Direct bookings vs. OTAs: A practical guide for independent hotels

They’re thinking about staffing gaps, rising costs, last-minute cancellations and whether tonight’s arrivals will actually show up. Distribution decisions often happen in the background, until commission invoices arrive or an unexpected wave of cancellations hits.

That’s when the familiar question resurfaces: are OTAs helping or hurting the business?

The honest answer is both. OTAs remain one of the strongest sources of demand for independent hotels, especially in competitive or seasonal markets. But direct bookings consistently deliver higher profit, stronger guest relationships and more predictable operations.

The challenge isn’t choosing one over the other. It’s learning how to use each channel for what it does best.

Key takeaways

• OTAs drive visibility and demand, while direct bookings deliver higher profit and stronger guest relationships.

• OTA customers cost you more in commission and cancel more often than direct bookings.

• A healthy channel mix focuses on maximizing net revenue, not booking volume.

• Use OTAs to acquire new guests and direct channels to retain them.

• Actively manage channels by season and demand instead of setting and forgetting them.

Rethinking the role of OTAs

OTAs have become a vital part of the distribution landscape. Just imagine how many fewer bookings, visibility, and ultimately revenue you would have without them. They not only have a big influence on the daily operations of every accommodation around the world, they’re also a major part of travelers’ decision-making process. They provide an overview, easy comparison, quick filtering based on preferences and the trust that travelers need to actually book.

For independent hotels, OTAs (and other third-party booking channels) also level the playing field when it comes to bigger chains and groups. Suddenly, even small, lesser-known properties can have the same visibility as a bigger hotel group without excessive marketing costs. However, this visibility comes at a different cost for your hotel. 

OTAs are designed to make booking efficient, but can’t really help your brand building, guest loyalty and retention. The OTA is the face of the booking, leaving you with little interaction with the travelers who book with you. Your property becomes just one of many listings.

There are many advantages to relying on OTAs, but it’s important for your distribution health to balance the OTA versus direct booking ratio wisely. Overreliance on OTAs comes with financial risks, as commission fees are often high and continue to rise year after year. Next to commission costs, there are various optional programs (like Genius discounts) and visibility boosters that help you gain visibility, but can quickly drain your revenue.

So, how do you best add OTAs to your distribution mix? Instead of adding more and hoping you’ll get extra bookings, you should treat each connected OTA as a performance channel. Keep what works well and eliminate the channels that consistently perform low. Ideally, if your listing is optimized, you measure them by net profitability and demand coming from the channel. Change your mindset from “set and forget” to intentional use, and actively keep track of their performance.

The real difference between OTA and direct bookings

Now that you know how OTAs should fit into your distribution strategy, it’s crucial to know what benefits they bring compared to direct bookings. Why should you pay high commission costs? What advantages do they give your accommodation? Let’s break it down.

Cost of acquisition

It’s no secret that OTAs cost more than direct bookings. For independent hotels, OTA commissions typically range between 15–30% per booking. When preferred programs, discounts or promotions are added, the real cost is often even higher.

Direct bookings tell a different story. Once you have a functional website and booking engine in place, the blended cost of payments and marketing usually sits around 4–5%. That difference translates directly into profit. On average, a direct booking can deliver 9–10% higher profit contribution per reservation compared to an OTA booking. If you take into account the lower acquisition cost and higher average spend of direct customers, you can understand why these bookings are considerably more profitable

Often, those higher costs are offset by a high volume of bookings. OTAs have the ability to gather more reservations than most direct booking engines can. But if you’re connected to OTAs that only bring in five bookings a month for a 20-room hotel? That channel is not worth the high commission rate and you should switch it out to one that will perform better. This is why volume alone is misleading. Fewer direct bookings can still outperform a higher number of OTA bookings when you look at net revenue.

OTAs can also act as discovery channels. Guests may first find your hotel on an OTA, then later search for your name and book direct. While this billboard effect exists, it’s hard to measure. OTAs show listing views and on-platform conversions, but you can’t clearly link those views to later direct bookings. 

Demand and visibility

As mentioned above, OTAs are the perfect booking channels to generate demand for your accommodation. They either offer instant global exposure or direct access to the travel segment that fits your hotel best. Travelers prefer comparing their options directly on a platform that’s already a trusted name and brand within the hospitality industry. 

Direct bookings require a lot more effort. Gaining that website traffic means ongoing investment in SEO, metasearch channels, paid campaigns and brand presence. It’s slower to build, but it creates long-term independence from third-party platforms and strengthens your position over time. That’s why your direct booking channel is important to generate repeat bookings and create guest loyalty. 

Guest relationship and data

For an independent hotel, its secret weapon is the level of personalization they offer and how personal they can make the whole guest experience from before booking to long after their stay.

Direct bookings give you full control of the guest journey and customer relationship. You have access to contact details, preferences and booking history, which makes email marketing, upsells and loyalty programs possible.

With OTA bookings, that relationship largely belongs to the platform. Guest data is restricted and the OTA remains the primary point of contact. This limits pre-stay personalization and makes post-stay remarketing much harder.

Cancellation rates

Lastly, there’s a significant difference between OTA cancellations and direct booking cancellations. Psychologically, it’s easier for guests to cancel via a large platform, it feels less personal and most OTAs offer a very flexible cancellation policy. This is largely driven by how OTAs are designed. They make it extremely easy for travelers to compare options, book multiple properties “just in case” and cancel later with little friction. That’s why their cancellation rates can approach 50% in some markets. 

Direct bookings, by contrast, tend to sit closer to 18–20%. Guests who book directly are usually more committed. They’ve actively chosen your property, interacted with your brand and completed a booking process on your own website. This creates a psychological “ownership” of the reservation that reduces casual cancellations.

Payment structure plays a role here too. Direct channels give you more flexibility to apply deposits, prepayments or tailored cancellation policies. These don’t have to be strict, but they add just enough friction to filter out speculative bookings.

This doesn’t mean OTAs should be avoided. It means cancellation behavior must be factored into how you use them. On OTAs you can also apply stricter cancellation rules or non-refundable rates on high-demand dates. You can even close OTA channels once occupancy reaches defined thresholds.

In short, not all bookings are equal. Understanding how cancellation behavior differs by channel is key to building a distribution strategy that supports both profitability and peace of mind.

Diagnosing your distribution mix: where profit is created and where it’s lost

Do you already actively review and compare how each of your connected booking channels perform? Many independent hotels don’t have a clear picture of how each channel contributes to their revenue and long-term growth. Does your booking engine frequently suffer abandoned bookings? Or do your OTAs bring you few bookings but high commissions?

To clearly understand your booking mix, you need to look at more than only your end revenue. There are some key metrics that can help you keep track of your performance:

• Average Daily Rate (ADR)

• Revenue Per Available Room (RevPAR)

• Average length of stay (ALOS)

• Cost Per Acquisition (CPA)

• Cancellation rates

• Net revenue after commission and other fees

If you want to know more about tracking your performance, you can read our hotel performance metrics guide for more information.

This is also where “leakage” becomes visible. Leakage happens when a guest who could have booked direct ends up booking through an OTA instead. Common causes include inconsistent pricing or value, a clunky booking experience, limited payment options on your website or simply no clear reason to book direct.

But of course, who has the time to manually keep track of that? No worries, most channel managers already offer extensive reporting and insights into your channel performance. So all you need to do is: review the report, optimize what’s working, eliminate what’s only costing you and try out new niche channels that fit your target traveler segments.

Lighthouse’s solutions even go beyond basic channel management, optimizing your entire distribution strategy with data-driven automation.

Advantages and disadvantages for independent hotels

Every channel has its own perks and limitations. For independent hotels, it’s important to keep a good balance between both direct and indirect booking channels. Let’s take a look at the main aspects to keep in mind when working on your distribution mix.

Direct bookings (website and booking engine)

Strengths

• Lowest net cost per booking and strongest profit contribution

• Full control over pricing, cancellation rules, upsell offers and on-site experience

• Lower cancellation rates and better show-up behavior

• Strong foundation for loyalty and repeat demand

Limitations

• Requires investment in a modern booking engine, UX (user experience) and copy

• Needs ongoing performance monitoring, marketing efforts and follow-up

• Your brand and offer must be strong enough to win the booking from OTAs

OTAs (Booking.com, Expedia and others)

Strengths

• Massive reach, especially for international and short-window bookings

• Strong conversion optimization handled by the OTA

• Effective for filling base occupancy and shoulder periods

• Programs like Genius or Preferred can drive fast volume and visibility

Limitations

• High and structurally rising distribution costs

• Discounts and visibility boosters further erode margins

• Limited loyalty and difficulty migrating guests into your own CRM

• Rate parity and policy constraints can restrict revenue tactics

The winning strategy: OTAs for reach, direct for retention

For independent hotels, success rarely comes from favoring one channel at the expense of the other. The most resilient distribution strategies recognize that OTAs and direct bookings serve very different purposes and perform best when used together.

OTAs are powerful acquisition tools with a global reach. They excel at putting your property in front of travelers who may never have heard of you, especially international guests, last-minute bookers and price-sensitive segments. This makes them particularly valuable for new hotels without brand recognition, properties in highly seasonal destinations or periods where demand needs an extra push, such as weekdays or low seasons.

Used strategically, OTAs help build a base level of occupancy and social proof. Reviews, visibility and consistent exposure all contribute to future demand, including demand that later shifts toward direct channels. The mistake many independents make is treating OTA demand as something to maximize indefinitely, rather than something to manage.

Direct bookings, on the other hand, are where long-term value is created. Repeat guests, in-house rebooking and branded search traffic should almost always be steered toward your own website. These guests already know your property. They are less price-driven, more likely to stay longer and more open to upgrades or add-ons. Over time, they also form the foundation of loyalty and predictable demand.

The transition from acquisition to retention doesn’t happen automatically. It requires strategic decisions about pricing, availability and guest communication. As occupancy builds, especially during high-demand periods, OTA channels should gradually play a smaller role. Pricing can be adjusted, availability limited or certain restrictions applied to ensure that the most profitable bookings are prioritized.

Crucially, this doesn’t mean systematically undercutting OTAs. Instead, it means offering better value on your direct channel. Public rates can remain aligned across channels while direct bookings include meaningful extras such as breakfast, late checkout, flexible terms or upgrade priority. These incentives give guests a clear reason to book direct without damaging rate integrity or OTA relationships. Depending on your country’s regulations, you can lower your direct rate slightly, whilst keeping all third-party platforms consistent. 

The strongest independent hotels also treat every stay as an opportunity to shift future behavior. Guests who initially book through an OTA can be encouraged to rebook direct next time through thoughtful pre-stay communication, on-property messaging and post-stay follow-up. Over time, this reduces dependency on costly channels and increases the share of bookings that deliver higher margins and stronger guest relationships.

In practice, the winning strategy isn’t about choosing OTAs or direct bookings. It’s about balancing them. OTAs ensure higher reach and occupancy. Direct channels attract higher-value bookings and loyal guests. When managed deliberately, this approach delivers both visibility today and profitability tomorrow.

Common mistakes independent hotels make with their channel mix

Even experienced independent hoteliers fall into the same distribution traps, often without realizing it. These mistakes usually aren’t caused by a lack of effort, but by time pressure, limited visibility into channel performance or reacting to short-term fluctuations instead of following a clear strategy.

One of the most common mistakes is trying to eliminate OTAs too early. After seeing how much commission is paid each month, it’s tempting to drastically reduce OTA presence or close channels altogether. For most independents, this creates an immediate demand gap. Without a strong direct booking foundation, organic traffic or brand recognition, removing OTAs can lead to sudden drops in occupancy that are difficult to recover from.

Another pitfall is discounting direct rates instead of adding value. Lowering website prices below OTA rates may seem like a quick win, but it can backfire. It risks breaching parity agreements (depending on your location), trains guests to expect discounts and erodes your pricing power. Independent hotels that succeed with direct bookings focus on value-based incentives, not cheaper rates. If your location allows you to break parity, you shouldn’t discount your rates by a significant amount. The average discount is usually not much more than 10%. 

Leaving OTAs fully open during high-demand periods is another costly mistake. When demand is strong and rooms would sell anyway, continuing to accept unrestricted OTA bookings means paying commission on nights that could have been booked direct. High-demand dates are exactly when channel control matters most. Without adjusting availability, pricing or restrictions, hotels quietly give away margin they could have protected.

Many hotels also fail to adjust their distribution based on occupancy and seasonality. Distribution is often treated as a set-it-and-forget-it exercise. In reality, channel strategy should evolve continuously. Low-demand periods call for broader reach and flexibility. High-demand periods require tighter control, stricter policies and a stronger focus on direct channels. Applying the same rules year-round almost always leads to missed revenue opportunities.

Another common error is viewing distribution purely through a volume lens. Receiving more reservations feels like success, but not all bookings are equally valuable. Channels with high cancellation rates, low average length of stay or high commission costs can look attractive on the surface while delivering weak net results. Without evaluating profitability and guest quality, hotels risk optimizing for the wrong outcomes.

Finally, many independent hotels underestimate how dynamic distribution has become. Pricing, availability and channel mix need ongoing attention, especially as market conditions change. Treating distribution as static rather than something to manage daily leaves hotels reacting to problems instead of steering performance proactively.

Avoiding these mistakes doesn’t require eliminating OTAs or investing in complex systems. It starts with awareness, clear priorities and a willingness to actively manage the channel mix instead of letting it control your business.

Conclusion: From channel dependence to control

For independent hotels, distribution is rarely a one-time decision. It’s an ongoing balancing act shaped by demand shifts, rising costs and changing guest behavior. That’s why the question isn’t whether OTAs are good or bad for your business. It’s whether your current channel mix is working for you or quietly working against your business.

OTAs continue to play an important role in bringing visibility and demand, especially in competitive and seasonal markets. Ignoring them or trying to remove them entirely often creates more problems than it solves. At the same time, relying on them too heavily comes at a cost: thinner margins, weaker guest relationships and less control over your own commercial strategy.

Direct bookings offer the opposite trade-off. They require effort and consistency, but they give something back that OTAs never will: ownership. Ownership of the guest relationship, of marketing decisions and of long-term loyalty. Over time, that ownership translates into stronger profitability, more predictable operations and greater independence.

The most successful independent hotels don’t try to “win” against OTAs. They design their distribution intentionally. They use OTAs where they add the most value and pull back where they don’t. They protect high-demand dates, encourage repeat guests to book direct and continuously review which channels truly earn their place in the mix.

This is where the right tools make a real difference. Balancing OTAs and direct bookings only works when pricing, availability and restrictions are aligned across channels. Lighthouse brings these pieces together in one platform, helping independent hotels use OTAs for reach while strengthening direct bookings for profitability. Instead of commission-heavy guesswork, you gain clearer control over which channels you rely on and when.

Ultimately, balanced distribution isn’t about choosing sides. It’s about building a system where every booking, no matter where it starts, contributes to long-term profitability and confidence in how your business is run.

Lighthouse’s commercial platform is there to help you optimize your distribution strategy without adding more work or complexity.