Skift Take

Hotel companies pay billions a year to online travel agencies and other distributors. Our estimate of how much is eye-opening. So is hoteliers' naiveté about how sustainable their level of spending is.

Seth Borko and Sean O'Neill, Skift

How much will hotel companies pay OTAs (online travel agencies) and similar third-party distributors this year? That was the thought-provoking question raised on Thursday by Max Starkov in a LinkedIn post.

"In 2023, hoteliers will pay the top OTAs and bed banks $50 billion in commissions and markups," Starkov wrote. "A staggering amount!"

The post went viral among distribution nerds. Putting a figure on third-party distribution underscored its importance.

We'll highlight some points that many hoteliers misunderstand about distribution in a moment.

But first, is this $50 billion figure plausible?

Estimating Hotel Distribution Costs

Starkov — a consultant in New York who formerly ran a digital agency since merged with Cendyn — based his estimate on an "amalgamation of publicly available data for the publicly traded companies and investor presentations for the private ones."

Skift Research thinks Starkov's estimate looks pretty good.

Our own estimate is that hotels — both branded and not affiliated with major hotel brands — will spend roughly $47 billion this year on online travel agency commissions.

Hotel companies will spend an additional $11 billion on bed banks — essentially wholesalers, such as Hotelbeds and WebBeds (which typically distribute rooms through tour operators and packagers).

We're going further than Starkov did by also estimating hoteliers' total indirect distribution costs. We put it at $75 billion — a figure that accounts for the costs of working with corporate travel agents and traditional travel agencies.<