What OTA means
An OTA performs the same role as a traditional travel agency, selling other companies' travel products, but the whole search, booking and payment journey happens online. The largest groups operate several brands: Booking Holdings lists Booking.com, Priceline and Agoda among its main brands, and Expedia Group lists Expedia, Hotels.com and Vrbo. Many smaller OTAs focus on one country, language or product, such as flights from a single market.
OTAs generally use two commercial models. In the agency model the OTA passes the booking to the supplier and the traveller pays the hotel or airline, with the OTA earning a commission. In the merchant model the OTA takes the traveller's payment, pays the supplier a net amount, and keeps the difference. Booking Holdings' 2023 annual report describes agency revenues as coming from transactions where it does not facilitate payment, and merchant revenues as those where it does.
Behind the storefront, an OTA connects to many content sources through a booking engine and middleware: a GDS or NDC for airlines, direct LCC connections, and hotel chains, channel managers or bedbanks. Unlike metasearch sites, which send users elsewhere to book, an OTA completes the sale itself.
How OTA works
An OTA booking moves from search to supplier confirmation in a few automated steps.
- Customer searchesThe traveller enters dates and destinations; the OTA queries its connected suppliers and aggregators in parallel.
- Offers are pricedResults are normalised, filtered and priced, with markups or fees applied according to the OTA's rules and the supplier's terms.
- Booking is createdWhen the traveller selects an offer, the OTA creates the reservation with the supplier, such as a PNR in a GDS or an order through NDC.
- Payment is takenUnder the merchant model the OTA charges the customer and later pays the supplier; under the agency model the supplier collects payment directly.
- Ticketing and servicingThe OTA issues tickets or vouchers, sends confirmations, and later handles changes, cancellations and refunds through the same connections.
OTA in practice
Illustrative agency-model example: a guest books a hotel on an OTA and chooses to pay at the property. The hotel charges the guest at check-out and later pays the OTA its agreed commission.
Illustrative merchant-model example: the same guest pays the OTA US$500 at booking. The OTA pays the hotel a net US$420, often by virtual credit card, and keeps US$80 as its margin.
Flight OTAs in markets such as Bangladesh, Pakistan or the Gulf typically combine GDS content for full-service carriers, direct or aggregated LCC content, and, increasingly, NDC offers. If the OTA is IATA-accredited it issues tickets itself and settles through the BSP; if not, it usually tickets through a consolidator.
Who uses it
Advantages and limitations
Advantages
- Customers can book at any time without visiting an agent, which lowers the cost per transaction.
- Aggregating many suppliers gives travellers wide choice and price comparison.
- Suppliers gain international reach and demand without building their own marketing in every market.
- The merchant model lets OTAs control pricing and package products together.
Limitations
- Customer acquisition through search ads and metasearch is expensive and competitive.
- Suppliers often push direct booking, using lower prices or loyalty benefits.
- Merchant-model OTAs take on payment, refund and fraud risk.
- Servicing complex changes and disruptions online is harder than with a human agent.
Frequently asked questions about OTA
What is the difference between an OTA and metasearch?
An OTA sells the travel product and completes the booking, taking payment or passing it to the supplier. A metasearch site compares prices from OTAs and suppliers and sends the user to one of them to book, earning mostly from clicks or referrals. Some groups own both types of brand.
What is the difference between the agency model and the merchant model?
In the agency model the traveller pays the supplier directly and the OTA earns a commission afterwards. In the merchant model the OTA collects payment at booking, pays the supplier a net amount and keeps the margin. Booking Holdings reports these as separate revenue lines in its annual filings.
Do OTAs need IATA accreditation to sell flights?
Not necessarily. An OTA with IATA accreditation, or ARC in the US, can issue tickets and settle directly with airlines. Many smaller OTAs instead book through a consolidator or host agency that holds accreditation and issues tickets on their behalf, while low-cost carriers can often be sold through direct connections.
How do OTAs make money?
Mainly from commission paid by suppliers, margin between the customer price and net rate under the merchant model, service or booking fees charged to the customer, and in larger groups, advertising. Many also earn from ancillaries such as insurance, seats and transfers, and from card payment rebates.
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