The hotel industry’s relationship with online travel agencies (OTAs) has evolved from being a matter of convenience to a necessity, and increasingly, a source of tension.
OTAs now account for over $400 billion in global bookings annually, with the largest players Booking.com and Expedia alone controlling nearly half of the worldwide OTA market.
This article explains everything you should know about online travel agencies, such as the business model, the most important OTAs, OTA marketing, and what the domination of OTAs means for the profitability and guest relationships of hotels.
An online travel agency (OTA) is a digital platform that aggregates and sells travel inventory, primarily hotel rooms and flights, to consumers through a centralized booking platform.
In hotel management, OTAs are distribution channels that connect properties with potential guests, additionally handling functions such as transactions, payment processing, and even pre- and post-stay customer service.
The catch, if it can be called that, of this convenience is that hotels pay commissions to the OTAs on the value of each booking. The term OTA booking refers to the reservations that are made through these third-party platforms as opposed to directly through a hotel’s website or other traditional channels.
From a hotel operator's perspective, OTA hotel management is a balancing act between the pros of being on these platforms, such as the visibility and volume in bookings, and the drawbacks, primarily having to do with commissions.
OTAs came about in the late 1990s as the internet fundamentally changed travel distribution. Expedia launched in 1996 as a part of Microsoft, and Booking.com began in 1996 as a Dutch startup.
Although they had rather humble beginnings, they are now sophisticated platform businesses that exemplify the mechanics of the digital platform economy.
OTAs are quintessential examples of a platform business, specifically, a two-sided marketplace that creates value by facilitating transactions between distinct user groups.
According to McKinsey research, digital platforms are projected to mediate approximately 30% of global economic activity (roughly $60 trillion) within the coming years, and OTAs represent one of the most mature examples of this model in action.
In platform economics, OTAs are not producing the core product (hotel rooms) as they only orchestrate the exchange between hotels (supply side) and travelers (demand side). This creates what economists call "indirect network effects", which means that the platform becomes more valuable to both sides when more users are on it.
In the case of OTA platforms, additional hotel listings make the platform more attractive to guests who want to easily compare a large variety of properties. Each additional guest, on the other hand, creates more potential bookings for hotels, which justifies their continued participation on the platform.
This two-sided structure is what determines OTA business models and pricing strategies, as platforms can subsidize one side of the market to attract the other.
The consumer-facing services of OTAs are often free or low-cost (no booking fees for travelers on many platforms), while hotels pay commissions that can range from 15-30% of the booking value which can significantly impact profit margins.
According to recent industry data, commission rates have significantly increased in the past decade. Commissions used to average at 10-15% but now some properties pay effective rates that can approach 30-40% when we include fees from added visibility or promotions.
The platform model also explains why OTAs massively invest in customer acquisition. In 2024, the four largest OTAs (Booking Holdings, Expedia Group, Airbnb, and Trip.com Group) spent a combined $17.8 billion on sales and marketing, which was a number up $1 billion from the previous year.
Much of this spend goes to Google, which creates a rather ironic situation where OTAs pay a lot to advertise on a search engine that also happens to compete with them through Google Hotels (quite the win-win for Google if you ask me).
While hotel commissions are the backbone of OTAs' profitability, they also generate revenue through a variety of streams.
The primary OTA business model charges hotels a percentage of the value of each booking made through the platform. While flight tickets are also bookable through OTAs, Skift reports that the majority of revenues come from accommodations, as they have higher commission rates compared to airlines.
Commission size depends largely on negotiation leverage, with independent hotels paying more than large chains, which can negotiate better rates due to the sheer volume of properties.
Add-ons such as travel insurance, airport transfers, experiences and activities, and car rentals are increasingly monetized by OTAs.
Hotels can pay to have more visibility on OTAs, for instance, to appear higher in search results or have premium sponsored positions on the website.
The more hotels opt in, the more it creates a “pay-to-play” dynamic where hotels are effectively required to spend more than the base commissions to be competitive on the platform. This has become a significant revenue stream for OTAs.
The OTA market exhibits significant concentration, with two of the largest OTAs essentially dominating global distribution.
Booking Holdings, the company behind Booking.com, reported total revenue of $22 billion in 2024, representing 9% year-over-year growth. The company holds the highest market capitalization among online travel companies and leads in booking volume, particularly in Europe. While the conglomerate hosts many brands, Booking.com alone offers more than 29 million listings.
Expedia Group reported approximately $14 billion in revenue for 2024, roughly half that of Booking Holdings, with approximately 6% year-over-year growth. While Booking is the largest OTA in Europe, Expedia has a stronger presence in the U.S. market.
Together, these two giants control approximately 42% of global OTA market share, virtually creating a duopoly. In Europe specifically, OTA market share grew from 19.7% in 2013 to 29.6% in 2023. In the United States, OTAs accounted for 21% of booking revenue in 2024, which totaled to $100 billion.
The relationship between OTAs and hotels is a challenging one. Already in 2024 OTAs had surpassed hotel direct channels in gross bookings, $266 billion versus $262 billion respectively. However, Skift has forecasted a possible change in this dynamic with a projection that direct (digital) channels could overtake OTAs as the dominant distribution channel by 2030.
This list represents major players as of 2026, though the market is in a constant state of change with ongoing consolidation, acquisitions, and new entrants (without even mentioning AI!).
The rise of the platform economy has had a significant secondary impact on hotel economics. As OTAs account for a growing and often majority share of hotel bookings, the commission burden creates significant margin pressure for operators.
This cost structure has made direct bookings an urgent priority for hotels. Hoteliers surveyed by Skift imagined an ideal situation where they would change their distribution channel mix from 25% OTA bookings to just 13% and significantly increase direct digital bookings from 25% to 42%.
The preference for direct bookings comes from that their average cost is only at around 4.5%, which, needless to say, is dramatically lower than OTA commissions.
Even if cost is taken out of the equation, OTAs have spurred some strategic challenges for operators related to data ownership and guest relationships. When bookings come through third-party platforms, hotels lose direct access to guest data and interactions, arguably very important features of hospitality.
Research shows that more than 80% of hoteliers found that direct customers were likely or much more likely to become return guest compared to third-party customers, showcasing that building lasting relationships is a real struggle in the OTA economy.
Just because the situation is not messy enough, enter AI. Artificial intelligence could turn the dynamic between OTAs and hotels on its head or deepen operators’ current dependency on these platforms.
OTAs have established certain platform advantages (economies of scale and low marginal costs, to name a couple), but these could be diminished if AI agents that can autonomously search, compare, and book can access hotel inventory directly.
Some industry observers even argue that this would remove the role of OTAs in discovery and comparison in the guest journey completely.
Still, on the other hand, OTAs have accumulated decades of expertise in distribution and have immense amounts of traveler data, which could position them to integrate with AI agents instead of being replaced (or displaced) by them.
Consumers have already hopped on the AI train, as the usage of generative AI for travel planning more than doubled from 6% in late 2024 to 15% by mid-2025. At the same time, the use of traditional search engines for the same purposes dropped from 51% to 36% in the same period.
Interestingly, travel planning is the second most popular use case of AI after entertainment.
It would be an understatement to call the ever-changing state of the hotel OTA market tricky. In this environment, there are a few important strategic considerations hoteliers should keep in mind:
The OTA platform economy represents both extraordinary challenge and opportunity for hotel distribution. Understanding the mechanics of the OTA business model such as the commission structures and how AI may be threatening it is foundational for sharp OTA hotel management.
I do think OTAs will keep their spot as significant distribution channels for the foreseeable future, but the balance of power between platforms and operators continues to evolve.
That said, no matter what the next configuration looks like, hotels will not lose by investing in direct guest relationships and working to optimize their distribution mix to fall a bit more to their own court.