Merchant Model vs Agency Model

In the merchant model, the online travel agency (OTA) is the merchant of record: the guest pays the OTA, generally at booking. In the agency model, the OTA acts as the agent: it passes the reservation to the hotel and earns a commission, and the guest pays the hotel at the time of the stay (Expedia Group Form 10-K FY2025) (Booking Holdings Inc. Form 10-K FY2025).

Last updated: October 2026

How the merchant model and agency model work

Expedia calls its two hotel payment choices Expedia Collect, its merchant model, where the traveler pays Expedia in advance, and Hotel Collect, its agency model, where the traveler pays at the hotel at the time of the stay. On Hotel Collect bookings, Expedia records its agency revenue when the night is stayed (Expedia Group Form 10-K FY2025).

Booking Holdings splits its accounts along the same line. Merchant revenue comes from transactions where it facilitates the traveler's payment, and agency revenue from transactions where it does not; its agency revenue is almost entirely commission on Booking.com accommodation reservations (Booking Holdings Inc. Form 10-K FY2025).

Each model tends to travel with its own rate type. Gross rates, where the hotel sets the final asking price, have traditionally been tied to the agency model, and net rates to the merchant model, although either rate type can be used under both (Hospitality Net: Understanding Booking.com's shift to the merchant model (2022)). For how a net rate is built, see Net rate.

When Booking.com handles the guest's payment through Payments by Booking.com, the property can be paid by bank transfer on a schedule, such as monthly or weekly, or per reservation by virtual card. A net payout excludes the Booking.com commission and payment fees (Booking.com Connectivity docs: Understanding payouts).

Why the merchant model matters for hotel distribution

Merchant was 70% of Expedia Group's FY2025 revenue and agency 22%, across all its lines of business. Most of Expedia's merchant transactions are lodging bookings, while most of its agency gross bookings are air (Expedia Group Form 10-K FY2025).

Booking Holdings now processes the majority of its transactions on a merchant basis (Booking Holdings Inc. Form 10-K FY2025). In Q2 2025 its merchant revenue was USD 4,457 million, more than double its agency revenue of USD 2,044 million. A year earlier, in Q2 2024, the figures were USD 3,446 million and USD 2,144 million, so merchant rose while agency fell (Booking Holdings Q2 2025 Earnings Press Release (29 Jul 2025)). Its merchant gross bookings grew 25.1% year over year in the same quarter (Booking Holdings Q2 2025 Earnings Press Release (29 Jul 2025)).

For a hotel or rental operator, the model on each booking decides who collects the guest's money, which rate type the channel expects, and whether the property receives a payout from the OTA or pays the OTA a commission. A property selling on several OTAs can meet both models at once (AltexSoft: OTA Rates and Building Commission Engine).

Merchant model compared with agency model

 Merchant modelAgency model
Who the guest paysThe OTAThe hotel
When the guest paysAt Expedia, generally at bookingAt Expedia, at the time of the stay
Traditional rate typeNet rateGross rate, the final price set by the hotel
How the hotel gets paidA payout from the OTADirectly by the guest; the OTA earns a commission
Expedia's name for itExpedia CollectHotel Collect

Who pays, when, payout and Expedia rows: Expedia Group Form 10-K FY2025; Booking.com Connectivity docs: Understanding payouts. Rate type row: Hospitality Net: Understanding Booking.com's shift to the merchant model (2022).

Frequently asked questions

What is the merchant model?
The merchant model is a way of selling hotel rooms in which the online travel agency collects the full price from the guest. The OTA then normally pays the hotel the net price, which is the final price minus the agreed commission, after the check-in date.
What is a merchant business model for an OTA?
In the merchant model the OTA collects the traveler's payment and passes the hotel its share. Some OTAs work from a negotiated net rate and add a markup; others pass on the price minus a commission. Booking Holdings notes that facilitating payments brings extra payment processing costs, which are typically higher for foreign currency transactions.
What is the difference between the merchant model and the agency model?
The difference is who takes the guest's money. In the merchant model the guest pays the OTA, and the OTA pays the hotel the net price after check-in. In the agency model the hotel sets gross rates, the guest pays the hotel, and the hotel pays the OTA a commission after the guest checks out.
Is the merchant model the same as a merchant of record model?
As Expedia uses the terms, yes. Expedia states that it is the merchant of record for bookings under its merchant model, and that travelers pay it for those hotel stays, generally when they book. Under its agency model, Expedia acts as the agent and passes the reservation to the hotel, and the traveler pays at the hotel at the time of the stay.
Can one property use both models?
Yes. OTAs typically mix and match the two approaches, and one OTA can offer both payment choices side by side.

Related terms

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Where Jetstream fits

Merchant and agency bookings can arrive at the same property from different OTAs, each with its own rate type and payment flow. Jetstream builds an AI channel manager that connects a property's systems to the channels where guests book, and keeps rooms, rates and availability accurate on each one, managed from one place.

See Jetstream's AI channel manager Book a demo