Distribution
OTA commission
Also written: commission rate
What OTA commission means
OTA commission is the percentage fee a hotel pays to Online Travel Agencies, such as Booking.com or Expedia, for driving bookings through their platforms. Calculated on the total room rate, it reduces net room revenue and directly impacts distribution costs.
Formula
OTA Commission Cost = Gross Room Revenue × Commission Rate Percentage
How it is used
Revenue managers monitor commission rates to evaluate channel profitability and calculate net RevPAR. High commission costs drive direct booking strategies, such as loyalty member rates and rate parity management, aimed at shifting demand to lower-cost channels. Operators negotiate commission tiers based on volume, preferred placement programs, or merchant model agreements to balance visibility against acquisition expense.
Worked example
A guest books a 3-night stay at $200 per night via an OTA with an 18% commission rate. The gross room revenue is $600. The hotel pays $108 in commission ($600 × 0.18), netting $492 in room revenue before operating expenses.
Common mistake
Focusing solely on top-line revenue from OTAs without accounting for commissions can mask poor net profitability and obscure true channel performance.
Related terms
Work it out
OTA Commission Calculator — See what channel commission actually costs you, and what a direct booking is worth.