At the end of 2024, the global online travel market was estimated to be worth approximately $613 billion1. It is expected to grow to $1.4 trillion by 20342. At 41%, airline bookings formed a lion’s share of revenues for OTAs3.
Reports suggest that OTAs already process more than 10 million transactions per day4. With the proliferation of high-speed internet and rising adoption of smartphones across the globe (especially in emerging markets like Africa and Latin America), OTAs are poised for a decade of robust business growth.
Meanwhile, OTAs continue to navigate challenging revenue-share partnerships with airlines. Profit margins for airlines acutely depend on monetizing the inventory of flight seats and ancillary services. Hence, airlines incentivise OTAs to sell more seats on flights operated by them through Performance Linked Benefit (PLB) agreements.
On paper, PLB agreements sound promising - OTAs push higher airline ticket sales, and earn a bonus when they hit the agreed-upon targets. However, it is an understatement to say that tracking PLB and airline sales incentives is a big challenge for OTAs. Finance teams have to contend with legacy systems and painfully slow manual workflows.
The result? Erroneous calculations often lead to OTAs missing out on PLB revenue that is rightfully due to them. Let’s dive into the challenges plaguing PLB management, and what could be a potential solution.
The Problem with Performance Linked Bonus (PLB) for OTAs
Let’s decode the challenge of managing PLBs by looking at the degrees of complexity involved in this partnership that is intended to be mutually beneficial to airlines and OTAs:
- The impact of high transaction volume: Estimates suggest that a large OTA processes close to 50 million airline booking transactions in any given year. Peak booking seasons can see transaction volumes spiking by 10x. When such a high volume of transactions trigger PLB calculations, manual processes can easily get overwhelmed.
- Multi-carrier complexity: Leading OTA players partner with up to 500 airlines, with partnerships spanning across domestic and international carriers. Each PLB contract with an airline typically encompasses multiple PLB structures, and contract terms that can change indefinitely over the course of a financial year. This affects PLB calculation workflows.
- Dynamic contract variables: The complexity of managing PLB calculations increases by several orders of magnitude when you consider the dynamic nature of PLB contracts, which can have as many as 15 PLB structures and multiple contract terms:
- Volume-based incentives: These are traditional commission structures tied to booking volumes - higher sales net the OTA higher commissions.
- Performance thresholds: Benefits are tiered across ‘slabs’ with PLB rates going up successively after sales exceed certain thresholds. This requires precise tracking to avoid losing out on benefits.
- Cabin Class Variations: PLB rates typically vary by cabin class. Ticket bookings for Economy and Premium Economy classes carry a different PLB rate when compared to bookings for Business and First Class.
- Mix incentives: These are benefits linked to cabin class distribution and route preferences - airlines usually incentivise OTAs to push booking on specific ‘priority’ routes.
- Seasonal multipliers: Airlines make dynamic adjustments to incentives to push a larger inventory during peak travel periods, such as festive holidays and long weekends.
- Manual, Excel-based workflows: Given the scale of transactions and multiple layers of complexity involved in PLB contracts, Excel-based PLB management systems cannot keep up. Two key failure points can be summarised as follows:
- Data fragmentation: To get the complete picture of an airline booking, finance teams have to stitch together booking/transaction data from as many as 30 different systems and a plethora of Excel spreadsheets. Manual standardization of inconsistent data formats and incomplete data can be a massive drain on the time/bandwidth of finance teams.
- Lack of accuracy: Manual formula errors, incorrect application of seasonal multipliers, cabin class misclassification, and currency conversion errors in international transactions are some of the issues that arise from manual Excel-based calculations.
- Data fragmentation: To get the complete picture of an airline booking, finance teams have to stitch together booking/transaction data from as many as 30 different systems and a plethora of Excel spreadsheets. Manual standardization of inconsistent data formats and incomplete data can be a massive drain on the time/bandwidth of finance teams.
The True Cost of PLB Mismanagement
Legacy systems, data silos, and manual workflows combine to create substantial revenue leakages for OTAs.
Here’s how:
- Under-claiming: OTAs take the biggest hit to their revenues due to under-claiming. Due to incomplete and/or inaccurate trip data, coupled with Excel-based workflows that have limitations in applying PLB incentive structures, OTAs could be eligible for incentive amounts that are up to 8x of the amount they claim.
For a major OTA processing over $20 billion in bookings, even a conservative estimate of under-claiming 8% of eligible PLB amounts translates to a loss of $1.6 billion annually. - Delayed Claims: Sourcing data from legacy systems, consolidating multiple Excel files, and manually calculating PLB incentives for huge volumes of trip data takes time.
For OTAs, bottlenecks caused by these inefficient workflows snowball into delays of up to 60 days in submitting PLB claims. Which in-turn can adversely impact cash flow to the tune of $12-18 million per quarter for large OTAs. - Calculation Errors: Airlines typically specify multiple incentive criteria i.e PLB structures, when drawing up contracts with OTAs. To qualify for the PLB incentive, trips often need to satisfy multiple if not all of these criteria. Eg. Bookings for business class that do not include infants, that are not group bookings, between London and Tokyo, with the ‘flown date’ is during the month of May 2025.
Incentive calculation is complicated due to missing trip data like cabin class, flown date, etc. In addition to data quality issues, VLOOKUP formulae on Excel workbooks cannot accommodate all incentive criteria, leading to calculation errors.The result? Formula and classification errors lead to 6-9% revenue variance from optimal PLB capture.
- Operational Cost: Manual PLB reconciliation consumes 2,400-3,600 hours monthly for major OTAs (not to mention the additional 480-720 hours every month of senior finance team time).
At $85/hour fully loaded cost, the annual labor cost for a large OTA could be as high as $2.4-3.7 million to manage PLB.
Beyond these direct costs, manual PLB management severely hinders the ability of an OTA’s finance team to focus on strategic initiatives like margin optimization and partnership evaluation.
What OTAs and Airlines Stand to Gain from Seamless PLB Management
For OTAs: Airline incentives become a predictable revenue stream
- Higher revenue: Automated PLB capture increases claimed benefits by 15-22%
- Higher margins: Improved PLB management contributes 2.8-4.1% gross margin improvement
- Faster cash flow: Streamlined processes reduce settlement cycles by 35-45%
- Accurate forecasts: Enhanced PLB visibility improves revenue forecasting accuracy by 25-30%
When you automate PLB workflows, it frees up the finance team to focus on strategic tasks such as expanding the scope of existing airline partnerships and evaluating newer airline partnership opportunities.
Equipped with the power of analytics built on top of accurate carrier and route-level data, you can negotiate favorable contract terms with airlines.
For Airlines: Partnership Optimization: Enhanced PLB management strengthens airline-OTA relationships:
- Performance Visibility: Clear metrics on OTA partnership effectiveness
- Strategic Alignment: Data-driven partnership terms and incentive structure optimization
- Market Intelligence: Insights into booking patterns and customer preferences
- Revenue Assurance: Confidence in accurate and timely PLB calculations
The Solution: Automated Reconciliation and Unified Data Architecture
- Finance teams at OTAs spend weeks in PLB calculation as raw data needs to be sourced from multiple legacy systems and reconciled manually in Excel workbooks.
The Bluecopa Solution: Automated data pipelines that ingest excel/.csv files from legacy systems, and automated reconciliation that matches OTA booking data with airline sales data. - PLB calculation errors arise when contract terms specified in PDF documents are incorrectly input when manually entering into Excel sheets - typo errors, missed input fields, etc., result in erroneous calculation of PLB incentive and lead to disputes with airlines.
The Bluecopa Solution: An MIS with pre-defined datasets enables account managers to select from dropdown menus. This ensures contract terms are accurately captured and applied in PLB calculations. - OTAs under-claim incentives due to a lack of concrete data on how many bookings satisfy PLB criteria and qualify for incentives. They use crude estimates called a ‘deflator’ that is based on the incentive credited in the previous month/quarter.
The Bluecopa Solution: Automated calculation of incentives based on ‘flown’ data from airlines and by accurately applying multiple incentive criteria to arrive at the exact number of trip bookings that qualify for PLB incentives.
Final thoughts: Faster Reconciliations x Accurate Data = Higher Revenue
Airlines are cashing in on the post-COVID travel boom, with a record number of passengers in 2024 pushing profits beyond $30 billion. The question that has become the proverbial elephant in the room for CFOs: ‘Why is my OTA not able to take a bite out of this apple?’.
With OTA players losing up to $2.5 billion in airline incentives every year, inefficient finance operations have become a critical vulnerability that has been left unaddressed for far too long.
In an industry with cut-throat margins, every penny and every second counts.
In the age of AI-driven business transformation, legacy systems and manual workflows should not weigh down revenue and profitability for your OTA.
And for CFOs, inaction is no longer an option. The technology solutions exist today to eliminate manual processes, capture optimal PLB revenue, and provide the real-time data and analytics that are essential to optimize airline partnerships.
The benefits are not insignificant to ignore:
- 12-18% PLB revenue improvement,
- 60-75% operational cost reduction, and
- 25-35% cash flow acceleration
So if you are a CFO at an OTA, the path forward is crystal clear: Act now. Switch to AI-powered autonomous finance operations to turn PLB management from an operational burden into a strategic advantage.
There could be turbulent skies ahead. It is time to put your finance operations on autopilot for smooth sailing. Talk to a bluecopa specialist to learn how.
Sources
1 - https://www.grandviewresearch.com/industry-analysis/online-travel-agencies-market-report
2 - https://www.grandviewresearch.com/industry-analysis/online-travel-agencies-market-report
3 - https://www.grandviewresearch.com/industry-analysis/online-travel-agencies-market-report
4 - https://www.marketgrowthreports.com/market-reports/online-travel-agency-ota-market-112012
