The complete guide to OTA commission rates and fees

What is an OTA commission? 

OTA commission is the percentage of the total price that an online travel agent (OTA) charges when they accept a booking on behalf of a hotel. Online travel agencies (OTAs) are great avenues for getting your small property’s name out there and filling its rooms with international guests.

The trouble is, they can be expensive – especially when you take into account the rate parity agreements they put in place.

If an OTA commission sits at 15% – a standard industry rate – and the platform accepts a booking for your hotel worth $200 per night, you’ll pay the OTA $30 for every night that was booked. In short, OTA fees are a cost that can really add up.

The distribution strategy that you develop for your small hotel needs to include a diverse range of agents — including Online Travel Agencies. These agents are some of the biggest players in the travel industry. They have seemingly endless marketing budgets, and they dominate the search engine results page.

When you partner with OTAs, you increase your online visibility significantly. However, you also need to pay commissions for every booking you receive through an OTA.

So while they may be a powerful partner, you don’t have to rely solely on OTAs to generate business. Read on for a few ways to cut down on OTA commissions and increase direct bookings at your small hotel.

10 tips to stop paying OTA commission

1. Don’t list ALL of your rooms with OTAs

By partnering with only one or two OTAs, you run the risk of becoming overly reliant on them for bookings. What happens if one of them goes bust, or if they decide to significantly increase their commission?

While we do recommend pooling your inventory, you don’t have to list all of your available inventory on OTA websites. Instead, you can reserve your most lucrative room for walk-ins and phone bookings.

This allows you to use OTAs to increase your visibility, without being forced to pay a commission on every sale for the most expensive room that you have at your property.

To get the word out about this room, it depends on what the package is. For example, if it’s a honeymoon suite, partner with wedding planners or design promotions that encourage your guests to book directly through your website.

Promote those deals on social media to generate buzz and increase your bookings.

2. Partner with many booking sites

You’re better off partnering with more OTAs, because you can retain more control of your commission rates (you have bargaining power), and you encourage what’s known as ‘the billboard effect’ to get more commission-free bookings from your website.

The ‘billboard effect’ means that even if guests discover you through an OTA, they may ultimately decide to book directly with you. The benefit is you raise awareness from the OTA marketing your property, but the booking is commission-free.

Plus, more guests will find you. 74% of leisure and 77% of business travellers rely on the internet as the top source for travel planning, and search engines are the most popular planning source.

3. Focus on increasing repeat bookings

When you get a repeat booking, you boost your revenue per customer significantly. That’s why loyalty programs are playing a more prominent role in hotel marketing strategies across the globe.

Millennials, in particular, love a good loyalty program, and they are travelling now more than ever.

Your loyalty program might provide your guests with free rewards if they book a subsequent stay, such as a wine and cheese platter or a gift card to a local restaurant.

It also might give guests the opportunity to earn a free night’s stay—such as 1 free night after you stay at the property 3 times.

4. Use a channel manager instead of a GDS

In simple terms, a GDS acts as a middle-man that connects your small hotel to a network of travel agency professionals, including corporate travel bookers.

Using what’s known as a ‘merchant model’, you would work with online travel agents (OTAs) like Booking.com via the third party service provider. An OTA sells rooms on your behalf, allowing your guests to find and select your hotel, check your availability, and make a booking.

However, this is very costly. As they are a third party provider of GDS services, you would not only pay commission to the OTA (a percentage of each booking), but you would also be paying the third party service provider a commission for use of the system (usually $10-$12 per reservation).

GDS’ are great for tapping into the corporate travel market – however, it is being used more for other types of travel than for accommodation, such as flights or car rental.

By using a channel manager small hotels can cut the commissions they pay in half by using an all-in-one solution (including a channel manager component) like Little Hotelier that connects you directly with hundreds of OTAs.

5. Win over guests with direct booking

It may be easy to throw your hands up in the air and admit defeat to your guests that book through OTAs, but don’t give up!

Focus on finding ways to drive awareness and bookings through OTAs while retaining the guest relationship.

So then how can you make guests feel more loyal to you than they do to these third party booking sites? Well the answer is simple:

• Work on improving your online booking process. The ease of booking directly with you needs to match if not be smoother than booking with OTAs.
• Capture guest emails once they’re at your property as a quick-win initiative that is easy to implement. All you need is self-discipline to ask for their email address upon check-in or check-out.
• Send them your special offers and promotions! They can either use them for themselves, or refer a friend who will be in the area and may need a place to stay.

6. Leverage social media

One of the main reasons that many small, independent hoteliers feel they need the assistance of online travel agencies is for their reach – Booking.com and Expedia are huge brands with huge customer bases, after all. But if you’re savvy with your social media use, you can begin to reduce your reliance on these middle-men.

The good news is that the travel industry was seemingly built for social media. You can attract the eyes of potential guests by posting stunning photos of your hotel, of attractions in your area, and by offering local tips for the best food and fun. Social media rewards consistency – while it may take some time, a well curated online presence will eventually lead to more direct bookings, allowing you to leave OTA commission rates behind.

7. Encourage guests to leave reviews

A reason that the likes of Booking.com and Expedia are so successful is that they host – and actively encourage – guest reviews. The reality is that modern consumers are wise to marketing, and they don’t trust brands to talk about themselves. They do however trust people who share first-hand experiences online.

Reviews about your hotel will be posted not just on OTAs, but on your TripAdvisor, Google and Facebook profiles too, which are often viewed by people who are considering a stay at your hotel. Encourage guests to leave reviews on these platforms and respond to them to sculpt your reputation. As TripAdvisor, Google and Facebook allow you to link to your own website, you can then encourage guests to book direct with you.

8. Build strategic partnerships

We’re not talking about partnerships with OTAs, but rather partnerships with other organisations that can help you to facilitate direct bookings. Consider advertising on metasearch engines, which place your direct booking site alongside OTAs. Create partnerships with other, non-competing businesses in the travel space, such as airlines and tour companies – you’ll recommend them if they recommend you.

9. Offer competitive pricing

Price is the defining factor for most hotel booking decisions, so you need to do all that you can to ensure yours is competitive. This can be difficult when many OTAs demand their users offer rate parity – a legal agreement in which the hotel must charge the same rate for rooms, regardless of the distribution channel.

If there’s an opportunity to avoid being trapped in rate parity while staying on an OTA, take it. But beyond that, you should ensure your pricing is competitive against your actual competitors, a job made far easier with Little Hotelier.

10. Prioritise direct bookings

Optimise your small hotel website to encourage your guests to book directly with you.

• A simple, seamless online booking form complete with a secure payment portal is the best way to do this.
• You also need to make sure that you have a responsive website design that also allows your guests to book on their preferred mobile device. Most last-minute bookings are made on a mobile device, so this can help you reduce your available inventory without paying a commission to the OTAs.
• Using the right hotel technology suite will help you create and execute a perfectly balanced distribution strategy for your small hotel.

Win more direct bookings and reduce OTA commissions with Little Hotelier

The only way to reduce your OTA commission fees is to reduce your reliance on OTAs. The good news is that Little Hotelier is designed to help small, independent hoteliers do exactly that.

Little Hotelier is the ultimate direct booking generator. Our direct booking engine is capable of driving up to 46% more bookings, 43% more revenue, and an incredible ROI of 63x. Here’s how:

• Add or integrate: Our booking engine can be seamlessly added to your current hotel website, or you can build a brand new direct booking website in less than an hour with the Little Hotelier website builder!
• Optimise your rates: Little Hotelier’s direct booking engine allows you to add multiple rate plans to a single room, helping you maximise booking revenue.
• More value per booking: You enjoy complete control over the direct booking process, which means you can include extras, add-ons and package deals that the guest can include in a click.