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When planning their annual vacation, many people turn to well-known and popular platforms. This is not surprising as online travel agencies (OTAs) and booking portals have a wide reach and international presence that can be difficult for individual hotels to match. Additionally, these websites are often associated with deep discounts on already low prices.

When travelers start planning their annual vacation, well-known and popular booking platforms are often top of mind. It is easy to see why: OTAs (Online Travel Agencies) and booking portals offer extensive reach and an international presence that is difficult for an individual hotel to match. Guests also tend to associate these platforms with substantial discounts and already-low prices.

What Costs and Dependencies Do OTAs Create for Hotels?

Online Travel Agencies (OTAs) such as Booking.com and Expedia are important distribution channels for many hotels. They expand reach, increase international visibility, and provide access to additional demand. However, every reservation they generate comes with costs that directly affect the profitability of hotel distribution.

The goal is therefore not to eliminate OTAs entirely but to create an economically balanced distribution mix with a strong direct channel. Hotels should regularly assess the costs associated with each distribution channel and the contribution each channel makes to reservations and revenue.

The most important factors include:‍

• Commission costs: Hotels pay contractually agreed commissions on reservations generated through OTAs. As OTA revenue increases, total commission expenses within distribution rise as well.
• Discounts and platform programs: Depending on the programs and terms selected, additional discounts can reduce the net revenue from a reservation.
• Distribution channel dependency: A high share of OTA bookings makes hotels more dependent on platform rules, visibility, and the terms offered by each platform.
• Guest data: With direct bookings, hotels can build the guest relationship themselves within applicable legal requirements and use these contacts for further communication. With bookings through third-party platforms, these opportunities may be limited.
• Differentiation: A hotel’s own website provides more flexibility to communicate its positioning, services, and direct-booking benefits than the standardized search results on booking platforms.

The objective is therefore not to avoid OTAs altogether. Hotels should assess their economic contribution in relation to the distribution costs they create while systematically increasing the share of profitable direct bookings.

How Can Hotels Compare OTA Costs and Direct Distribution Fairly?

A meaningful comparison requires more than looking solely at the commission charged by an Online Travel Agency (OTA). Direct bookings also involve costs, including online marketing, the hotel’s own website, the booking engine, and other systems. The key is to determine the actual distribution cost of a confirmed reservation and the reservation revenue it generates.

For OTA bookings, distribution costs are relatively easy to calculate based on the commissions paid. For direct distribution, hotels should include all attributable expenses that contribute to generating direct reservations. Comparing these costs with the direct bookings and resulting revenue reveals the economic difference between the distribution channels.

In addition to the cost per reservation, other factors also matter. These include cancellations, the share of direct bookings, and the opportunity to use direct guest contacts for ongoing communication and future repeat bookings.

Direct bookings are therefore not automatically free for hotels. From an economic perspective, what matters is whether the cost per confirmed direct reservation is reasonable in relation to the reservation revenue generated and how it compares with the effective distribution cost of an OTA booking.

Why Direct Bookings Can Lower Distribution Costs

Direct bookings can come through the hotel’s own website, by phone, or by email. They are particularly relevant from an economic perspective because these reservations do not incur the commission-based intermediary fees charged by an Online Travel Agency.

However, this does not mean that direct bookings are free. Direct distribution also involves expenses for online marketing, the hotel website, the booking engine, and other systems. What matters is whether these costs are economically reasonable in relation to the reservations and resulting revenue they generate.

Direct bookings also strengthen the relationship between the hotel and its guests. Where legally permitted and with the appropriate consent, existing contacts can be used for further communication, re-engagement, and repeat bookings.

ADDITIVE+ MARKETING AUTOMATION helps hotels communicate with guest contacts throughout the guest journey using data-driven automation. This allows hotels to deliver relevant offers more precisely and systematically develop existing guest relationships over time.

The article “Increase Direct Bookings for Your Hotel” explains how hotels can systematically strengthen direct distribution and generate more reservations through their own channels. It focuses on specific measures throughout the digital guest journey—from the website and search engine marketing to CRM, newsletters, Marketing Automation, and measuring actual booking performance.

Case Study: More Direct Bookings, Lower Commission Costs

The example of SAXX Hotels & Apartments shows how stronger direct distribution can reduce dependence on booking platforms. One of the main objectives of working with ADDITIVE was to attract more guests through the hotel group’s own distribution channels and reduce its dependence on Online Travel Agencies.

According to Simon Bruker, General Manager of SAXX Hotels & Apartments, the number of direct bookings increased by approximately 25% within a short period of time. As a result, the hotel group reduced its dependence on booking platforms and saved on commission costs.

This case study shows why the share of direct bookings should not be viewed in isolation. What matters is the economic impact on the overall distribution strategy: Generating more reservations through a hotel’s own channels can reduce commission-based bookings while building direct guest relationships. The extent to which this affects actual distribution costs depends on the individual hotel’s cost structure and distribution mix.

Conclusion: Use OTA Reach and Strengthen Direct Distribution Profitably

Online Travel Agencies remain important distribution channels for hotels, particularly when it comes to increasing reach and accessing additional demand. However, a high share of commission-based bookings can increase distribution costs and deepen dependence on external platforms.

A sustainable distribution strategy should therefore not aim to eliminate OTAs entirely. The goal is an economically balanced distribution mix that makes strategic use of the reach provided by external platforms while strengthening the hotel’s own direct channel.

A higher share of profitable direct bookings can reduce commission costs and give hotels greater control over direct guest relationships. However, whether direct distribution is actually more economical should not be assessed based on individual KPIs. What matters are the actual cost per reservation, the reservation revenue generated, and the long-term development of guest relationships.

This turns the question of “OTA or direct booking?” into a business decision. What matters is not which channel generates the highest number of reservations, but which distribution mix sustainably contributes to reservations, revenue, and profitability for the individual hotel.