Hotel distribution: OTA commissions and revenue management

A hotel can have a good building and a fair location and still earn too little because it sells its rooms through expensive channels or at the wrong prices. For an investor, distribution is a cost line and a risk: it decides how much of each booking reaches net operating income and how dependent the hotel is on a few platforms. This article explains the main channels, what commissions look like, how revenue management works, and what changed in the European Union with the Digital Markets Act. It is general information, not advice on a particular hotel.

The channel mix

A hotel sells rooms through several channels, each with a different cost and a different type of guest.

• Online travel agencies (OTAs) such as Booking.com and Expedia Group: high visibility, commission per booking, and the platform owns much of the guest relationship.
• Direct: the hotel website and booking engine, phone, email and walk-ins. No platform commission, but marketing, technology and payment costs.
• Tour operators, wholesalers and travel agents: contracted rates, often large volumes in resort markets, with commissions or net rates.
• Corporate and group business: negotiated rates, sometimes through intermediaries, with lower volatility.
• Metasearch (price-comparison sites) and the brand's own channels in a franchised or managed hotel.

A source of confusion: a rising OTA share is not automatically bad. For a new or remote hotel it may be the only affordable way to be found. The question for a buyer is how the mix changes the net revenue per room sold, and how much of it can be shifted.

What OTA commissions look like

Commissions are usually a percentage of the booking value, agreed in a contract with the platform. Public information from platforms and hotel-technology vendors suggests that standard rates are commonly in the range of roughly 15-25%, with Booking.com often quoted at the lower end of that range and Expedia Group slightly higher, and with higher effective costs when a hotel buys visibility through preferred or promoted programmes. We could not confirm these figures from the platforms' own current rate cards, which differ by country, property type and contract, so treat them as an order of magnitude and ask the seller for the actual agreements.

Commission is not the only cost of an OTA booking. Add payment fees, promotions and discounts the hotel agrees to for better ranking, and the cancellation behaviour of OTA guests, which vendor reports describe as higher than for direct bookings. Compare channels by net revenue after all costs, not by the headline percentage.

A hypothetical illustration with round numbers: a hotel sells 100 room-nights at EUR 100. If 60 come through OTAs at an effective cost of 18%, the acquisition cost is EUR 1,080. If 10 of those guests could be moved to direct booking at an effective cost of 8% including marketing and payments, the saving is about EUR 100 on EUR 1,000 of revenue. The numbers are invented to show the arithmetic; the real saving depends on the hotel.

Direct booking: how it is built

Direct booking is a capability, not a switch. It needs a website that converts, a booking engine, good photos, clear cancellation terms, a visible best-rate message, local-language content and a reason to book direct, such as flexible terms, breakfast or a loyalty benefit. Guests often discover a hotel on an OTA and then book elsewhere, so direct performance also depends on the hotel's reputation and review scores.

For a branded hotel, the brand's reservation system and loyalty programme supply part of the direct demand in return for fees; see management agreements, leases and franchise. An independent hotel carries more of this work itself.

Channel managers, PMS and the technology stack

The core technology is usually four layers.

• Property management system (PMS): the hotel's operational record of reservations, rooms and billing.
• Channel manager: pushes availability and rates to all channels and receives reservations, which reduces the risk of overbooking and rate errors.
• Booking engine and payment tools on the hotel's own website.
• Revenue management system (RMS) or analytics, for pricing recommendations and forecasts.

Ask who owns the contracts, the data and the guest database. In a management agreement the operator often controls these and the owner may lose access on termination. That is a point to negotiate; see how to choose an operator and read the contract.

Revenue management

Revenue management means selling the right room to the right guest at the right price through the right channel. Its tools are forecasting, pricing, inventory control and channel strategy.

• Dynamic pricing: rates change with demand, events, seasonality, lead time and competitors' prices. Hotels usually track a competitive set and set minimum stay or closed-to-arrival rules on peak dates.
• Segmentation: separate rates for leisure, corporate, groups and long stays.
• Length-of-stay and cancellation conditions: non-refundable and flexible rates priced differently.
• Upselling and ancillary revenue: breakfast, parking, spa, late check-out, and food and beverage.

The metrics are RevPAR (revenue per available room), ADR (average daily rate), occupancy and, for owners, GOPPAR and the net revenue after distribution costs. For how these feed valuation, see how to value a hotel. In a small hotel the revenue management is often a manager's daily habit, not a system; an investor should ask what data the hotel keeps, how often prices change and what happens on slow days.

Rate parity and the Digital Markets Act

Parity clauses used to require hotels not to offer a lower price on their own channels than on the platform (narrow parity), or on any other channel (wide parity). In September 2024 the Court of Justice of the European Union ruled in a case concerning Booking.com that its wide and narrow parity clauses were not objectively necessary for the platform and were not proportionate. Separately, the European Commission designated Booking.com as a gatekeeper under the Digital Markets Act in May 2024, and the Act prohibits a gatekeeper from requiring parity of this kind. Reports say Booking.com removed parity clauses from its terms in the EU from December 2024. See the Commission's page on the Digital Markets Act.

What this changes in practice: a hotel in the EU may generally offer a lower price on its own website or other channels. It does not mean that commissions fall, that other platforms follow identical terms in every country, or that discounting is always wise. Hotels outside the EU, in Thailand, Georgia, the UAE or Indonesia, are not covered by the same rules, and contracts there should be read as written. Whether a particular platform contract still contains parity-like terms is a question for a lawyer reading the actual document.

What to check when buying

• Channel statistics for at least two years: share of each channel, net revenue after commission, cancellation rates, and the trend.
• The actual OTA, tour operator and corporate contracts, including commission rates, promotions and termination terms.
• Dependence on a single channel or a single tour operator. A concentration above what the buyer is comfortable with is a risk to price.
• Direct booking share and review scores on the main platforms.
• Who runs pricing and with what tools, and whether the technology contracts and data transfer on a sale or a change of operator.
• Whether the seller's forecast quietly assumes a shift to direct that has not happened yet.

FAQ

Are OTA commissions negotiable? Sometimes, mostly for larger or well-performing hotels and for volume programmes. Small independent hotels have limited leverage. Ask for the actual contract.

Can a hotel in the EU now sell cheaper on its own website? Generally yes: parity clauses of this kind were found unlawful for Booking.com by the EU court in 2024, and the Digital Markets Act prohibits them for designated gatekeepers. Check the current contract and national law.

Is direct booking always better than an OTA? Not necessarily. Direct booking has marketing and technology costs, and OTAs bring guests the hotel might not reach. Compare net revenue by channel.

What is a channel manager and do I need one? It is software that synchronises rates and availability across channels. Almost every hotel selling through more than one channel needs one to avoid overbookings and pricing errors.

Does revenue management matter for a small hotel? Yes, but it can be simple: a competitive set, a calendar of events and weekly price reviews already improve results.

How we help

We are a trilingual platform that finds hotels and hospitality properties and coordinates independent local lawyers, tax advisers and, where needed, hotel consultants who can review channel data and contracts. This text is informational and is not legal, tax or investment advice; rules and platform terms change, so verify current conditions before you decide. See also the hotel investment guide for private investors.