Negotiating with Online Travel Agencies (OTAs) especially the major ones, can be frustrating and at best feel like walking a tightrope. It is also a LONG GAME.
On one side, you need their reach and marketing power; on the other, you want to maintain healthy profit margins and control over your distribution strategy. And leverage varies widely depending on whether you are an independent hotel or part of a global chain – and of course the size and reach of the OTA.
But here’s the good news: you can definitely aim for a balanced partnership that works for both parties, but it does require some painstaking work and diligence.
In this post, we’ll walk through seven proven steps to negotiate win-win agreements with OTAs, backed by real-world experience and a pragmatic approach. Again remember it is a long game BUT every action and recommendation below will help your hotel win across all distribution channels in the long run.
Before you even think about sitting down at the negotiating table, you need to have your distribution strategy clearly mapped out. (Just starting out? Check out our brand new course on Distribution Landscape & Opportunities)
Direct Booking Strategy
First things first – your direct booking game needs to be strong. This isn’t just about having a pretty website (though that helps!). You need:
- A clear brand identity that resonates with your target market
- A well-optimised booking engine that converts
- Compelling content that tells your property’s unique story
- The right technology stack to manage rates and inventory efficiently
A strong direct booking presence isn’t just about reducing OTA dependence – it’s about having a balanced distribution mix that gives you leverage in negotiations.
Wholesale Partnerships
Your wholesale strategy needs to be just as thoughtful. Consider:
- Which source markets are you targeting, and why?
- What’s the reputation of your wholesale partners?
- How well-structured are your agreements regarding rate control? How much trouble are you having currently with partners on rate leaks?
- Do you have clear yield management principles in place?
Corporate Strategy
Your corporate business strategy needs to align with your leisure strategy.
This means:
- Clear rate fencing between segments where called for
- Minimal overlap between corporate and leisure channels
- Well-defined corporate rate structures that don’t undermine your leisure business
- No stacked discounts where a Booking.com Genius rate is cheaper than the preferred rates provided to a corporate partner
As with any smart operator, OTAs know their strengths well and can pick up on your weaknesses quickly. Before you start negotiations, ensure that your internal commercial operations are running like a well-oiled machine.
Team Alignment
Your commercial team needs to be in perfect sync. This means:
- Regular meetings between sales, marketing, distribution and revenue management
- Clear communication channels for rate changes and promotions
- Everyone understanding their role in the distribution strategy and understanding the impact of channel strategy, importance of rate control and cost of sale
- Quick response times to market changes
Content is Critical
Where hotel content is poor, you are unlikely to be in a good negotiating position. You need:
- Professional, high-quality photos that show your property at its best
- Detailed, accurate room descriptions
- Regular content updates reflecting seasonal changes
- Virtual tours and video content (where possible)
- Consistent messaging across all platforms
- A good content distribution platform
Room Type & Rate Structure Simplification
Less is often more when it comes to rate plans. You will need:
- Clear, simple rate structures that are easy to understand
- Well-defined room types without confusing variations
- Automated rate monitoring systems
- Clear processes for handling rate violations
- Active reputation management
You can’t negotiate effectively if you don’t know your own numbers inside and out. This is an area where hoteliers sometimes fall short – they enter negotiations without a clear picture of their performance and the metrics that matter most to them.
Essential Metrics to Track:
- Source market performance
- Channel-by-channel revenue contribution
- Conversion rates across different platforms
- Total cost of sale (including all those hidden costs)
- Return on investment by channel
On cost stacking, it’s not just about the base commission – you need to factor in:
- Any promotions and discounts
- Cost of discounts when participating in loyalty programmes, programmes that offer higher visibility etc
- Any channel manager fees
- Payment processing costs
- Marketing contribution fees
- Connectivity costs
- Staff time for management and reconciliation
Use a technology tool like Juyo Analytics that allows you to track costs effectively or create a comprehensive cost analysis spreadsheet that factors in ALL costs. You might be surprised at what you find.
Specific to the OTA, you may want to review the following key performance metrics:
Reservations volume and Revenue generated: Total revenue brought in through the OTA channel. Significant revenue contribution strengthens negotiation position. (Warning: It can work against you if your internal structures are not in order as above!)
Average Daily Rate (ADR): The average rate at which rooms are booked. Higher ADRs mean more revenue per booking for the OTA.
Conversion rate: The percentage of OTA visitors who book the hotel. High conversion rates show the hotel’s appeal to the OTA’s audience.
Length of stay: Longer average stays typically generate more revenue per booking.
Cancellation rate: Lower cancellation rates mean more reliable bookings and revenue for the OTA.
Guest ratings and reviews: High ratings and positive reviews increase the hotel’s value to the OTA’s platform.
Seasonal performance: Strong performance during both peak and off-peak seasons demonstrates consistent value.
Year-over-year growth: Consistent growth in bookings or revenue strengthens the hotel’s position.
Participation in OTA promotions: Active engagement in OTA marketing initiatives can be leveraged for better rates but this is a double-edged sword that must be used carefully
Direct booking ratio: A healthy balance of direct and other channel bookings should be used to negotiate better terms.
Knowledge is power, and market intelligence is critical. You need to work your way through the following even though not all of it will be straightforward to acquire. Equally there needs to be sensitivity around commercial terms as there are legal implications on sharing confidential information with competitors.
Competitor Research
- What commission rates are your competitors paying?
- Which promotional programmes are they participating in?
- How visible are they on different OTA platforms?
- What’s their rate strategy across channels?
Market Trends
- Overall market performance metrics
- Seasonal demand patterns
- Emerging distribution channels
- New OTA features and programmes
As you can imagine, OTAs will have this data too. Being prepared shows you’ve done your homework and strengthens your position.
OTA negotiations should not be seen as a battle and more like structured engagement. After all, you both mostly want the same thing: more bookings and revenues at the optimal cost.
Building Trust
- Stay positive in communications
- Follow through on commitments
- Maintain rate parity (where agreed)
- Provide excellent guest experiences
- Share success stories and feedback
Professional Engagement
- Keep emotions out of discussions but build a professional rapport where possible
- Focus on data and facts
- Highlight mutual benefits
- Maintain open communication channels
A good rapport and goodwill can pay dividends during tough negotiations.
At the negotiating table and this is where all your preparation should pay off.
Data-Driven Arguments
Present your case using:
- Clear performance metrics
- Market analysis
- Cost breakdowns
- ROI calculations
- Guest satisfaction scores
Unique Value Propositions
Highlight what makes your property special:
- High-quality content and regular updates
- Strong guest reviews
- Reliable inventory management
- Quick response times
- Willingness to create unique packages
Creative Solutions
Where applicable consider proposing:
- Tiered commission structures based on performance
- Package deals that add value
- Seasonal promotions
- Market-specific offers
And of course like in any negotiations, don’t show all your cards at once. Keep some options private to maintain leverage in discussions.
This is perhaps the most important step – knowing when to walk away and having the courage to do so (and of course if you can afford to!)
Setting Boundaries
- Define your non-negotiable terms clearly
- Know your minimum acceptable margins
- Understand your breaking points
- Have backup plans ready
Building Long-Term Value
Remember that OTAs are more likely to be flexible with properties that:
- Consistently perform well
- Maintain high guest satisfaction
- Provide reliable inventory
- Engage actively with their team and platform
- Drive value to their platform
The Path Forward
Negotiating with OTAs isn’t a one-time event – it’s an ongoing process. Success comes from:
- Maintaining consistent performance
- Building strong relationships
- Regular review and optimisation
- Staying informed about market changes
- Continuous improvement in operations
Remember, the most important driver here is the hotels commercial goals and distribution channel strategy. And that should guide the types of partnerships and negotiations your hotel participates in. Creating sustainable partnerships that drive value in alignment with your hotel’s commercial goals for everyone involved: your property, the OTA, and most importantly, your guests is paramount.
Final Thoughts
The key to successful OTA negotiations lies in preparation, professionalism, and patience. By following these seven steps, you’ll be well-equipped to secure better terms while maintaining positive relationships with your OTA partners.
Take it one step at a time, focus on building value, and remember – sometimes the best deals are the ones you’re willing to walk away from. Your distribution strategy should work for you, not against you.
What’s your experience with OTA negotiations? Have you found certain strategies more effective than others? Share your thoughts and experiences in the comments below.
Remember: Every property is unique, and what works for one might not work for another. Use these guidelines as a framework, but adapt them to your specific situation and market conditions. Good Luck!