Direct bookings vs OTAs: the honest economics

Every operator who has ever paid a 25% commission has done the same daydream: what if all of this ran through my own website instead? No commission, all the margin, a direct relationship with the guest. The arithmetic looks irresistible, and it is the reason “cut out the middleman” advice sells so well.

The daydream skips a step. Commission saved is not the same as profit gained, because the moment a booking stops coming from a marketplace, you inherit the cost of finding that customer yourself: the ads, the search visibility, the booking software, the payment processing, and the staff time to keep it all running. The real question is not whether direct is cheaper in theory, but whether your cost to win a direct booking is lower than the commission you would have paid — and for a lot of bookings, it is not.

This piece lays out the honest comparison: what direct actually costs, the billboard effect that ties the two channels together, what a realistic channel mix looks like, and why pulling your OTA listings usually backfires.

The cost you inherit when you go direct

An OTA commission is a bundled, pay-on-success price. You pay nothing until a booking happens, and in return the platform handles demand, payments, trust and support. Go direct and you unbundle all of that and pay for each piece yourself, mostly up front and mostly whether or not the booking comes:

• Acquisition. Paid search and social ads, plus the time and money to rank organically. Unlike commission, ad spend is charged whether or not the click converts.
• Booking software. A reservation system, a website, and the fees that come with them — often a per-booking or subscription cost.
• Payment processing. The card fees an OTA used to absorb now land on you directly, along with fraud and chargeback risk.
• Support and admin. Answering pre-sales questions, handling changes and refunds, and chasing no-shows — labor the marketplace previously did for free.

Add these up and you get your true cost per direct booking. Sometimes it lands well under the OTA commission — typically for repeat guests, word-of-mouth referrals, and searches for your brand name, where acquisition is nearly free. Sometimes it lands above commission, especially for cold traffic you have to buy through ads against well-funded competitors. Direct is not universally cheaper; it is cheaper for specific kinds of demand.

The billboard effect: why the channels are linked

The tidiest reason not to think of direct and OTA as enemies is a piece of research from Cornell. The billboard effect, a term from a 2009 Cornell Center for Hospitality Research report, describes “a boost in reservations through the hotel’s own distribution channels (including its website), due to the hotel’s being listed on the OTA website.” Travelers discover a property on a marketplace, then book direct — the listing works like a billboard.

The size of the effect was striking. In the same study, Cornell professor Chris Anderson found that a hotel’s direct bookings increased from 7.5% to 26% when listed on Expedia. The mechanism is simple: OTAs spend enormous sums on advertising to put listings in front of travelers, and some of those travelers complete the purchase on the operator’s own site instead. In other words, part of your direct traffic exists because you are on the marketplace. Pull the listing and some of your “free” direct bookings quietly disappear with it.

The research was done in hotels, and activities are not hotels, so treat the specific numbers as illustrative of a mechanism rather than a promise for your tour. But the mechanism travels: a marketplace listing is discovery you do not pay for until it converts, and that discovery spills into your own channels.

What a realistic channel mix looks like

The goal is not “all direct” or “all OTA.” It is a mix where each channel does the job it is best at. OTAs are strongest at reaching travelers who have never heard of you, especially in destinations you cannot afford to advertise in. Direct is strongest at converting demand you already own — past guests, referrals, and people searching for your name — at a lower cost than commission.

That points to a division of labor. Let the marketplaces do the expensive top-of-funnel discovery you cannot match, and work hard to convert the resulting relationships into direct repeat business you keep. The trend makes this urgent rather than optional: OTAs grew to 37% of experiences bookings in 2025 while operators’ direct website share slipped, and the same research noted rising acquisition costs pushing operators toward more OTA dependency. Building direct is a defense against that drift, but it is a long game, not a switch you flip.

A worked example

Illustration, not a claim. Say you sell 100 seats a month at $100. Route all of them through an OTA at 25% and you pay $2,500 in commission. Now imagine moving 40 of those seats to direct. On the direct 40 you save $1,000 in commission — but you spend, say, $400 on ads, $150 on booking-software and payment fees, and a few hours of staff time to win and service them. Net, direct beat OTA on those 40 seats by a few hundred dollars, and you kept the guest relationship. But push to move all 100 direct and your ad cost per booking climbs as you chase colder traffic; the last 20 seats might cost more to acquire than the commission you saved. The profitable move is partial, not total.

Why killing your OTA listings rarely works

Delisting feels like taking back control. In practice it usually costs more than it saves. You lose the billboard effect, so some direct bookings vanish alongside the OTA ones. You lose reach in markets where you have no advertising presence. And you concede visibility to competitors who stay listed and now own the search results a traveler sees. The commission line on your P&L drops to zero, but so, often, does a slice of revenue you did not realize the listing was generating.

A better frame is to treat your OTA presence as marketing you monitor rather than a leak you plug. Your listings are a paid shop window in the world’s busiest travel malls. What matters is watching them — your ranking, your reviews, and your price against competitors on each platform — so the window stays attractive and consistent with what you show on your own site. Operators who track this catch a slipping rank or a competitor undercut early; those who do not find out when bookings fall. Tools that monitor rankings, reviews and prices across channels automate that watch, but the discipline is the point.

What to do with this

1. Compute your true direct cost. Add ads, software, payment and support per booking. Compare it to your OTA commission — per source of demand, not as one average.
2. Chase the cheap direct demand first. Repeat guests, referrals and brand-name search convert far below commission. Win those before buying cold traffic.
3. Keep your OTA listings working. Treat them as top-of-funnel discovery and preserve the billboard effect rather than delisting.
4. Convert, don’t just acquire. Turn OTA-sourced guests into direct repeat customers with follow-up, an easy booking site and a reason to come back.
5. Monitor your OTA presence. Watch ranking, reviews and price across platforms on a schedule so problems surface early, not in the booking report.
6. Aim for a mix, not a binary. The profitable answer is a channel blend that shifts over time, not an all-or-nothing bet on either side.

Working to increase direct bookings is a genuinely good goal — direct guests are cheaper to keep and yours to remarket to. Just do it with the real numbers in front of you. Direct is a channel to grow deliberately, not a reason to burn down the marketplace presence that is quietly feeding it.