An OTA (Online Travel Agency) is a web-based marketplace that enables consumers to research, compare, and book travel products from multiple suppliers on one platform. Acting as a digital intermediary, an OTA aggregates inventory from airlines, hotels, car rental agencies, and tour operators, offering a centralized interface for travelers to make reservations and process payments.
From the financial and technical perspective, OTAs operate mostly on two distinct types of commercial models, although many modern platforms can use a hybrid approach.
In this model, the online travel agency serves as the “merchant of record.” The OTA contracts with the supplier for a net rate ($80, for example) and sells to the consumer for a marked-up price ($100). The traveler makes the payment to the OTA directly at the time of booking. The online travel agency makes the payment to the supplier at a later stage, often after the guest has made their stay.
In this model, the online travel agency (OTA) acts as a facilitator. The traveler books through the OTA, but the contract is technically between the traveler and the supplier. The supplier charges the customer’s credit card, and the OTA sends an invoice to the supplier to collect a commission (usually 15% to 25%) after the stay.
While mostly in association with metasearch, many OTAs are now making substantial income by selling “sponsored placement” to suppliers. A hotel can place a bid to be the top result in a search for a certain destination, just like Google Ads.
For travel suppliers, OTAs are a double-edged sword. They charge high commissions, which dilute the yield of the supplier. However, they do provide the “Billboard Effect.”
Research shows that listing on an OTA (online travel agency) does increase direct bookings on the supplier’s own website. Consumers use the OTAs as a search engine to find hotels, then often check the hotel’s site to see if they can find better rates or more pictures. This makes the OTA an essential, if expensive, marketing channel for acquiring new customers that would otherwise never be able to come across the specific property.
This is the most common confusion. An OTA (like Expedia or Booking.com) does the booking and payment. A metasearch engine (like Google Flights, Trivago, or Skyscanner) aggregates the prices from the OTAs and suppliers but redirects the user to another site to actually complete the booking.
Rate parity comprises contractual terms in which online travel agencies (OTAs) require a supplier not to sell their inventory for lower than what they are selling the product for in the OTA. Although widespread, such clauses have been prohibited or limited in some areas (particularly in Europe) in order to promote competition.
OTAs connect to suppliers through channel managers, switches, or GDSs. They use APIs (mostly XML/JSON) to get rates and availability in real-time. If the connection is broken, the OTA may show “sold out” and/or incorrect prices.
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