For many hotels, OTAs feel like a necessary compromise.
They deliver visibility, volume, and access to global demand – but often at a price that quietly eats away at profitability. In the race to appear higher in search results, too many hotels rely on discounting and promotions as their primary lever for OTA performance.
The problem? Visibility gained through discounts is rarely free – and it can cost far more than commission alone.
The Visibility Trap
OTA algorithms reward a mix of factors: conversion, availability, price competitiveness, and participation in promotions.
Discounting seems like the fastest way to tick those boxes.
But over time, this creates a dangerous cycle:
- Lower rates improve visibility
- Higher visibility attracts price‑sensitive demand
- Price‑sensitive demand reinforces the need to discount
- Margins shrink – even when occupancy grows
What looks like strong demand on paper is often rate dilution disguised as success
Commission Is Only the Beginning
Most hotels measure OTA cost by commission percentage.
But the real cost of chasing visibility goes much deeper:
- Promotional discounts layered on top of commission
- Rate parity pressure across other channels
- Displacement of higher‑value direct or corporate demand
- Increased price resistance for future bookings
By the time all costs are considered, heavily discounted OTA bookings can be among the least profitable rooms in the house.
When Discounts Become a Crutch
Discounting often fills gaps created by deeper issues:
- Weak brand positioning
- Poor conversion on direct channels
- Inconsistent marketing messaging
- Unclear value proposition
OTAs are then used not as a distribution channel – but as a demand substitute.
This short‑term fix trains both guests and algorithms to expect lower prices, making it harder to step away from discounts without losing visibility.
The Long‑Term Impact on Brand and Pricing Power
Over‑discounting on OTAs doesn’t just affect today’s revenue.
It shapes future behaviour:
- Guests associate your brand with price, not value
- Direct channels struggle to compete without matching discounts
- Revenue Managers lose flexibility during high‑demand periods
- Rate increases are met with resistance
Visibility gained at the expense of pricing power is rarely sustainable.
A Smarter Way to Use OTAs
This isn’t about abandoning OTAs – they remain a critical part of most hotels’ distribution mix.
But successful hotels treat OTAs as strategic partners, not volume engines.
1. Segment Visibility, Not Blanket Discounts
Target promotions to need periods only.
Visibility during compression is rarely necessary – and often harmful.
2. Compete on Value, Not Just Price
Leverage:
- Room type differentiation
- Added inclusions
- Flexible policies instead of deeper discounts
These improve conversion without eroding ADR.
3. Protect Pricing Power During High Demand
High‑demand periods should strengthen margins, not subsidise algorithms.
Reduce promotional participation when demand supports it.
4. Measure Contribution, Not Volume
Success is not rooms sold – it’s profit generated.
Analyse OTA performance through contribution margins, not pickup alone.
Visibility Should Be a Strategy – Not a Panic Button
Discounting for visibility often happens reactively.
A few soft weeks trigger promotions. Promotions attract lower‑value demand. Revenue improves on paper, but profitability weakens.
The most effective revenue strategies ask a different question:“Where does visibility make commercial sense – and where does it destroy value?”
Final Thought
OTAs don’t destroy profitability – uncontrolled discounting does.
Hotels that move away from visibility‑at‑all‑costs thinking gain something far more powerful: control.
And in today’s volatile demand environment, control is one of the most valuable assets a Revenue Manager can have.