The Real Cost of OTA Commission: A Worked Example

Most hotel managers can quote their OTA commission rate off the top of their head — usually somewhere between 15% and 25%. But that percentage on its own doesn't mean much, because the real question isn't "what's the rate," it's "how many dollars does that turn into by the end of the year." That gap is the difference between the number on your RevPAR report and the number that actually lands in your account.

In this post, we walk through a sample hotel step by step to show what OTA commission really costs, and what a modest shift toward direct bookings is worth in annual profit.

The Sample Hotel: Where the Numbers Come From

To make this concrete, let's use a hypothetical 50-room hotel with an average daily rate (ADR) of $110 and 60% annual occupancy:

• Available room-nights per year: 50 rooms × 365 days = 18,250 nights
• Nights sold: 18,250 × 60% = 10,950 nights
• Annual room revenue: 10,950 × $110 = $1,204,500

Assume 70% of this hotel's bookings come through OTAs and 30% arrive direct (website, phone, repeat guests) — a realistic split for many independent hotels.

RevPAR vs. Net RevPAR: The Difference Is the Commission

The standard RevPAR calculation only shows gross revenue — it ignores commission entirely:

Gross RevPAR = $1,204,500 / 18,250 nights ≈ $66

But if we assume an average 18% commission on the OTA-sourced 70% of revenue:

• Revenue from OTAs: $1,204,500 × 70% = $843,150
• Commission paid on that revenue: $843,150 × 18% = $151,767/year
• Net room revenue: $1,204,500 − $151,767 = $1,052,733
• Net RevPAR: $1,052,733 / 18,250 ≈ $58

The gap might not look dramatic per night, but it adds up to roughly $150,000 a year — enough for a marketing budget, a staffing line, or a renovation — quietly going to the OTA. And that's just the most visible layer of what OTA dependency actually costs; guest data staying on the platform is a separate issue entirely.

The Common Mistake: Treating Commission as a Fixed Cost

Many hotels treat OTA commission like rent or electricity — a fixed cost of doing business that isn't worth revisiting. But even if the commission rate itself is fixed, the share of revenue exposed to it is not — and that share shrinks in direct proportion to how strong your direct booking channels are. With the same occupancy, shifting the channel mix alone can raise net profit.

What a 10-Point Shift Toward Direct Bookings Is Worth

Take the same sample hotel and move the direct booking share from 30% to 40% — total revenue and occupancy stay flat, only the channel mix changes:

• New OTA share: $1,204,500 × 60% = $722,700
• New commission cost: $722,700 × 18% = $130,086/year
• Savings vs. the original commission cost: $151,767 − $130,086 = $21,681/year

That's commission savings alone — before accounting for the fact that direct bookings typically carry a higher average value (upsells, longer stays). A 10-point channel shift by itself can be worth close to a year's marketing budget for a small hotel.

See Your Own Hotel's Numbers

The figures above are illustrative — your hotel's ADR, occupancy, and commission rate will be different. Our Hotel Revenue Distribution Calculator lets you plug in your own numbers and see the RevPAR, Net RevPAR, and direct-booking-shift impact specific to your property in seconds — no sign-up required.

What Actually Reduces Your Commission Share?

Shrinking your commission share doesn't mean walking away from OTAs — they still bring reach and visibility. It means making your direct channel competitive enough to earn a bigger share of demand. That comes down to three things: a website that builds as much trust as an OTA all the way through checkout, a call center that can catch a hesitant visitor by phone, and a measurement system that shows which channel is actually profitable. Without those three, trying to raise your direct booking share is just a goal with no data behind it.

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