What OTA commission actually costs an East African hotel

The headline commission rate is the smallest part of the bill. Here is the full arithmetic, including the costs that never appear on the invoice.

Ask most operators in the region what an online travel agency costs them and you will get the headline commission rate. That number is real, but it is the beginning of the calculation rather than the end of it — and the gap between the two is where a great deal of margin quietly goes.

This is the full arithmetic, and how to run it against your own numbers.

Start with your own contract, not a published rate

Commission is negotiated, tiered and varies by market, property type and programme participation. Published or widely-cited rates are a starting reference only. Before doing anything else, pull your actual signed rate and your actual participation level from your extranet — including any accelerator, visibility or preferred-partner programme you have opted into, which raises the effective rate above the base.

Write down the real number. Everything that follows is applied to it.

The costs beneath the headline rate

Payment processing. Where the OTA collects and remits, or where you process a virtual card, there is a merchant fee. Cross-border card processing in East Africa typically carries a higher rate than domestic, and virtual card transactions often price as card-not-present.

Currency conversion and settlement spread. If the guest pays in one currency, the OTA settles in another and you bank in a third, a spread is taken at each hop. On a USD-denominated booking settled to a local account, this is rarely trivial and almost never appears as a line item you can point at.

Settlement delay. Money that arrives 30 or 60 days after checkout has a cost, and in a high-rate environment that cost is not rounding. Compare it against a direct booking where funds clear within days.

Cancellation asymmetry. Free-cancellation inventory converts better on OTA platforms, which is precisely why it is promoted. It also produces a materially higher cancellation rate. A channel that books more and cancels more may deliver less realised revenue than its gross production suggests. Measure realised, not booked.

Rate parity drag. Parity obligations constrain what you can offer directly, which suppresses the direct channel that would otherwise be your cheapest. This cost is real and structural, and it does not appear anywhere in your accounts.

The comparison most properties get wrong

The common error is comparing OTA commission against zero, as though a direct booking were free. It is not. A direct booking carries:

• Marketing and paid search cost to acquire
• Booking engine subscription or per-transaction fee
• Payment processing on your own merchant account
• Staff time on reservations, enquiries and phone conversion
• Website and content maintenance

The right comparison is cost per realised, retained room-night by channel — not commission versus nothing.

Fill that table in with your own figures for one quarter. Most operators who do this for the first time find the true gap is wider than they assumed — but also that their direct channel is more expensive than they had been telling themselves.

What the OTA is genuinely worth

Being honest about the value matters as much as being honest about the cost, because the goal is not zero OTA business.

• Reach into markets you cannot address directly. For a lodge selling into six source markets in four languages, this is real and hard to replicate.
• The billboard effect. Listing visibility drives direct enquiries that never touch the platform. It is difficult to measure and it is not zero.
• Distressed inventory. Filling a room at commission is better than not filling it.
• New-market entry. A genuinely faster route into an unfamiliar source market than building distribution from scratch.

The strategic question is not "how do we eliminate this" but "what is the right mix, and are we paying for reach we no longer need in markets where we are already known?"

Practical moves

1. Calculate your true blended acquisition cost per channel. Not commission — total cost per realised room-night, with cancellations netted out.
2. Segment by source market. Your OTA dependence in a market where you have brand recognition is a different problem from dependence in one where you have none.
3. Attack the parity constraint with value, not price. Where parity limits your headline rate, compete on inclusions, room type, flexibility, upgrades and length-of-stay bundles. These are usually outside parity scope — check your own contract wording.
4. Fix the direct funnel before trying to shift volume to it. Shifting demand into a booking engine that converts poorly is not a saving.
5. Track the ratio over time. Channel mix moves slowly. Quarterly is the right cadence; monthly is noise.

The concentration question

If a single distribution partner represents a large share of your forward book, that is a strategic exposure regardless of what it costs — because the commercial terms can change, and your negotiating position at renewal is a function of how easily you could walk away.

Concentration risk and commission cost are separate problems. Solve them separately.

The EA Hospitality Pulse tracks distribution economics, source-market shifts and cost-side pressure across Kenya, Uganda, Tanzania, Zanzibar and Rwanda.