective is clear:
A balanced distribution of bookings between OTAs and direct channels

Α. Invest in Google Hotel Ads & Meta Ads

Action:
Do not allow OTAs to dominate search results or social media.

Make your direct hotel rate visible:

  • Next to OTAs via Google Hotel Ads

  • Directly to your audience via Meta Ads (Facebook & Instagram)

Indicative COA: up to 7.5%

Even with a COA close to 7.5%, the cost remains significantly lower than OTA commissions (15%–25%), while you also:

  • gain customer data

  • strengthen brand awareness

  • build the foundation for repeat bookings

Goal:
Win the customer and convert interest into a direct booking at a lower net cost.


Β. Brand Bidding & SEO

Action:
When someone searches for your hotel’s name on Google, your official website must appear first:

  • organically (SEO)

  • or via paid advertising (Brand Bidding)

You pay a small amount to Google in order to avoid paying a much higher OTA commission for a guest who was already looking for you.


C. Best Rate Guarantee (BRG) with conditions

Action:
Promise the best value on your official website — not necessarily a lower price, but added benefits.

Examples:

  • “Book direct & enjoy complimentary breakfast”

  • “10% discount at the hotel restaurant”

  • “Early check-in / Late check-out”

Value-added benefits are often more effective than price reductions.



D. Cultivate repeat guests (CRM)

  • Action:
    The COA of a repeat guest is almost zero.

    • Email collection

    • Email marketing

    • Exclusive benefits for past guests

    Goal:
    Convert the first-time visitor into a loyal direct-booking customer.

     



    Conclusion: From RevPAR to Net RevPAR

    Modern hotel sales and marketing management is not only about RevPAR.

    It is about:
    Net RevPAR = RevPAR – COA

    To maximize profitability and sales efficiency, hotels must maintain a controlled and balanced COA ratio between:

    • Direct bookings, with low acquisition cost

    • Digital marketing, acting as a lever to reduce average COA

    • OTAs, with higher COA but strong contribution to demand, visibility, and customer acquisition

    Attempting to completely eliminate OTAs is a strategic mistake, not only because it reduces bookings, but also because it:

    • artificially increases overall COA

    • limits the hotel’s total visibility

    • cuts off access to new customers who would never reach the brand directly

    OTAs should be treated as customer acquisition channels with a controlled COA.
    The role of digital marketing and CRM is to gradually reduce the average COA by converting OTA guests into direct customers at a lower cost in the future.

photo-1551882547-ff40c63fe5fa

FAQ – Frequently Asked Questions

1. Why is COA more important than RevPAR alone?

RevPAR shows how much revenue a hotel generates, but not how much profit remains. COA reveals the true cost behind each booking. Two hotels with the same RevPAR may have very different profitability depending on their acquisition costs.

2. Is it bad to rely heavily on OTAs?

No. OTAs are essential for acquiring new customers and increasing visibility. The issue is not their use, but the lack of a strategy to convert OTA guests into direct bookers over time.

3. What is considered a “healthy” COA for a hotel?

There is no universal benchmark. Generally:

  • low COA for direct bookings

  • controlled COA for digital marketing

  • consciously accepted higher COA for OTAs as acquisition channels
    Success depends on the overall average COA, not on one channel alone.

4. Does digital marketing increase or reduce COA?

When executed correctly, it reduces it. Although it has a cost, digital marketing helps hotels compete with OTAs, capture guest data, and grow direct bookings. The mistake is evaluating ad costs without comparing them to OTA commissions saved.

5. How can I reduce COA without losing bookings?

Not by excluding channels, but by balancing them. Invest in brand strength, website performance, CRM, and digital marketing so OTAs act as the first touchpoint and future bookings happen directly — lowering average acquisition cost over time.

 

Share this post

Keep reading