A data-driven guide to OTAs for hoteliers and short-term rental managers

Why? Because they solve a fundamental market challenge: connecting properties with global travelers at scale.

For hoteliers and short-term rental managers, understanding how OTAs operate and how to work with them effectively is critical. Yes, there are commission costs to consider. But there's also unprecedented access to a worldwide audience and powerful marketing reach that would be difficult to replicate independently.

This guide explores what OTAs are, why they remain vital, and how hoteliers and property managers can leverage them to boost bookings and revenue.

What is an OTA?

The acronym OTA is a simple one, that you likely already know: Online Travel Agent. 

OTAs are online booking platforms on which guests can find and reserve hotel rooms (and travel). The key benefit otas offer consumers is the ability to compare the market based on selected criteria quickly. Because these providers have no affiliation with any one brand, they are often called a “Third-party” channel.

Unlike wholesalers operating on a B2B model, OTAs work directly with consumers. They don't purchase inventory upfront - instead, they earn through pre-negotiated commissions on each booking they facilitate.

The technical side:

Hotels typically provide live rates and inventory to OTAs by means of a channel manager, which allows for an easy booking process for both guest and hotel.

Popular OTAs in the travel industry include Expedia Group (and their affiliates such as hotels.com, and Travelocity) and Booking.com (and their affiliates such as Priceline and Agoda), which operate somewhat like a duopoly, but there are many others in this space.

Why hotel and short term rental owners rely on OTAs

It’s no secret that OTAs are acting in their own self-interest and want to drive traffic through their websites rather than directly to hotels. So where is the benefit for hoteliers and vacation rental property owners, and why does so much booking traffic still go through these third parties? 

Global Reach: expanding to a wider audience of travelers

The first answer is simple: OTAs allow hotels to access a wider audience. Online travel agents create a marketplace where visitors from all around the world can quickly and easily find and book a property in a destination using a simple booking platform that allows them to see review scores, property images, rates and availability in one place. 

The evolution of travel distribution:

The shift from traditional travel agents and printed guides to digital marketplaces hasn't just changed how travelers book - it's fundamentally changed how properties reach potential guests.

Consider this digital transformation:

Then:

-Limited by physical travel agents

-Restricted to print directories

-Brand-dependent distribution channels

-Geographic constraints

Now:

-Global digital reach

-24/7 booking capability

-Brand-independent visibility

Maximize revenue with higher occupancy rates

With access to a larger market of prospective guests, hotels can capitalize on higher demand levels, boosting their occupancy. OTAs themselves also run marketing campaigns to target potential travelers and offer loyalty programs that incentivize more and more travel from these guests, increasing the effect. While direct bookings remain vital, OTA partnerships expand your total addressable market. Think of it as market multiplication rather than channel competition - OTAs don't just redirect existing demand, they create new demand opportunities that boost overall occupancy.

Understanding OTA partnerships

OTAs operate on a straightforward commission-based business model: when guests book through their platforms, properties pay a percentage of room revenue, typically ranging from 15-25%. These platforms amplify your property's revenue potential by providing access to a broader market of prospective guests, enabling properties to capitalize on higher demand levels.

Through their extensive marketing campaigns and loyalty programs, OTAs continuously generate new demand and incentivize repeat travel. When the relationship is finely tuned and tailored such that OTAs don't become your only channel, these commission costs can be more than compensated for by significant booking volume.

With hotels

The dynamics of OTA partnerships for hoteliers vary considerably, especially between independent hotels and brand-affiliated ones.

Independent hoteliers typically have a higher commission percentage as they do not have the bargaining power of a large brand with thousands of locations and a robust distribution framework. That said, independent hoteliers typically have more freedom in the kinds of offers and promotions, and can often work more freely with OTA partners than chain hotels can.

Chain Hotels and major brands typically pay a lower commission (which is negotiated centrally) but participate less closely with OTAs, choosing to focus on maintaining parity across all third-party channels, and driving hotel bookings away from OTAs, and toward their direct booking channels.

Most hoteliers, regardless of brand affiliation, can choose the degree to which they ‘play nice’ with OTAs. Hoteliers can boost their visibility and, in turn, their OTA business by increasing their “score” on OTAs. This is achieved through actions including maintaining guest satisfaction standards, providing top-quality guest experiences, responding to reviews, updating their property’s listing with high-quality images and ensuring accurate listing information. You can learn more about how hotels can boost their ranking in this blog.

Short-term rental OTA Distinction

The relationship between short-term rental owners and OTAs is similar in nature to the relationships between hoteliers and OTAs, though there are some distinctions in areas like partnership incentives and fee structures.

Fee structures are typically a bit different and often more complex for short-term rentals. For example, some OTA channels charge a flat or % owner fee, along with a % commission fee, while other platforms such as VRBO simply charge a 15% per booking fee which is more reminiscent of their hotel model.

• Short-term rental owners need to understand the exact terms of their agreement with each OTA, so they avoid confusion when it comes time to reconcile their commissions/fees.

Additional benefits: Other differences: some OTA channels, such as Vrbo and Airbnb include a million dollar Host Guarantee insurance program to protect hosts from costs associated with damage & accidents.

• Also, Airbnb sports a smart pricing tool for hosts to optimize their rates directly, as well as the Superhost program to boost listing visibility and occupancy.

Partnering with more than one OTA is the best way to boost awareness and drive revenue

The truth is that hoteliers and short-term rental operators rarely (if ever) rely on a single OTA partnership. By partnering with multiple OTAs, hoteliers and short-term rental owners can maximize their visibility, occupancy levels, and revenue by utilizing a healthy mix of direct channels and OTA partners.

That said there are challenges to this approach: hoteliers must manage the distribution of rates and inventory, maintain parity across the various OTAs (if they choose), set rates and monitor other factors such as competitor pricing.

Effective management of these challenges requires sophisticated tools that can automate and streamline your multi-channel distribution strategy, ensuring you capture maximum value from each partnership while maintaining operational efficiency.