What is an OTA (Online Travel Agency) in Travel?
If you've heard the term "OTA" thrown around in the travel industry but aren't quite sure what it means, you're not alone! OTA stands for online travel agency.
Don't go just yet though! Stick with us through the article and soon you'll be a pro when it comes to understanding:
- what an OTA is in travel,
- what role OTAs play in the travel ecosystem and
- how OTAs make money.
What is an OTA (Online Travel Agency)?
Now you've passed the first test, which is knowing what OTA stands for in the world of travel. But let's dig in more. What classifies a travel agency as online?
An online travel agency (OTA) is a travel agency that offers an online platform where travelers can search for and book their travel.
Is a traditional travel agency--ones with travel agents that make bookings for clients--an online travel agency if it has an online presence like a website? Does an agency need to have the ability for clients to book online in order to be an OTA? What if only 20% of the agency's bookings come in online?
An online travel agency (OTA) is a travel agency that offers an online platform where travelers can search for and book their travel. All of the OTA's bookings are typically done through their booking engine.
Here's some of the larger OTAs you're likely familiar with:
- Expedia.com
- Booking.com
- Priceline.com
Like a traditional travel agency, the OTA's inventory comes from suppliers such as airlines (through the GDS), hotels, tour operators, car rental companies, and cruise lines.
Unlike a traditional travel agency, OTA clients do the searching and booking of their travels without the support of a travel advisor.
What Percent of Bookings Go Through OTAs?
The travel agency distribution channel has always been a helpful route for suppliers looking to sell their product. Travel agencies—both traditional and OTAs—account for just under half of all travel sales in the U.S. 1.
Phocuswright's 2024 US Travel Agency Landscape Report projects that in 2026, U.S. travel agencies will book $141.3 billion in travel.
How much of that $141.3 billion in sales will be from OTAs? It may surprise you.
While OTAs gobbled up market share from traditional travel agencies starting in the early 2000s, the pendulum is swinging back the other direction. OTA's market share in the U.S. is projected to drop from 22% in 2022 to 21% in 2026, overtaken by traditional travel agencies whose market share is projected to jump from 21% to 26%.
Who woulda thunk?
How Do OTAs Make Money?
Like traditional travel agencies, OTAs have an accreditation number that helps suppliers recognize them as a travel agency, which opens up the door to commission payments.
Due to their huge reach, OTAs have been able to negotiate higher commission rates compared to traditional travel agencies. OTA commissions can be 15-30% for hotels vs. roughly 10% for traditional travel agencies.
In recent years, as high commissions eat into profits, hoteliers have begun to encourage travelers to book direct with the hotel. This led to initiatives like:
- Marriott's Best Rate Guarantee (price match + 25% off or 5000 points)
- Your Rate by IHG Rewards Club (special rates + perks for booking direct)
- OTA bookings not being eligible for points or loyalty perks
In most situations, because of the lower commissions paid to traditional travel agencies, hoteliers continue to offer points and perks when travelers book through a traditional travel agency. (More on what travel agents do and how they do it.)
Here's Hilton's policy:
Having a Travel Industry Acronym Conundrum?
Congrats!! You know what an OTA is, how OTAs make money, and the overall OTA market share in the US. (I bet you never thought you'd be spouting off that factoid! I know I didn't...)
If you're new to the travel industry or thinking about becoming a travel agent, there is a lot of learning ahead of you. We're glad you found us because we're always happy to help answer questions. Drop your questions in the comments below or tune in to our Friday 15 podcast, where we answer the questions you've sent our way. :)
Last thing! If travel industry acronyms are killing you, take a look at our 7 Day Setup Accelerator course. There's a nice 700+ word glossary of travel terms that should get your ship righted in no time!
Happy learning to you!
Footnotes
- Phocuswright 2024 US Travel Agency Landscape Report. https://www.phocuswright.com/Special-Projects/2024/US-Travel-Agency-Landscape-2024 ↩
About the Author
Steph Lee
Steph grew up in the travel industry, helping on and off with her mom's homebased travel agency. She has worked with thousands of agents in her role as a former host agency director before leaving in 2012 to start HAR. She's insatiably curious, loves her pups Fennec and Orion, and -- in case you haven't noticed -- is pretty quirky and free-spirited.
If you’re looking for Steph, she leaves a trace where ever she goes! You can find her on Facebook, Instagram, LinkedIn (her fav) and Pinterest as 'iamstephly'. 🙂 You can also catch her on her Substack, Bumblin' Around, where she writes on things outside the world of HAR.
