Direct Booking Details That Hotels Often Miss

Everyone agrees that direct bookings are better for margins—and they come with added benefits like stronger guest relationships and long-term value. But in the rush to drive more of them, it’s easy to overlook some important details. And sometimes, those details matter more than we think.

Everyone's data analysis consistently shows that direct bookings are more profitable than OTA reservations. Still, even experienced hotel managers often miss some of the associated costs—not out of neglect, but because certain expenses are harder to quantify or take more time to calculate. Retainer fees, cancellation risk, and shared attribution with OTA demand are frequently left out of the equation.

That’s why it’s worth pausing every so often to take a closer look. A deeper understanding of your true costs—across all channels—can give you clearer insight into what’s really driving your profitability.

This article breaks down the full economics of direct bookings versus OTA bookings, outlining the costs, risks, and strategic advantages of each.

Direct Bookings Are More Profitable, But Not Free

Direct bookings generally lead to higher net revenue per reservation, particularly because they avoid OTA commissions, which can run 15% or higher. But hotels must also consider the marketing and operational costs needed to attract these guests on their own. A shallow comparison—like saying 12% in advertising is better than 15% OTA commission—misses key nuances.

1. Advertising Expenses and Agency Fees

When calculating the cost of direct bookings, many hoteliers only look at their media spend—say, 12% of the revenue generated. But this number often excludes agency fees or retainer costs, which can significantly raise the total cost of customer acquisition.

For example, if you pay a digital agency a fixed fee of $1,500 per month to manage ads, and your direct revenue from those ads is $10,000, your actual marketing spend isn't just the ad budget—it’s the ad budget plus that management fee or retainer. Those are the fully loaded costs of those bookings, and that could make the % of revenue jump from 12% to 15%, or 18%, or more.

2. The Impact of Cancellations

Unlike OTAs, which only charge you for completed stays, your direct advertising campaigns spend money upfront. If a guest books and later cancels, that cost is sunk. And if cancellation rates are high, your cost per successful booking increases significantly.

For example, if 20% of bookings cancel, your cost per acquisition needs to be adjusted upward by 25% to account for the lost revenue. That means your “effective” advertising cost as a percent of net revenue is even higher than it appears on paper.

3. OTAs May Drive Some Direct Bookings

Another underappreciated factor: OTAs contribute to your total demand, including some portion of your direct bookings. Travelers often use OTAs to research, then visit the hotel’s website to book directly.

This “billboard effect” has been studied and debated in the industry. According to various sources—including past studies by Cornell University and more recent OTA behavior research—being present on major OTAs can lift overall bookings by 10–25%, even if some of those bookings ultimately come through direct channels.

This means that a portion of your direct bookings may not be purely attributable to your own marketing—further complicating cost analysis.

4. OTA Commission Add-Ons: Accelerators, VIPs, and More

While base commissions with OTAs are straightforward, the reality is more complex. OTAs now offer tiered programs—like Genius on Booking.com and VIP Access on Expedia—that promise better visibility in exchange for additional discounts or higher costs.

There are also “accelerators” and sponsored listings that allow hotels to buy extra visibility, effectively turning the OTA channel into a paid media platform. These extras can push your actual cost per OTA booking well above the standard 15%, especially if used heavily without careful ROI tracking.

5. Strategic Value of Direct Relationships

Despite the hidden costs, direct bookings offer long-term strategic value that’s difficult to measure—but very real. Direct relationships mean more guest data, more control over communication, and a better chance at building loyalty or repeat visits. You can craft better guest experiences and potentially drive higher lifetime value per guest.

These benefits aren’t easily captured in spreadsheets, but they matter—especially for independent hotels that thrive on character, service, and brand identity.

Best Practice: Take a Holistic View

Rather than assuming one channel is cheaper or better than the other, hotels should take a holistic approach to cost analysis. Consider all inputs—media spend, agency fees, website maintenance, cancellation rates, OTA add-ons, and strategic outcomes—when comparing channel profitability.

Here’s a simple framework to consider:

• Direct Costs: Ad spend, agency retainers, website maintenance, booking engine fees

• Indirect Costs: Cancellation losses, time spent managing marketing campaigns

• OTA Costs: Base commission, optional visibility tools, guest discount requirements

• Intangible Benefits: Loyalty, upselling opportunities, brand control

When analyzed properly, you’ll often find that direct bookings are more profitable. But they are not free—and the comparison to OTAs is more nuanced than it first appears.

How to Maximize Profit Across Channels

• Track true costs by channel. Use reporting tools or spreadsheets to calculate net revenue per booking after all related expenses. Don’t rely solely on top-line figures.

  
  

• Offer private discounts for direct bookings. Provide loyalty or email-only deals to maintain rate parity while encouraging direct traffic.

  
  

• Treat OTAs as partners, not enemies. They provide marketing reach, international demand, and a pay-per-stay model that reduces risk.

  
  

• Monitor cancellation rates closely. Track this metric by channel to assess true marketing efficiency, especially for your paid campaigns.

  
  

• Build long-term direct strategies. Use email marketing, social content, and guest experience improvements to increase the share of direct bookings over time.

Final Thought

Direct bookings offer many advantages—but they come with their own set of costs. OTAs, meanwhile, may appear expensive but deliver predictable results and global reach. The key is to understand the true economics behind both and use data to guide your decisions.

At Resort Income, we help boutique hotels break down these costs, measure performance across channels, and build strategies that maximize profitability. If you'd like to dive deeper into this and related topics, our education products can guide you through the details and help you take action with confidence. Visit www.ResortIncome.com to learn more.