Breaking Down the Commission Hotels Pay to Online Travel Agencies

person booking hotel on phone_commission to otasMany people don’t know this, but hotels pay high commission rates every time you book a hotel through a mega booking site like Expedia and Booking.com. We’re not even talking about the “sponsored” or “promoted” listings that appear at the top of their search results that everyone knows are ads. We mean, some serious cash is required just to be in the game.

To anyone who thought these online travel agencies (OTAs) were a free service, think again. Hotels fork over commissions to OTAs equal to 15 to 30% of the nightly rate you pay for the hotel room. Ouch! That’s a major shot to anyone’s bottom line. And it’s worse if you’re a small boutique hotel.

Here is everything you wanted to know (or maybe didn’t want to know) about hotel commissions.

Smaller Hotels Pay More

OTAs make money from the hotel every time you book a stay on their website. What the hotel has to pay the OTA depends on the contract between the hotel chain and that particular OTA group. Big hotel groups, like Marriott and Hilton, are hit with commission fees just like everyone else, but their size gives them some leverage. Hotel chains such as these are usually able to negotiate lower commission rates because they have so many properties tied to their name.

Unfortunately, the little guys don’t carry the kind of clout that the large hotel groups do. So, independent hotels have to give up a lot more in order to appear in search listings. In fact, their commission rates can be as high as 25-30%! It’s hard enough for boutique properties and independent hotels to be successful when they have to compete with branded hotel groups, but imagine the dent in annual revenues that they have to endure thanks to the OTAs.

Worse, these booking sites probably treat the small hotels as if they’re doing them a favor by exposing their properties to the millions of customers who search on their sites each day. While that might be true, the catch-22 that hotels are left with is a real problem: Pay the OTAs an expensive commission? Or lose out on the exposure and bookings that listing on an OTA site will drive? A passionate Australian traveler tells this story after interviewing a few family-owned hotels that are battling with this very conundrum.

Full Transparency

Before we can go any further, we’d like to make a note for full transparency: Roomkey also makes a commission when hotels are booked via the Roomkey.com search platform. That’s how travel search sites work. But there are distinct ways that we are different from OTAs.

1. Our Commissions Are Lower

First and foremost, our commissions are lower than what hotels have to pay OTAs. While we don’t know the exact commissions that get paid to OTAs—those numbers are confidential between the OTA and the hotel—we do know the general range of how much they pay. We also know that our rates are up to 50% lower. That’s a significant difference. And that difference adds up over time, saving the hotels serious cash when people book a room via Roomkey vs. via an OTA site.

2. Search Results the Way You Want to See Them

Not only do we charge much lower hotel commission rates, but we also present search listings in a way that’s more desirable for travelers. We don’t take money from hotels so their properties can appear at the top of the page. Instead, our results are based on search filters that you define.

Our default is to show hotels sorted in order of proximity to city center. We make it easier by displaying the hotel listings on a map so you can quickly visualize where you want to be. From there, you can sort by the lowest or highest rates, as well as by hotel chain or loyalty program. Need a hotel with an airport shuttle? Our filters can also sort by amenity. We leave it up to you.

3. No Pressure-Selling Tactics

The mega booking sites are literally all about the money. How can they make the most money out of each visitor that comes to their site? To do this, they’ve incorporated pressure selling tactics into their site experience that make each searcher more likely to book. You’re being played, and you probably didn’t realize it.

They test different colors, fonts, layout, banners, etc to determine what drives the most bookings. They look at heat maps to learn where your eyes and mouse are drawn to. And they’re really good at aggregating big data to learn what best helps them get your clicks and your money.

Success for the OTAs is not based on how many travelers they’ve matched with the perfect hotel. It’s also not about customer service. It’s all about how high their commission rates are and how much revenue they bring in from hotels, big or small. The OTAs do their best to appear consumer-friendly but rarely act in the interests of their customers.

Skip the Bells and Whistles

Roomkey does none of that. We encourage you to bypass the bells and whistles of OTA sites. We’re not about tricking you into booking a room that isn’t right for you. In fact, we even have a tool called Price Alerts that helps you book your room at a lower price when you’re ready.

We’ll never guide you down a path toward a hotel room you really don’t want. Instead, we’re all about helping you find and book the right room for you at a rate that’s competitive. We show you low rates, then let you click through to the hotel’s website where you’ll complete your booking at the source. We’re here to help you have the very best hotel experience, not a terrible one. Give Roomkey a try next time you open your browser to search for a hotel.