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The 'direct booking' you're crediting to your loyalty program, specially for some mid-tier hotels - may have started as an Expedia transaction two decades ago — and the hotels that put real management behind their OTA segment today are seeing returns that far outpace what that management costs.
Expedia charges too much. Booking.com skims too much commission. Rate parity is a constant migraine. Loyalty discounts erode rate integrity. Billions get spent bidding on our own brand names in search results. And after covering the mortgage, payroll, utilities, insurance, renovations, franchise fees and the toilet that decided to overflow at 2 a.m., we still hand somebody else 15% to 20% for delivering the guest.
Yes. I get it. But the commission was never the whole story — and there's good news on the other side of it.
Because somewhere across twenty-five years of grievance, the hotel industry missed something considerably larger.
In 1998, Joe barely traveled. Maybe one family vacation every few years. Maybe he stayed with relatives. Maybe he drove somewhere and hunted for a motel once he arrived.
Could Joe have used a travel agent? Sure. But the old travel-agency model wasn't exactly built around a guy hunting for a cheap two-night road trip. Travel agencies could be intimidating — occasionally downright snobbish. Walk in and announce your entire weekend budget is $200, and you weren't going to feel like Aristotle Onassis chartering his next cruise.
So Joe stayed home.
Then came Expedia, Travelocity, Priceline, Booking.com that saw that massive untapped market, and the rest is history!
Suddenly Joe could sit at home at 10:30 at night, still in his underwear, and shop hotels without speaking to another human being. Destination. Dates. Price. Photos. Pool. Breakfast. Reviews. Map.
Nice hotel that he had only dreamed of entering — $119.
Joe clicks. Done.
That sounds almost quaint today. In 1998, it was revolutionary.
Here is the part the industry routinely overlooks.
Joe checks into the hotel. The room is clean. The bed is comfortable. His kids like the pool. Breakfast is downstairs. Nothing catches fire.
Joe has a good trip.
Six months later his wife says, “Why don't we go somewhere this weekend?”
Something has shifted. Joe now understands the mechanics. Travel isn't mysterious anymore. Hotels aren't mysterious anymore. And, critically, Joe remembers the same hotel — the brand — he most likely not even remember how he booked, but he remembers the hotel.
Next time he Googles the same hotel directly. Eventually he books through brand.com. Eventually he joins the hotels loyalty program. The following year he takes three trips. Then his daughter starts travel soccer. Then a wedding. Then a graduation. Then weekend getaways become routine.
They
now feel like royalty when they visit the hotel.
Ten years on, Joe might consume 10, 15 or 20 hotel-room nights a year. Only two might originate on an OTA.
The hotel industry looks at the other eighteen and calls them direct bookings.
Technically correct. Economically, not necessarily — because the OTA may have manufactured the customer in the first place.
This isn't purely theoretical. Cornell researcher Chris Anderson documented what the hospitality industry now calls the Billboard Effect: simply appearing on Expedia can lift a hotel's total reservation volume, including bookings through the hotel's own channels. An earlier study measured increases of roughly 7.5% to 26%, depending on the property.
Why? Travelers discovered the hotel on the OTA, then booked elsewhere. That's the textbook version:
OTA → Hotel discovery → Direct hotel booking.
But there's a larger effect we've barely discussed. Call it the Traveler Creation Effect:
OTA → First or additional trip → Good hotel experience → Confidence in travel → Brand recognition → More travel → Future direct bookings → Rising Platinum Member
That isn't one converted reservation. That's the lifetime value of a traveler.
In 2000, the entire U.S. OTA market generated roughly $6.6 billion in gross bookings. By 2024, U.S. OTA gross bookings had climbed to approximately $108.5 billion — more than sixteen times larger in a quarter-century.
Now weigh that against hotels. In the early 2000s, U.S. hotel-industry revenue ran about $109 billion annually, across roughly 4.1 million rooms. Today, AHLA reports about 5.7 million rooms and approximately $352.3 billion in hotel sales, though the old and new revenue definitions aren't perfectly comparable.
So, broadly:
None of that, however, proves OTAs single-handedly drove hotel-industry growth. Of course they didn't cause all of it. Population grew. Prices rose. ADR climbed. Household income shifted. Airline travel became more accessible. Interstate travel expanded. The broader economy grew. Hotel supply expanded. Google, smartphones, social media and hotel websites all played a role. OTA contributed the lion share!
It would be equally foolish to look at that growth curve and conclude OTAs merely shuffled reservations from Column A to Column B. They altered consumer behavior. And behavior is what builds markets — not government mandates, not industry task forces, not a committee memo out of some regulatory office. Market forces did this.
Oxford Economics' Tourism Economics group studied precisely this question across Asia-Pacific. In 2019, roughly 705 million room nights in the region were booked through OTAs. Their model estimated that about 10% of those — 70.2 million room nights — would not have happened at all without the added choice, transparency and trust OTAs supplied.
Stop and sit with that.
Those weren't reservations siphoned from Marriott.com. They weren't reservations diverted from a storefront travel agent. According to the economic model, those were additional nights — travel that happened because the marketplace made traveling easier.
Now extend that logic past the first transaction. What happens after those 70 million incremental stays? Some guests discover Marriott. Some discover Holiday Inn. Some discover Hampton. Some discover Best Western. Some stumble onto a small independent property they'd never have found otherwise. Some enroll in loyalty programs. Some eventually book direct. Some simply start traveling more often.
In essence, OTAs bring guests to your door. It is then your responsibility to deliver a memorable—and positive—experience that turns those guests into repeat customers.
That said, suddenly we have a measurement problem.
Suppose Expedia introduces Joe da Trav to Holiday Inn in 2005. Over the next twenty years, Joe 100 hotel nights — maybe 25 through OTAs, 75 direct.
Our industry statistics will report: OTA contribution — 25 room nights.
That's incomplete. What if, absent the accessibility, transparency and confidence that online travel created, Joe would have taken only 30 hotel nights across those years total? Who gets credit for the other 70?
Nobody. They vanish into the broader category of “industry growth,” uncredited and unmeasured.
That is precisely why judging OTAs solely by current market share understates their historical contribution to hotel demand. We can measure Expedia's commission. We can measure Expedia's room nights. We can measure Expedia's gross bookings. What we cannot easily measure is the 52-year-old guy booking directly on IHG.com today whose habit of taking weekend trips began because Priceline made travel absurdly easy for him twenty years ago.
There's
no field in the PMS for:
SOURCE: EXPEDIA, 2006.
Maybe
there should be.
“What if we went to Nashville this weekend?” Twenty seconds later, 247 hotels populate the screen. Sort by price. Sort by rating. Study the photos. Read what other travelers said. Check the neighborhood. Shift Friday to Saturday. Too expensive? Try Louisville. Too far? Try Baltimore. Found one? Book it.
That workflow didn't merely change where people booked. It changed whether most trips happened at all.
Travel became retail. And when anything becomes easier to shop for, easier to understand, easier to compare and easier to purchase, people buy more of it. That's not a hospitality-industry quirk — that's basic market economics, and it works the same way whether you're selling hotel rooms or refrigerators.
How much? Nobody can honestly hand you an exact figure. I wouldn't claim OTAs caused all — or even necessarily most — of the roughly 223% nominal increase in U.S. hotel sales over the past quarter-century. Too many other economic forces are tangled up in that number, and a substantial share of the dollar growth is simply higher prices.
But I'll make one statement without hesitation: the hotel industry's growth over the past twenty-five years would almost certainly have been smaller without OTAs. And their true contribution runs larger than the share of hotel rooms booked through OTAs suggests — because OTAs did three things simultaneously. They captured existing demand. They redirected existing demand. And, most consequentially, they created new demand.
The first two are easy to measure. The third is where it gets interesting — and where the industry has been sloppy.
Here's the part of the argument worth reframing.
Hoteliers spend twenty-five years fixed on a 15% to 20% commission line, as if that number were the ceiling on what's possible. It isn't. The bigger story is what happens when a property gives the OTA segment the same dedicated attention it gives group or corporate business: rate parity across a dozen channels held tight, channel mix optimized in real time, packaging and promotions calibrated so they support direct business instead of undercutting it, inventory positioned right, on the right channel, on the right night.
Hotels that put real time — or a real professional — behind the OTA segment consistently see stronger OTA contribution at a lower effective cost. And the results more than cover what the help costs.
That's the encouraging part. This isn't a problem that requires a bigger team or a bigger budget to fix. Revenue teams are stretched thin industry-wide, and hotel labor has been under real pressure for years — which is exactly why the properties getting this right are, more and more, leaning on specialists rather than trying to squeeze one more responsibility onto an already-full plate.
Companies like ManageOTA specialize in exactly this — giving the OTA segment focused, ongoing management without adding headcount. Some hotels handle it by simply carving out dedicated time internally. Others go further and hire management companies that run revenue management as a single, all-inclusive discipline — OTAs folded in alongside every other channel, managed as one coordinated system instead of an afterthought.
The properties that do this see it show up in the numbers: better OTA contribution, better rate integrity, more of that OTA-sourced guest converting to direct over time. And the math tends to work decisively in the hotel's favor — the incremental revenue and savings from professional OTA management routinely cover the cost of the service several times over.
Use them.
Because the hotel that invests in real management of its OTA segment isn't just easing the commission conversation — it's turning a line item hoteliers have complained about for twenty-five years into one of the better returns on the P&L.
None of this means hotel owners should ease off direct bookings. Good Lord, no. Every well-run hotel should fight for the customer relationship, protect its margins, build its database, sharpen its website and its loyalty strategy, and convert OTA customers into direct customers whenever the opportunity presents itself. Paying an 18% commission forever for a guest who has already stayed with you six times leaves real money on the table — not because anyone dropped the ball, but because most teams simply don't have the bandwidth to chase it.
But neither should we rewrite history.
OTAs were genuine disruptors. They dismantled the traditional travel-distribution system. They stripped power away from traditional travel agents and, to a lesser degree, from hotel brands themselves. They handed enormous power to consumers. They made hotel pricing transparent. They forced mediocre hotels to answer for themselves through public reviews. They gave independent hotels a storefront next to billion-dollar brands — no gatekeeper required.
And they made travel accessible to millions of Joe da Travs who previously traveled less — or, in plenty of cases, not at all.
Some of those Joe da Travs eventually stopped booking through Expedia entirely. That's the irony sitting at the center of this whole argument.
Expedia may have created the traveler.
You brand may now
own the customer.
So the next time someone in your ownership meeting looks at an OTA report and says, “Only 50% of our business comes from OTAs,” don't let it stop there.
Ask the harder question: how much of the other 50% exists because OTAs helped turn America into a nation of frequent travelers in the first place?
Nobody has a perfect answer. But I'd wager the number is a great deal bigger than this industry is prepared to admit.
Truth is the truth: OTAs ballooned a new and massive segment of travelers — one that traditional travel agents, for all their charm and Rolodexes, would never have been able to create.
Keep fighting for the direct booking. Just stop pretending the OTA that trained your guest to travel in the first place doesn't deserve a line in the ledger.
Nicholas Vasseghy