How lenders assess OTA, direct and forward bookings when underwriting hotels

Quick answer: Lenders underwrite hotels to net cashflow and quality of revenue. Direct bookings are preferred because they usually deliver higher net margin, better guest data and stronger payment guarantees. OTA bookings count as revenue only after commissions and are usually subject to further haircuts for volatility and cancellations. Forward bookings are credited depending on type — contracted groups and deposits carry weight; unsecured OTA reservations without deposits are heavily discounted or ignored beyond a short window. To see how this affects typical hotel finance deals and get matched to lenders who understand hotels, Get Quote Now (free eligibility check).

TL;DR — what hotel underwriters want you to know

Lenders underwrite hotels on net revenue (after OTA commissions), profit margins and the predictability of cashflows. Direct and contracted bookings score higher because they typically provide better payment guarantees, higher ancillary spend and more reliable conversion. OTAs reduce net margin (typical commission 15–30%) and add volatility — underwriters usually deduct commission then apply an extra risk haircut (commonly 5–15%) before including that revenue in DSCR and covenant modelling. Forward bookings backed by deposits or signed contracts are often recognised; unsecured OTA reservations without payment are discounted heavily or excluded beyond a short horizon. Get a Free Eligibility Check if you want lenders and brokers who specialise in hotels to review your case.

Why channel mix matters to hotel underwriters

Lenders view channel mix as a proxy for revenue quality and predictability. Underwriting focuses on cash actually available to service debt, not headline occupancy.

• Key KPIs: RevPAR, GOPPAR, occupancy, ADR, booking lead time, cancellation rate and booking pace (pick-up).
• Cash collection: commissions, chargebacks and payment delays reduce usable cash flow.
• Volatility and correlation: high OTA dependency often means short lead times, higher cancellations and a weaker ability to predict future cashflows — this increases stress tests and covenant buffers.
• Valuation & covenants: lenders use net revenue forecasts (after commission & haircuts) to calculate DSCR, LTV and covenant triggers — channel mix directly affects these metrics.

If you want lender-ready forecasts and channel analysis, Get Quote Now (free & no obligation).

How lenders treat OTA bookings

OTAs (Online Travel Agencies) are usually underwritten to net revenue — gross room revenue minus OTA commission and fees. Lenders then apply additional haircuts to reflect volatility, cancellations and weaker payment guarantees.

Why OTAs are higher risk in underwriting

• Commission drag: OTAs commonly charge 15–30% commission, directly reducing GOP.
• Short booking windows & cancellations: Short lead times increase volatility and make forward visibility poor.
• Payment uncertainty: Reservations via OTAs are often paid to the OTA and remitted to the hotel or held on account — this can delay cash and increase chargeback risk.
• Limited guest data: less ability to upsell, fewer loyalty repeat stays and lower ancillary spend.

Typical lender adjustments for OTA revenue

• Subtract OTA commission (15–30% typical range).
• Apply a volatility haircut (commonly 5–15%) to reflect cancellations and pick-up risk.
• Limit the counting of OTA forward reservations beyond a short window (often crediting them only for 0–3 months unless prepayment/guarantees exist).
• Require PMS/channel manager exports, OTA commission schedules and month-by-month booking pace reports.

Result: heavy OTA usage usually reduces the amount of future revenue lenders will accept for DSCR/LTV calculations and may increase pricing or reduce levers such as loan term and LTV.

How lenders treat direct bookings

Direct bookings score higher in underwriting for three reasons: better net margin, stronger payment capture and richer guest data that supports future revenue assumptions.

Why direct bookings are preferred

• Higher net margin: no OTA commission or much lower distribution cost.
• Payment security: credit card pre‑authorisations, advance deposits and non‑refundable rate options improve cash certainty.
• Customer data & loyalty: ability to upsell and higher ancillary spend improves GOPPAR.

How lenders credit direct bookings

Lenders will more readily accept forward direct bookings when backed by:

• Merchant statements showing payment capture.
• Signed corporate agreements with POs or deposit terms.
• PMS/website booking engine exports and CRM evidence of loyalty growth.

Direct bookings supported by deposits or prepayments may be taken at face value in forecasts (subject to historic conversion accuracy).

How lenders treat forward bookings (types and differences)

“Forward bookings” means reservations that exist in the future pick‑up curve. Underwriters distinguish types and treat them differently:

Types of forward bookings

• Contracted group bookings: signed contracts, deposits and cancellation penalties — highest credit.
• Corporate negotiated rates: secure when backed by contract/PO or payment terms.
• OTA forward reservations: reservations in the system without payment — low weight unless prepayment applies.
• Wholesale/tour operator: depends on contract and payment terms with the operator.

What lenders require to credit forward bookings

• Signed contracts and deposit schedules (groups/corporates).
• Historical pick‑up vs arrival conversion curves (demonstrating reliability).
• Evidence of payment capture: card on file, prepayments, merchant statements.
• PMS/channel manager exports and STR or market reports where needed.

Typical discounting approach

• Contracted group revenue with deposits: often credited largely, perhaps with small reductions for no‑show risk.
• Direct prepaid bookings: treated favourably if payments are captured.
• OTA forward reservations (no deposit): larger haircuts and may be excluded beyond short windows (0–3 months).

Worked underwriting example (mini scenario)

Hotel A projects £100k of forward OTA revenue for next quarter. Underwriter deducts 20% average commission → £80k net. Then applies a 10% volatility haircut → £72k counted in the DSCR model. By contrast, £50k of contracted group revenue with 30% deposits and signed contracts might be counted at £47k after smaller adjustments. The combined effect reduces what the lender will accept as secure future cashflow and increases the stress required to meet a DSCR covenant.

Underwriting checklist — what hotels should prepare

• Last 12–24 months management accounts, historic P&L and bank statements.
• PMS exports by channel (monthly occupancy, ADR, RevPAR) and channel manager reports.
• Booking pace / pick‑up reports and historical conversion curves.
• OTA commission schedules and contracts.
• Group contracts, corporate agreements, deposit schedules and cancellation terms.
• Merchant statements and proof of payment capture (cards on file, prepayments).
• STR or market comparables and a short CV/resume of management team.

Ready to have your materials reviewed? Get Started — Free Eligibility Check.

How to improve your funding chances

Operational and commercial actions hotels can take to present stronger underwriting metrics:

• Grow direct sales: improve website booking engine, loyalty programmes and corporate channels.
• Insist on deposits and non‑refundable rates for targeted inventory; use prepayment promotions to capture cash.
• Negotiate OTA commission caps where possible and diversify channel mix to reduce single-source risk.
• Secure more contracted business: groups with deposits and corporate accounts with POs.
• Strengthen revenue management evidence: clear, documented forecasts and historic pick‑up charts.
• Improve financial housekeeping: up‑to‑date management accounts and clean bank/merchant reconciliations.

If you’d like help matching with lenders and brokers who understand hotel underwriting and channel issues, Get Quote Now (no obligation).

FAQ

Do lenders count OTA bookings as assets?

No — lenders treat OTA reservations as potential future revenue, not separate collateral assets. They underwrite to net revenue after OTA commissions and usually apply additional haircuts unless bookings are supported by prepayments or contractual guarantees.

Can forward OTA bookings secure a hotel loan?

Only when they’re contractually supported — e.g., deposits, prepayments or strong historic conversion. Unpaid OTA reservations in the PMS without guarantees are typically heavily discounted or excluded beyond a short horizon.

How much commission do lenders assume for OTAs?

OTAs commonly charge 15–30% commission. Underwriters deduct commission to arrive at net revenue, then usually apply an extra risk haircut (often 5–15%) depending on volatility and evidence provided.

Will heavy OTA reliance prevent me getting a loan?

Not automatically. Lenders look at the overall business case: margins, market comparables, management strength and mitigation plans. High OTA dependence may mean stronger covenants, higher pricing or shorter terms unless mitigated by deposits, corporate contracts or a credible plan to grow direct bookings.

Still unsure? Free Eligibility Check — no cost, no obligation.

Next steps

If your hotel has significant OTA exposure or you rely on forward bookings, lenders will want evidence. Preparing the documentation above and demonstrating steps you’ve taken to secure deposits and grow direct business improves outcomes. UK Business Loans introduces hotel owners to lenders and brokers who specialise in hospitality finance — we don’t lend ourselves but we can connect you with the right partners. Start your free eligibility check and we’ll match your enquiry to the best lenders and brokers for your circumstances.

Useful internal resource

For more on sector-focused options and to understand typical hotel funding solutions, see our hotels business loans page: hotels business loans.

Compliance & transparency

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1. How do lenders treat OTA bookings when underwriting a hotel?
Lenders underwrite OTA bookings to net revenue after deducting OTA commissions (typically 15–30%) and then apply additional haircuts (commonly 5–15%) or limit forward crediting because of volatility and payment uncertainty.

2. Will heavy reliance on OTAs stop me getting a hotel loan?
Not automatically — lenders assess the whole business, but high OTA dependence usually reduces accepted cashflow and may lead to tighter covenants, higher pricing or shorter terms unless mitigated by deposits, contracts or a credible plan to grow direct bookings.

3. Can forward bookings be used to secure hotel financing?
Yes — forward bookings backed by signed contracts, deposits, prepayments or strong historic pick‑up/conversion evidence are often credited, whereas unsecured OTA reservations in the PMS are heavily discounted or excluded beyond a short window.

4. How much commission do lenders deduct for OTA bookings?
Underwriters commonly assume OTA commissions of 15–30% and may apply a further 5–15% volatility haircut depending on evidence and booking stability.

5. What documentation do lenders require from hotels during underwriting?
Typical requirements include 12–24 months of management accounts and bank statements, PMS/channel manager exports by channel, OTA commission schedules, booking pace/pick‑up reports, group/corporate contracts and merchant statements proving payment capture.

6. How can I improve my chances of getting a hotel loan?
Improve direct sales and loyalty, secure contracted groups and corporate accounts with deposits or POs, capture prepayments or cards on file, diversify channels, and provide clear historical pick‑up charts and up‑to‑date management accounts.

7. Do lenders count OTA reservations as collateral or assets?
No — lenders view OTA reservations as potential future revenue (not separate collateral) and only include them in underwriting after commission deductions and any applicable haircuts or guarantees.

8. How does channel mix affect DSCR and loan sizing?
Channel mix changes the net revenue assumptions used in DSCR and LTV calculations, so a higher OTA share typically lowers the amount of future cashflow lenders will accept and can reduce loan size or require stronger covenants.

9. Will submitting an enquiry on UK Business Loans affect my credit score?
No — submitting an enquiry to UK Business Loans is free and does not impact your credit score; lenders or brokers may carry out checks later only if you choose to proceed.

10. How quickly can UK Business Loans match me with lenders for a hotel funding enquiry?
We typically match enquiries within hours, connecting you with vetted lenders and brokers experienced in hotel finance who can review your case and request supporting documents.