What Is an OTA? How Online Travel Agencies Work

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ByElizabeth Lavis
8 min read

If you’ve ever skimmed Skyscanner for flights or scrolled Booking or Airbnb for an ideal accommodation, you’ve used an online travel agency (OTA). These are digital platforms that collect data from one or more travel sectors and let you compare options, bundle your hotel and flights, and book quickly and conveniently. 

Research shows that 43% of travelers use OTAs to book accommodations. These agencies certainly have a strong foothold in the market, with Booking and Expedia leading the pack, but they’re not without their drawbacks. Lack of personalized service, inflexibility, and hidden fees are often an unwelcome part of the package. 

According to GlobalData, these kinds of consumer concerns are making booking directly attractive, although it’s much more time-consuming when you can’t compare all of your options in one spot.  Travelers want an easier, more transparent way to book directly with hotels. DirectBooker is developing tools that integrate with conversational AI platforms, like ChatGPT and Gemini, giving travelers a faster, smarter way to compare direct rates and book with confidence.

Let’s examine how OTAs work, the upsides and obstacles, and the alternative tools you have available for swift, effortless booking.

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Definition of an Online Travel Agency (OTA)

Online travel agencies (OTAs) are web or app-based platforms that liaise between hotels, airlines, and travelers. They give you a comprehensive list of travel options based on your destination and travel dates. You can sort by price and other concerns like accommodation type or how many layovers you’ll have on your multi-city flight.

They’ve transformed the travel industry and are very popular. It’s easy to understand why. You don’t need to visit an in-person travel agent or do independent research to find hotels or flights—you can type in your destination and hit the search button. 

It all sounds great, right? But while OTAs provide many options on the surface, their customer service and inflexibility are hard to ignore. 

Types of OTAs

Let’s look at a few types of OTAs, where they shine, and what you need to look out for when booking through them.

Popular OTAs

While there are OTAs for every location, niche, and taste, some behemoths have tons of market share. The most popular OTA is the Bookings Holdings Group, which includes Priceline, Agoda, KAYAK, and Booking.com under its umbrella. Airbnb and Expedia are other prominent options.

How OTAs Work

OTAs work by collecting and displaying company inventory and information in one comprehensive list that you can skim through and choose from. They do this by cultivating relationships with their partners over a broad sector, like airlines, or a niche area, like pet-friendly hotels.  

Common OTA Business Models

OTAs come in all shapes, sizes, and models, but there are a couple of common types that you’ll likely encounter on your booking journey.

Commission model

Since OTAs are a popular way to book travel, they charge hotels a percentage of the sale or an agreed-upon payment for listing them. This payment structure varies depending on the OTA, but commissions often range between 15% and 35% of the hotel stay price. Larger hotel chains often hold more negotiating power and are able to drive commission rates down. But smaller, independent hotels often pay rates at the top of that range. 

The OTA commission model hinges on the idea that hotels get more visibility on the OTA platform and don’t have to do as much independent marketing to fill their rooms. This is called the “billboard effect”, and the idea is that by being visible on an OTA, you could get more direct business. 

Merchant model

The merchant model of the OTA business is one of the key reasons you may consider booking directly. The idea is this: hotels sell a portion of their room inventory to the OTA at a low price, and the OTA marks them up and sells them to you.

If you think this model sounds a lot like your traditional travel agent situation, you’re not far off. The OTA is a direct broker between you and the hotel.

Advertising model

Some OTAs charge travel-based providers per click and/or per booking. These providers can also place ads on the website, which impacts the ranking algorithm of the OTAs. This means that the order that you see hotel results is influenced by advertising and partnership agreements between OTAs and hotels.  

Advertising and commission models work well for OTAs, but might not always work well for travelers. Paid advertisements can confuse travelers and can be misleading. The advertising model hinges on upselling rooms, so you’re not getting the best deals here either. Plus, hotels are hurt by having to raise their prices to keep up with OTA commissions.

While OTAs are undeniably easy to use, they might not be the best choice for travelers. Let’s look at the benefits and limitations of OTAs and some alternatives.

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Benefits of Using OTAs

There are plenty of compelling reasons why people use OTAs, including the fact that they’re so common that they are difficult to avoid. 

OTAs have one-stop-shopping

OTAs are fast and comprehensive, putting all the travel data you need in one spot. This is especially true for OTAs that serve a variety of sectors. You can book your flight, hotel, and rental car all in one place.

OTAs offer easy comparisons

OTAs allow you to compare prices without having to bounce from website to website. Most OTAs have sorting and filtering tools to view your options from lowest to highest prices or vice versa. 

OTAs have customizable features

You won’t get personalized customer service from an OTA, but you will get customized features that might make the experience worthwhile. 

OTAs typically have:

Convenience, ease of use, and customized searches are the high points of OTAs. Now, let’s take a peek at the downsides.

Limitations of OTAs

While OTAs often come with a convenient booking experience, these platforms also come with their fair share of limitations.

OTAs are inflexible

Changing your reservation or canceling through an OTA can be extremely tricky. Although many of the larger platforms, like Booking and Expedia, can leverage their long-standing relationships with hotels to offer pretty good policies, smaller and lesser-known ones generally have poor service and restrictive policies, like large cancellation or change fees. Even though the more well-known platforms tend to be a bit less restrictive, there’s still a good chance that you, or someone you know, has been burned by them. 

You also can’t communicate with the hotel directly, but instead have to communicate reservation modifications through the OTA. With many OTAs, it can also be difficult to speak with customer service. If you decide to go through with modifying or canceling your reservation, it can be tough to get your requests through. 

OTAs are generally more expensive

If you want the best travel deals, skip OTAs. There are often hidden hotel fees hiding in that fine print that can come as a surprise during check-out or check-in.  If you value transparency, think twice.

OTAs don’t offer personalized experiences

OTAs often can’t give you a tailored experience or handle special requests. These usually need to be handled directly with the hotel, and hotels frequently prioritize guests who book direct, especially for services that may have limited availability, such as early check-in or upgrades. The hotels also have the ability to offer tailored packages that may include on-site or local services that can’t be offered via an OTA. 

OTAs limit accrual of travel points

When you use an OTA, you won’t accrue hotel points with the hotel’s loyalty program, and you won’t have access to special preferred customer deals or benefits. This means you lose out on free nights, room upgrades, and discounts on future stays.

Travelers prefer the personal touch and don’t like being surprised by hidden fees. Although OTAs seem convenient, there’s a lot to be skeptical about regarding transparency and cost. 

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Alternatives to OTAs

Luckily, OTAs aren’t the only travel booking options. These alternatives provide a refreshing change and address some of the OTA downsides.

Booking hotels directly using next-generation AI tools

New technology is changing how travelers compare hotels and rates. DirectBooker is building the next generation of travel tools that integrate with conversational AI platforms like ChatGPT, Gemini, and Claude, bringing real-time direct booking data to travelers in one place.

Instead of relying on traditional OTAs, these AI-powered tools will make it easier to see verified direct rates and book directly with hotels, helping travelers avoid hidden fees and earn loyalty rewards while hotels save on commissions.

Booking directly on hotel or airline websites

By booking directly on a travel property’s website, you’ll often enjoy lower prices, can customize your travel plans and make special requests, and can cancel or modify your reservation with ease. 

However, if you don’t already know exactly where you want to stay, you’ll need to compare prices across multiple hotel websites yourself, which can be time-consuming. And, you’ll need to seek out actual customer reviews, photos, and other intel, which adds even more time to an already time-intensive endeavor. 

Traditional travel agents

How do traditional travel agents stack up to the OTAs? Using an experienced travel agent means that you can enjoy very personalized, often white-glove service. Travel agents generally have many industry contacts and access to exclusive experiences. 

However, if you are looking to save money, travel agents aren’t the most budget-friendly option. They can carry heavy commissions for their services and often charge consultation fees. 

OTAs: Trading Peace-of-Mind for Convenience 

OTAs shine with their comparison tools, but they stumble on customer service, flexibility, pricing, and access to perks, upgrades, and rewards.  

DirectBooker is leading the next evolution of hotel search, making direct booking data accessible within conversational AI platforms so travelers can compare options with confidence and book directly with hotels.

Sources

Elizabeth Lavis

Elizabeth Lavis

Elizabeth Lavis is a travel journalist and co-author of four Lonely Planet guidebooks, with bylines in HuffPost, Business Insider, American Way, and TripAdvisor. She writes about responsible travel, local culture, and off-the-beaten-path destinations around the world.

Our editorial process: DirectBooker curates insights from global hospitality experts and our network of industry insiders. Articles undergo rigorous fact-checking and quality review before publication, ensuring authentic, actionable advice for savvy travelers.

Frequently Asked Questions: Online Travel Agencies (OTAs)

These frequently asked questions help shed more light on how OTAs operate.

  • OTAs allow people to book multiple aspects of their travel plans, like hotels, flights, and rental cars, all in one place. They’ve streamlined the booking process but are taking the personal touch out of travel planning.

  • The biggest OTAs are Bookings Holding, Airbnb, and Expedia. Hostelworld is one of the most popular niche OTAs, specifically catering to backpackers.

  • If you want to avoid using OTAs when you travel, you have plenty of options. DirectBooker eliminates the negatives of using OTA platforms but still delivers accommodation options in one easy-to-scan space. You can also use a traditional travel agent or book directly through a travel property’s website.

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