OTA Commission and Hotel Profitability: What Hotels Should Measure Beyond Booking Value

Start with the booking value attributable to the room sale and calculate the commission based on the contractual rate or the actual invoice. Subtract the commission and other channel-specific costs to estimate what remains before operating expenses.

A ₹10,000 booking with a 20% commission creates ₹2,000 of commission expense and ₹8,000 before considering other costs. This does not mean the hotel earned ₹8,000 of profit because housekeeping, utilities, linen, payroll, amenities and property overhead still need to be covered.

• ✓Separate booking value from net room revenue.
• ✓Include discounts and channel-specific costs.
• ✓Compare occupied-room contribution, not commission alone.
• ✓Reconcile actual OTA statements regularly.

Direct bookings avoid OTA commission, but acquiring them may require website investment, paid search, social advertising, loyalty offers, call handling, payment fees, and staff follow-up. Those costs should be measured instead of treating every direct reservation as zero-cost demand.

The economic advantage of direct booking often improves when the hotel builds repeat business, branded search demand, local visibility, and customer relationships that reduce acquisition cost over time.

A room that would otherwise remain empty may still create positive contribution through an OTA even after commission. In high-demand periods, the same hotel may prefer more direct bookings or stronger pricing because inventory is scarce and likely to sell without the same distribution cost.

This is why channel strategy should respond to demand conditions. Measure ADR, occupancy, RevPAR, cancellation rate, length of stay, and net revenue by channel rather than applying one fixed rule all year.

• ✓Compare net ADR by channel.
• ✓Track cancellation and no-show patterns.
• ✓Measure channel mix by demand period.
• ✓Protect direct-booking relationships without abandoning profitable distribution.

Review each major channel monthly using rooms sold, booking value, average rate, commission, discounts, cancellations, payment costs, and net room revenue. Then compare the channel's contribution with demand that would likely have been available through other sources.

The objective is not to eliminate OTAs. It is to use them deliberately, strengthen direct booking where economically sensible, and avoid judging distribution performance from gross booking value alone.