The travel business has evolved at a fast rate over the past 20 years. Previously, travelers had to rely on travel agents or make direct calls to the hotels and subsequently make their reservations. Nonetheless, nowadays the majority of reservations are made online in a few minutes. This change occurred primarily due to the OTAs. You have used an OTA platform already in case you have ever booked a room on Booking.com, Expedia, or MakeMyTrip.
But What is an OTA in Hotel booking? To put it in simple terms, an Online Travel Agency (OTA) is an online platform where hotels post their rooms and services to enable the travelers to be able to search, compare and book immediately. OTAs perform the role of third parties between the hotels and guests. They make the hotel more visible and at the same time convenient to the travelers.
Here, in this in-depth guide, you are going to learn clearly What an OTA is in hotel booking, how OTAs operate, how they make their profits, why hotels rely on them, and what their pros and cons are to the hospitality industry. Besides, this article is written with an easy language and directly using the active voice which makes understanding the topic easy.
What is an OTA in hotel booking? Understanding the Basics
We shall start by giving a straight forward answer to this question: What is an OTA in hotel booking?
An OTA (Online Travel Agency) is an online company that provides a list of hotels, airlines, transport services, tours and in some cases even travel insurance or forex. Through these sites, travellers can browse through the properties, compare the prices, read reviews, view images and book at the touch of the buttons.
OTAs are digital unlike the conventional travel agents. They also offer search filters in the form of price range, location, star rating, amenities and guest reviews. Due to these characteristics, the travelers are able to make decisions solely based on information within a short period of time.
Meanwhile, it is also beneficial to hotels as OTAs promote their organizations to millions of customers all over the world. OTAs, therefore, are strong marketing and distribution partners of hotels.
What is an OTA in hotel booking? How the Booking Process Works
Now that you understand What is an OTA in hotel booking?, let’s explore how the booking process actually works.
First, hotels sign agreements with OTA platforms. After that, hotels upload static information such as:
- Room descriptions
- Photos and videos
- Amenities
- Policies
- Location details
Next, hotels update dynamic information. This includes:
- Room availability
- Daily room rates
- Meal plans (European Plan, Continental Plan, American Plan, Modified American Plan)
This data can be updated by hotels manually. Of course, a Channel Manager (CM) or Property Management System (PMS) is utilised by numerous hotels to automatically update the information in several OTAs.
Once a tourist is making a reservation, the OTA informs the hotel immediately. Previously hotels used to receive booking information in fax or email. The current systems are mostly automatic updated using inbuilt software. Consequently, hotels minimize mistakes and eliminate overbooking.
That is why in response to the question, What is an OTA in hotel booking, one should also answer, it is a clear understanding of this well-flowing digital communication process between the systems of OTAs and hotels.
What is an OTA in hotel booking? Revenue Models Explained
To fully understand What is an OTA in hotel booking?, you must also know how OTAs make money. OTAs do not list hotels for free without benefit. Instead, they operate mainly on commission-based models.
Here are the two primary revenue models:
| Revenue Model | How It Works | Payment Flow | Commission Structure |
| Merchant Model | OTA buys rooms at discounted rates and resells at markup | Guest pays OTA | OTA keeps profit margin |
| Agency Model | Guest pays hotel directly | Hotel pays OTA commission after stay | Commission usually 15–30% |
Under the Merchant Model, the OTA is the merchant of record. It determines the prices and receives the payment of the guest.
The hotel receives payment in the Agency Model, which involves direct payment to the customer. Once the guest is paid, the OTA receives commission to the hotel.
commission to Hotels is usually 20 -30 percent. Airlines tend to offer lower commissions, approximately 10 percent, as airlines are not as discontinuous as the hotels.
Hence, in the case when individuals pose the question, What is an OTA in hotel booking, it is also necessary to realize that OTAs are mighty distribution partners who receive commissions.
Why Are OTAs Important in the Hotel Industry?
Hospitality business is very fragmented. There are thousands of competing hotels within the city. Small hotels cannot compete with large hotels in terms of attracting international tourists without the presence of strong online presence.
Here is where OTAs become essential.
Customers do not tend to make instant bookings. They rather compare alternatives in different websites. Research indicates that before travelers settle on a booking choice; they go through about 3040 sites. Further, there is approximately 1000:1 look-to-book ratio in travel. This is to say that every 1000 searches result in a single booking.
OTAs simplify this process. They combine various hotels in a single platform. As such, passengers can compare packages with ease and reserve faster.
Therefore, once again, when a person is questioned What is an OTA in hotel booking? one of the factors to consider is its place in the discovery, comparison and decision making process.
Benefits of OTAs for Hotels
Hotels have a number of benefits associated with the use of OTAs.
- To begin with, they enhance international presence. Through OTA listings, a small hotel in a remote town will be able to draw in international guests.
- Second, OTAs are big investors in online marketing. They invest in Google Ads, brand awareness, and SEO. This is marketing power that hotels receive without having to spend enormous budgets.
- Third, OTAs offer systems of reviews. Great reviews boost the confidence and enhance bookings.
- Nevertheless, hotels should not rely on OTA too much as high commissions decrease the profit margin.
Benefits of OTAs for Travelers
OTA platforms also benefit the travelers substantially.
They are able to make a price comparison within seconds. In addition, they are able to read screened reviews of the guests. Moreover, they have the option of filtering according to amenities such as free Wi-Fi, swimming pool, breakfast included or the closeness to landmarks.
Most significantly, OTAs provide a range of payment methods including credit card, debit card, bank transfer, and an option of pay-at-hotel in some cases.
OTAs, therefore, make the process of planning travels much easier.
Challenges Hotels Face with OTAs
OTAs, though they have an exposure advantage, create problems.
- The profit margins are lowered because of high commission fees. Hotels occasionally give as much as 30% commission on a booking.
- There is also a possibility that high OTA dominance undermines direct bookings. Hotels might also lose control of their prices in case they over-rely on OTAs.
- Furthermore, rate parity contracts further limit hotels to lowering their rates in the hotel websites.
Hotels are thus forced to formulate moderate distribution measures. They are to use OTA partnerships in association with direct booking campaigns.
What is an OTA in hotel booking? Difference Between OTA and Direct Booking
In order to explain further on What is an OTA in hotel booking, it would be a good idea to compare the OTA booking and direct booking.
Guests can visit the hotel directly by going to the official site or calling the hotel when they go through the booking direct system. The hotel will retain all the revenue without commission.
OTA bookings however have a wider exposure and international coverage.
Both channels are employed by smart hotels. They rely on OTAs to get new visitors. They then make invitations to repeat customers to make direct bookings.
Future of OTAs in the Hospitality Industry
The OTA business is in a state of development. Now recommendations are made personalized with the help of Artificial Intelligence. There is convenience in making bookings through mobile apps. Further, OTAs review the customer behavior to provide a specific offer.
Moreover, other OTAs combine routes, hotels, tours, and transport in a single system. This generates smooth traveling planning.
Nevertheless, the hotels also invest in the enhancement of the direct booking websites. They also provide loyalty programs and special offers to decrease the dependency on the OTAs.
Thus, hotels and OTAs continue to have a dynamic and strategic relationship.
Final Conclusion: What is an OTA in hotel booking?
What is an OTA in hotel booking? It is an Internet-based business where hotels and travelers are linked with a digital market. OTAs can assist the hotel in gaining exposure, distribute through the Internet, and find international clients. Meanwhile, they enable travelers to browse, compare and make reservations easily.
OTAs are primarily commission based. They are significant in a very disrupted hospitality sector. Nevertheless, the hotels should be able to control the expenses on commissions and have a healthy balance between direct and OTA reservations.
OTAs are also very strong distribution channels in the current digital travel space. Their mechanism of action will assist the hoteliers and the travelers make wiser choices.
Also Read About:- How to Escape OTA Commissions and Boost Your Profits