Agency Model

What is the meaning of OTA Agency Model in the hotel industry?

In hotel industry (Revenue) when talking about an Agency Model, we are referring to the commercial model of an OTA (online travel agency). The main characteristic of the Agency Model OTA is that the guest pays the hotel directly when the accommodation occurs and the hotel pays the OTA commission after the stay has taken place. In this case a hotel offersthe OTA a final sell rate, over which a commission is paid to the OTA by the hotel after the booking at the hotel has been used. The commission level of hotels has been agreed upon prior in the distribution partnership agreement between the hotel and OTA. A key advantage of the Agency or Commission OTA Model is that the hotel sets the final sell rate directly by themselves. It will allow hotels to create a transparent pricing to customers, taking rate parity as a strategy into consideration. Another benefit of the Agency Model is that it is favourable towards the cash flow statement of the hotel. It receives payment directly from the end consumer and does not have to await payment from a third-party distributor. The customer perceives a low barrier of risk when booking as he/she does not have to pay directly. The consumer is basically putting the room on hold and has a window in which he/she can cancel the booking without any extra payment. This usually results in an elevated conversion level than with other OTA models.

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