OTAs are one of the most important distribution channels in the hospitality industry. For some, they’re a necessary evil. For others, they’re the single biggest driver of new guest acquisition.
The reality is more nuanced than either extreme: OTAs are a tool, and like any tool, their value depends entirely on how you use them.
This guide covers everything hotels need to know about OTAs: what they are, how they work, the business models behind them, how they differ from metasearch and travel agents, and how to build a distribution strategy that makes OTAs work for you, not the other way around.
What is an online travel agency?
An online travel agency (OTA) is a digital platform that acts as an intermediary between travelers and travel providers, connecting hotels, airlines, car rental companies, cruise lines, tour operators, and activity providers in one place where consumers can search, compare, and book travel.
For travelers, OTAs offer convenience: the ability to compare hundreds of properties side by side, filter by price, location, amenities, and review score, and book travel products ranging from hotel rooms to vacation packages to car rentals — often bundled with loyalty programs that reward repeat bookings — all in a single session. For hoteliers, OTAs function as a global sales and marketing channel that comes with built-in traffic, consumer trust, and distribution infrastructure that would be impossible to replicate independently.
The OTA market is substantial and growing. The global online travel market is projected to reach $1.13 trillion by 2030, with OTAs continuing to hold a significant share of online hotel bookings worldwide.
During Passport, Jeremee Peters, Director of Product at Cloudbeds, explained why the most successful hotels use OTAs as a guest acquisition channel—not a replacement for direct bookings—and how the right distribution strategy turns third-party visibility into long-term growth.
Watch the full session.
From OTAs to direct bookings: How to own your commercial strategy.
A brief history: How OTAs reshaped the industry
OTAs emerged in the mid-1990s as the internet gave travel companies a way to aggregate global inventory and reach consumers directly:
- Expedia launched in 1996 as a division of Microsoft
- Booking.com launched in Amsterdam in 1996
- Priceline.com arrived in 1997 with its name-your-own-price model
What followed was decades of consolidation that reshaped the industry. Today, two parent companies — Expedia Group and Booking Holdings — control the majority of OTA market share in most Western markets, while Trip.com Group and Airbnb have carved out major positions globally.
The rise of OTAs permanently changed how hotels think about distribution. Before OTAs, travelers depended on travel agents or direct contact with hotels. After OTAs, rate transparency became the norm, consumer expectations around comparison-shopping were permanently elevated, and the pressure on hotels to maintain competitive rates across multiple channels became a daily operational reality.
How do OTAs work?
OTAs operate as intermediaries between travelers and travel providers. Here’s the core flow:
- A hotel lists its rooms, rates, and availability on an OTA’s platform
- The OTA displays that inventory to travelers searching for accommodation
- A traveler books through the OTA
- The booking flows back to the hotel (via the OTA’s API or channel manager connection)
- The hotel delivers the stay; the OTA collects a commission or takes a margin on the rate
For hoteliers, the key to making this work efficiently is technology. A channel manager connects your property management system (PMS) to your OTA listings, syncing rates and availability in real time across every channel. When a room sells on Booking.com, your channel manager closes that inventory on Expedia, Agoda, and every other connected channel simultaneously, eliminating the risk of overbookings.
Without a channel manager, hotels are manually updating rates across dozens of extranets – a process that’s slow, error-prone, and increasingly uncompetitive in a market where rate changes need to happen in minutes, not hours.
OTAs also offer mobile apps that have become travelers’ primary booking interface. 39% of travelers prefer to book on an app, and OTAs have invested heavily in mobile UX to make the booking experience fast and friction-free. This mobile-first behavior reinforces OTAs’ dominance at the top of the booking funnel.
39%
of travelers prefer to book on an app
3 OTA business models
When a hotel partners with an OTA, they’re entering one of three business model arrangements.
| Model | Who pays? | Hotel consideration |
| Merchant | Traveler pays the OTA upfront. | Payment comes after the stay; can create cash flow gaps. |
| Agency | Traveler pays the hotel; hotel pays the OTA a commission. | Better cash flow, but commission costs are still significant. |
| Advertising / metasearch | Hotel pays per click (CPC) or acquisition (CPA). | Drives direct bookings by placing your website alongside OTA rates. |
1. The merchant model
The OTA acts as the merchant of record: the traveler pays the OTA at the time of booking, and the OTA pays the hotel after the guest checks out, minus its margin. This is common in markets where travelers expect to pay upfront and want the OTA’s protection if something goes wrong.
Hotelier implication: You receive payment after the stay, which can create cash flow gaps. Rate control is limited since the OTA sets the final customer-facing price based on its margin requirements.
2. The agency (commission) model
The traveler books through the OTA but pays the hotel directly at checkout. The hotel pays the OTA a commission after the stay.
Hotelier implication: Better cash flow, more rate control, but commission costs are still significant. This is the most common model for traditional hotels on platforms like Booking.com and Expedia.
3. The advertising / metasearch model
Platforms like Kayak, TripAdvisor, and Skyscanner primarily operate as metasearch engines — aggregating rates from multiple OTAs and your direct booking engine, then directing travelers to the source for the actual booking. Hotels pay on a cost-per-click (CPC) or cost-per-acquisition (CPA) basis.
Hotelier implication: Metasearch is a powerful way to compete for travelers at the moment they’re comparing rates, and critically, it gives your direct rate a seat at the table next to OTA prices. When a traveler sees your website rate matches (or beats) the OTA price on Kayak, they have a reason to book direct.
Most major OTAs now offer a blended model, giving travelers the option to pay upfront (merchant) or at the property (agency). Understanding which model applies on each platform you use is essential for forecasting revenue and managing commission costs.
These three channels are often confused but they serve different roles in the distribution ecosystem.
| Channel | What it is | Who pays who |
| OTA (e.g., Booking.com, Expedia) | Books directly on the platform; traveler stays on the OTA’s site | Hotel pays OTA commission (15–25%) |
| Metasearch (e.g., Kayak, TripAdvisor, Skyscanner) | Compares rates across sources; clicks out to book | Hotel pays per click or per booking |
| Direct booking (your booking engine) | Traveler books on your website | No commission; you keep 100% of revenue |
| Travel agent / tour operator | Human intermediary plans and books on behalf of traveler | Commission or fee to agent |
The most effective distribution strategies don’t choose between these channels, but use each one for what it does best. OTAs for new guest acquisition and global reach. Metasearch for rate comparison visibility. Direct booking for margin, loyalty, and guest relationship ownership.
Is Google an OTA?
Not exactly — but it’s increasingly blurring the line. Google Hotel Search functions as a metasearch engine: it aggregates rates from OTAs and your direct booking engine and displays them side by side in Google’s search results. Travelers can compare rates without leaving Google.
What makes Google Hotel Search particularly valuable for independents is Google’s free booking links which allow hotels to surface their direct rates in the Google Hotel Search results at no cost. When a traveler sees your property’s direct rate alongside Booking.com and Expedia, and the price is equal or better, you’ve created a direct booking opportunity that didn’t require paid advertising.
Google isn’t an OTA in the traditional sense since it doesn’t take a commission on most bookings and doesn’t hold inventory. But its dominance in travel search means it’s a critical part of any distribution strategy.
OTAs vs. travel agents: What’s the difference?
The terms are easy to conflate, but they refer to different things.
An OTA is a platform — a technology-powered marketplace where travelers self-serve their bookings. An online travel agent is a person — a travel professional who researches and books on behalf of their clients, often using their own network of travel providers, supplier relationships, and expertise to curate the right experience.
Travel agents remain relevant, particularly for:
- Luxury and high-touch travel: Complex itineraries, exclusive experiences, destination weddings, and honeymoons where personalized curation adds genuine value
- Business travelers and corporate accounts: Companies that manage travel budgets often work with a travel management company (TMC) or dedicated travel agent for policy compliance and cost control
- Group travel and tour operators: Multi-room blocks, conference attendees, and package-based group bookings require coordination that self-service OTAs aren’t designed for
For properties that want to tap the group and luxury segments, building relationships with intermediaries like travel agents and tour operators can unlock booking streams that OTAs don’t reach.
Why OTAs and direct aren’t enemies
Here’s the most important thing to understand about OTAs: they can fuel your direct booking growth when you use them intentionally.
This happens through the billboard effect — a well-documented phenomenon where a traveler discovers your property on an OTA, then searches for your property directly (by name or website) before booking. If your direct booking experience is conversion-ready — with competitive rates, a clear value proposition, and a frictionless checkout — you capture that booking without paying commission.
OTAs are not just a distribution channel, but a really powerful customer acquisition tool that leads to a more profitable goal, which is direct bookings.
Research consistently shows that properties listed on OTAs receive a measurable uplift in direct bookings compared to properties that don’t list on OTAs at all. Your OTA listing is, in effect, a paid advertisement for your property — one where you only pay if the traveler books through the OTA.
The flip side: if a traveler finds you on Booking.com, searches your name on Google, and lands on a slow or confusing website with a clunky booking process, they’ll book back on the OTA. The billboard effect only works if your direct booking engine converts.
A note on rate parity: Many OTA contracts include rate parity clauses — requiring hotels to offer the same or better rates on the OTA as on any other channel. The enforcement and legality of these clauses varies by market, and the landscape has shifted significantly in recent years. Understanding your specific parity obligations on each platform is part of building a sound revenue management strategy.
How to connect to OTAs
Manually updating rates and availability across a dozen OTAs is a liability. One missed update creates a rate disparity. One slow sync creates an overbooking. One overbooking creates a guest complaint, a forced walk, and a review you’ll be managing for months.
A channel manager solves this by connecting your property management system (PMS) to all your OTA listings through a single interface. Rate and availability changes push to every connected channel simultaneously. Bookings pull back into your PMS instantly. The channel manager is the infrastructure layer that makes multi-channel distribution operationally viable.
Cloudbeds connects to hundreds of distribution channels, including preferred partner integrations with Booking.com, Expedia, Agoda, and Airbnb — meaning a deeper API connections with the platforms driving the highest booking volumes. Properties connect to any channel at no additional commission from Cloudbeds.
Key takeaways
- An OTA is a digital platform that connects travelers with hotels, airlines, car rentals, cruises, vacation packages, and other travel services acting as an intermediary that earns revenue through commissions or margins
- The OTA market is dominated by two parent companies: Expedia Group (Expedia, Hotels.com, Vrbo, Orbitz, Travelocity, Hotwire) and Booking Holdings (Booking.com, Agoda, Priceline, Kayak), with Trip.com Group, Airbnb, and MakeMyTrip rounding out the global landscape
- OTAs operate on three business models: merchant (OTA collects from traveler upfront), agency/commission (hotel collects at checkout and pays OTA a percentage), and advertising/metasearch (hotel pays per click or acquisition)
- A channel manager is the technology that makes multi-OTA distribution operationally viable — syncing rates and availability from your PMS across every connected channel in real time and eliminating overbooking risk
- OTAs and direct bookings are not mutually exclusive; the billboard effect means OTA visibility can drive direct bookings when a property has a strong direct booking engine and a competitive direct rate
- The most effective distribution strategies use OTAs for reach and acquisition, metasearch for rate comparison visibility, and direct booking for margin, loyalty, and long-term guest relationship ownership
More channels, fewer headaches.
With Cloudbeds, manage every OTA connection, rate, and reservation without the manual work.
