The stakes for independent hotels and resorts could not be higher.
Never before has Wall Street witnessed such an extraordinary spread of financial results from Online Travel Agencies. At the conclusion of Q4 2024, Booking.com, Expedia.com, and AirBnB all reported annual earnings that vastly exceeded analyst expectations, resulting in stock prices that, astonishingly, outperformed the S&P 500.
Booking Holdings, which owns Booking.com, OpenTable, and Kayak – surpassed its peers beyond any comparable measure.
Booking Holdings brought in $23.7 billion in revenue in 2024, compared to $13.6 billion from Expedia and $11.1 billion from Airbnb. Booking is the only major travel platform to outperform the S&P 500 since Airbnb’s December 2020 IPO.
The recent earnings reports from major Online Travel Agencies (OTAs) reveal a market landscape that poses profound challenges for independent hoteliers. Booking Holdings’ remarkable $23.7 billion in revenue for 2024 not only demonstrates market leadership but signals a fundamental restructuring of the hospitality distribution ecosystem. Let’s examine the multifaceted implications of OTA dominance and explore strategic opportunities for independent hotels and resorts navigating this increasingly challenging environment.
The OTA Oligopoly: A Structural Analysis
Booking Holdings’ financial performance—substantially outpacing competitors Expedia ($13.6 billion) and Airbnb ($11.1 billion)—reflects not only successful execution of an adaptive audience acquisition strategy but the emergence of a classic oligopolistic market structure. This concentration of market power creates several interrelated challenges that warrant deeper examination, and offer a salient warning to hotels and resorts that once relied on direct bookings to maximize their revenue:
Commission Compression and Value Extraction
The economics of OTA dependence have become increasingly problematic for independent properties. Commission rates frequently range from 15-30%, with premium placement often requiring the highest tier. This creates an irreparable margin squeeze:
Margin Erosion: For properties with operational profit margins often in the 15-25% range, these commissions can consume 50-100% of the profit from each booking.
Distribution Cost Inflation: Historical distribution costs in hospitality typically represented 5-10% of revenue. The normalization of OTA commission structures has effectively doubled or tripled this cost center with minimal offsetting of operational savings.
Bidding Wars for Visibility: The auction-based models for enhanced visibility within OTA platforms create a secondary cost layer, where properties must bid against competitors for prominence, further compressing margins.
Merchant Model Implications: Booking Holdings’ strategic shift toward the merchant model represents a particularly concerning development. This approach:
- Transforms hotels from service providers to inventory suppliers
- Creates cash flow challenges as payments are delayed
- Reduces pricing flexibility and dynamic responsiveness
- Distances properties from the customer relationship
Research by Cornell University’s School of Hotel Administration suggests properties with high OTA dependency experience total distribution costs approaching 40% of room revenue when factoring in all direct and indirect costs—a fundamentally unsustainable model for many independent operators.
The Erosion of Direct Relationships
The initial promise of OTAs as supplementary distribution channels has evolved into a more complicated reality where these platforms increasingly own the primary customer relationship:
Diminished Billboard Effect: Early research from Cornell’s Center for Hospitality Research identified a “billboard effect” where OTA listings generated direct bookings. Recent studies indicate this effect has diminished by 80-90% as OTAs have implemented sophisticated strategies to retain consumers within their ecosystems.
Search Engine Dominance: Major OTAs now invest billions annually in search marketing, effectively outbidding individual properties for their own brand terms. Analysis of Google search results shows that for non-branded hotel searches in major markets, OTAs occupy 85% of first-page organic results and 95% of paid positions.
Rate Parity Requirements: Rate parity clauses, though legally challenged in some jurisdictions, continue to limit hotels’ ability to offer direct booking incentives. Even in regions where these clauses have been restricted, the practical market reality often forces de facto compliance to maintain platform visibility.
Platform Loyalty Programs: OTAs have developed sophisticated loyalty programs that directly compete with hotel loyalty initiatives. These programs (like Booking.com’s Genius program) effectively create a competitive moat around high-value travelers, encouraging them to maintain platform loyalty across different properties rather than developing property-specific relationships.
Data Asymmetry and the Knowledge Gap
Perhaps the most strategically significant consequence of OTA dominance is the profound data asymmetry that has developed:
Customer Insight Imbalance: OTAs capture comprehensive customer data including search patterns, price sensitivity thresholds, comparison behaviors, and cross-shopping tendencies—yet share only transactional booking details with properties.
Preference Aggregation Advantage: By aggregating preference data across thousands of properties, OTAs develop sophisticated customer profiles that enable increasingly personalized offers that individual properties cannot match.
Predictive Capability Gap: The volume of data collected enables OTAs to develop predictive models for pricing, demand patterns, and customer behavior that create significant competitive advantages in customer acquisition and retention.
Limited Data Reciprocity: Properties provide extensive inventory, pricing, and availability data to platforms but receive minimal reciprocal data insights to inform their own direct marketing strategies.
This asymmetry creates a self-reinforcing cycle where platforms continuously enhance their ability to match consumers with properties while the properties themselves have diminishing insight into their own customer base.
The Technological Arms Race: AI as Accelerant
The earnings call commentary from Glenn Fogel, Ariane Gorin, and Brian Chesky, regarding artificial intelligence integration within OTAs, suggests an approaching technological horizon that may further disadvantage independent operators. These developments warrant close examination:
The AI-Powered Customer Journey
When Glenn Fogel of Booking Holdings discusses “AI-powered offerings” and “travel vertical-specific agents,” he’s describing a fundamental reimagining of the travel planning and booking process:
Conversational Search: AI-driven interfaces will increasingly replace traditional search parameters with conversational exploration that captures nuanced preferences and contextual factors.
Predictive Personalization: Advanced algorithms will anticipate needs and preferences before they’re explicitly stated, creating a perception of intuitive understanding that builds platform loyalty.
Dynamic Packaging: AI systems will assemble customized travel experiences by dynamically bundling accommodation, transportation, activities, and dining in ways that optimize for individual preferences and value perception.
Continuous Engagement: These systems will maintain ongoing relationships with travelers through the entire journey, from inspiration to post-stay engagement, further cementing platform primacy.
The capital investment required to develop these capabilities exceeds what’s available to all but the largest hospitality groups. A single AI research scientist’s annual compensation frequently exceeds the total technology budget for a midsize independent property.
The Intermediary as Experience Curator
Brian Chesky’s vision of Airbnb evolving toward an “AI-powered travel and living concierge” represents perhaps the most existential challenge—the gradual transformation of these platforms from distribution channels to experience curators:
Brand Disintermediation: As platforms increasingly shape and define the overall travel experience, individual property brands become subordinated components within the platform’s experiential framework.
Preference Filtering: AI-driven recommendation engines will fundamentally determine which properties travelers consider, potentially limiting visibility for properties that don’t align with platform objectives.
Value Perception Shifting: The perceived value of the stay experience may increasingly be attributed to the platform’s curation rather than the property’s service delivery.
This evolution potentially relegates properties to the role of fulfillment centers for experiences defined and sold by platforms—a fundamental challenge to independent identity and value creation.
Strategic Imperatives for Independent Properties
For independent hotels and resorts to maintain viability in this challenging landscape, several strategic imperatives emerge that demand thoughtful implementation:
1.) Differentiation Through Authentic Experience
As OTAs expand into the experiences sector (evidenced by TripAdvisor’s Viator growth and Airbnb’s Experience relaunch), properties must develop distinctive, location-specific experiences that resist commoditization:
Hyperlocal Integration: Developing deep connections with local communities and cultural resources to create experiences that cannot be replicated or easily listed on platforms.
Narrative Development: Crafting compelling property narratives and experiential storylines that create emotional connections transcending transactional relationships.
Service Personalization: Implementing high-touch, personalized service models that contrast with the inevitably more standardized platform experience.
Physical Differentiation: Investing in distinctive design, amenities, and physical attributes that create memorable impressions resistant to digital commoditization.
Properties that succeed in creating truly distinctive experiences gain negotiating leverage with platforms and build direct booking motivation for guests seeking those specific experiences.
2.) Strategic Coalition Building
While individual properties lack the scale to counter platform dominance, creative coalition approaches offer promising alternatives:
Shared Technology Development: Consortia investments in booking technologies, customer relationship management systems, and data analytics platforms that create economies of scale while maintaining operational independence.
Collective Data Pools: Developing anonymized data-sharing frameworks that enable properties to build collective intelligence about guest preferences and behaviors while respecting privacy considerations.
Cooperative Marketing Initiatives: Creating destination-specific or thematic marketing coalitions that aggregate resources to achieve greater visibility in digital channels.
Negotiating Collectives: Forming booking cooperatives that negotiate preferential OTA terms based on collective inventory volume while maintaining individual property identity.
3.) Technological Investment Priorities
While unable to match OTA technology spending in absolute terms, hotels and resorts must make strategically focused investments:
Frictionless Direct Booking: Implementing booking engines that minimize steps, preserve data between sessions, and offer intuitive interfaces comparable to OTA experiences.
Personalization Engines: Deploying systems that capture and utilize guest preferences to create tailored experiences from the first interaction through post-stay engagement.
Intelligent Pricing Systems: Implementing dynamic pricing tools that optimize rate strategies across both direct and indirect channels to maximize overall yield.
Guest Recognition Infrastructure: Developing technological frameworks that enable consistent recognition of returning guests across all touchpoints to build loyalty through acknowledged relationships.
Research from ESSEC Business School suggests that properties allocating 5-7% of revenue to strategic technology investments achieve direct booking rates 15-20% higher than industry averages—a compelling return on investment.
4.) Regulatory and Policy Advocacy
The concentration of market power among a few dominant OTAs warrants renewed examination of the regulatory landscape:
Rate Parity Scrutiny: Advocating for consistent regulatory approaches to rate parity clauses across jurisdictions, building on precedents established in France, Germany, and Italy.
Search Marketing Guidelines: Developing industry standards for fair search marketing practices, particularly regarding bidding on property-specific brand terms.
Data Reciprocity Requirements: Establishing expectations for two-way data sharing that provide properties with meaningful insights about their guests acquired through platforms.
Commission Transparency: Promoting requirements for clear disclosure of commission structures to consumers to increase awareness of the economic impact of booking channels.
The European Cities Alliance’s work on short-term rental regulation provides a template for effective policy advocacy that balances innovation with market fairness considerations.
Navigating the Platform Economy
The financial success of OTAs, particularly Booking Holdings, represents a watershed moment for the hospitality industry. These platforms have transformed from supplementary distribution channels to dominant market-makers with unprecedented influence over consumer choice and property economics.
For independent properties, the path forward requires a delicate balance—leveraging platforms for discovery and reach while developing distinctive experiences and direct relationships that create sustainable competitive advantage. This will require strategic clarity, technological investment, and collaborative approaches that build collective strength while preserving individual identity.
The coming decade will likely determine whether we evolve toward a more balanced ecosystem where platforms and properties participate as equitable partners in value creation, or whether we continue toward a model where properties become increasingly interchangeable inventory within platform-dominated experiences.
The stakes for independent hospitality could not be higher. The authentic, differentiated experiences that define meaningful travel depend on the continued viability of independent operators with the creative freedom and economic resources to innovate. Preserving this diversity of experience may require reimagining the relationship between digital platforms and physical hospitality in ways that distribute value more equitably across the ecosystem.
