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How Online Travel Agencies Make Money From Bookings

Online travel agencies may collect payment as merchant, earn commissions as agents, and sell advertising. Their revenue is not the full value of a trip booking.
From TheFinanceBase Team4 min to read
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Online travel agencies (OTAs) earn money through merchant booking revenue, supplier commissions or ticketing fees, advertising, and related services. The model depends on the booking: an OTA may collect the traveler’s payment and retain revenue after accounting for what it owes the provider, or it may arrange a booking for a hotel or airline and earn a fee. The trip’s full price is not necessarily the OTA’s revenue.

Booking value and OTA revenue are not the same

A traveler’s payment may include amounts owed to a hotel, airline, or other provider. In Booking Holdings’ description, merchant transaction net revenue is the amount charged to travelers, including merchandising effects, minus the amount owed to travel providers. The amount paid for a reservation therefore should not be treated as the OTA’s earnings.

OTAs also report revenue using company-specific accounting categories. Booking Holdings reported $26.9 billion in revenue for 2025 and classified it as merchant, agency, and advertising and other revenue (Booking Holdings’ 2025 Form 10-K). Expedia Group reported $14.7 billion in revenue for 2025 (Expedia Group’s 2025 Form 10-K). These are company totals, not estimates of the entire OTA industry.

Merchant bookings: the OTA collects payment

In a merchant transaction, an OTA can act as the merchant of record: it charges the traveler and accounts for the amount owed to the travel provider. The difference, as well as other merchant-related items, contributes to merchant transaction revenue. Depending on the booking and company, merchant revenue can also include reservation commissions, payment facilitation revenue, and ancillary fees.

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Payment timing and accounting revenue recognition are separate questions. Expedia says travelers generally pay for merchant hotel bookings before departure, often when booking. But for most travel services, Expedia recognizes revenue as the travel takes place. Receiving money early does not necessarily mean the OTA recognizes all the associated revenue at that moment.

Agency bookings: the OTA arranges the reservation

In an agency transaction, the OTA facilitates the booking and passes the reservation to the provider. Expedia describes its role in its 2025 Form 10-K as follows: “Under the agency model, we facilitate travel bookings and act as the agent in the transaction, passing reservations booked by the traveler to the relevant travel provider.” The OTA may earn a commission from the provider, a ticketing fee, or a fee from the traveler.

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Payment may go directly to the provider instead of the OTA. For agency hotel bookings through Expedia, travelers may pay at the property. Expedia says it generally records agency air revenue when the traveler books; for most travel services, it recognizes revenue as travel takes place. The accounting timing depends on the service and should not be inferred just from when payment is collected.

Some bookings combine different payment options

Merchant and agency describe the OTA’s role and the payment arrangement, but a traveler may see options within one hotel offering. Expedia says a customer can choose to pay Expedia in advance or pay the hotel during the stay. The provider, payment recipient, OTA fee basis, and revenue-recognition timing can therefore differ even for similar-looking reservations.

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Booking arrangement Who collects payment? How the OTA may earn revenue When revenue is recognized
Merchant booking The OTA charges the traveler; Expedia says merchant hotel travelers generally pay before departure, often at booking. Merchant transaction net revenue after accounting for what is owed to the provider; merchant revenue can also include commissions, payment facilitation revenue, and ancillary fees. For most travel services, Expedia says it recognizes revenue as travel takes place.
Agency booking The provider may collect payment; Expedia says agency hotel travelers may pay at the property. Commission or ticketing fee from the provider and/or traveler. Expedia generally records agency air revenue when booked; for most travel services, it recognizes revenue as travel takes place.

The table summarizes Expedia’s descriptions and general revenue-recognition practices; individual booking terms and accounting treatment depend on the service and company.

Advertising and related services add revenue

OTAs can sell advertising to companies seeking access to potential travelers. Expedia describes advertising across its sites, including metasearch, as a way for advertisers to reach potential incremental traffic and transactions. Booking Holdings reports an “advertising and other” revenue category. These earnings are distinct from the commission or transaction revenue tied to a particular reservation.

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What Booking Holdings and Expedia’s figures show

Expedia reported that its 2025 revenue mix was 70% merchant, 22% agency, and 8% advertising, media, and other. This is Expedia Group’s company-specific mix for 2025—not an industry average or a claim that every Expedia booking follows one payment model. Booking Holdings’ 2025 filing uses merchant, agency, and advertising and other categories, but its reported revenue total alone does not establish a universal OTA mix.

There is no universal commission-rate figure established by these company filings. Rates and revenue bases can vary by company, product, geography, and period, so applying one generic percentage to every hotel or flight booking would be misleading.

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How to tell what is happening on a booking

  • Check who takes payment. The booking details should say whether you pay the OTA at booking or the provider, such as the hotel, later.
  • Look for the transaction role. A merchant booking places the OTA in the payment flow; an agency booking arranges a reservation with the provider.
  • Separate the trip price from the OTA’s revenue. A substantial share of the traveler’s payment may be owed to the travel provider.
  • Do not equate payment date with revenue recognition. Companies can collect cash before travel but recognize revenue later, depending on the service.

Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.

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