What is OTA commission?

OTA commission is the percentage of a booking’s price that a hotel pays to an online travel agency, such as Booking.com or Expedia, when a guest books through it.

Why does it matter to a small hotel?

Online travel agencies bring guests a small hotel could not easily reach, and charge for it. Rates vary by agency and agreement: often 12–25%, most independents around 15–18%; check your contract. The big overseas booking sites bill UK hotels without UK VAT; a VAT-registered hotel accounts for it itself under the reverse charge and its cost is the commission alone, and a non-registered hotel pays no UK VAT on it. Only a UK-based supplier adds 20% VAT to its invoice. Check your own invoices; if in doubt ask your accountant. The cost shows up as one line in the accounts, but it is easy to underestimate because it is taken per booking and rises with every extra night sold through the channel. The real question is not whether to use agencies but how much of your business depends on them, and whether a guest who has stayed once could book direct next time. Even a few points shifted to direct bookings add up over a year.

A worked example

The 24-room hotel takes about £745,000 in room revenue a year, and about 40% of its bookings come through OTAs, roughly £298,000 of it. At 15%, that is about £44,700 a year paid out. Moving one tenth of that business to the hotel’s own website would save about £4,470 a year in commission, before counting the cost of whatever it takes to win those direct bookings. To see what channel commission is costing your hotel, try RatePulse free.

Related terms

• Rate parity
• Channel manager
• BAR
• OTA commission calculator