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With all the discounts and offer’s on your favorite travel website, have you ever wondered how travel website generates revenue?
Nowadays, even before stepping in for the flight, a travel website enables you to book tours, have flights, rent the car and tour guides all from their single websites? It takes time to integrate all the functionalities, but how do these companies earn a profit?
All these functionalities are expensive to add on a travel website. But, when you compare it to what a travel business earns once established, it is nothing. There are 3 ways that travel tour companies earn money and create a profit even without all the profits they provide.
Global tourism is changing, conveniences are no longer optional but companies like Uber, Taskrabbit, etc are established on grounds of providing convenience to customers. It is necessary that your website too upgrades to meet new demands. Worried about cost? Here’s another blog on the cost of developing a travel app.
Bulk Bookings
This applies to any business but travel businesses are running on this concept, bulk booking. Simply, you procure a large number of rooms from a single hotel with bulk buying discount and then market on your website with the lowest price online.
Here are numbers to make it easily understandable. A travel company is offering a 1-week tour of Hawaii, it will include everything for two people. The company contacts hotels and books 100 rooms (1 for each couple) for $50 each, instead of the available online price of $90 (Why will the hotel book at less cost? it sells 100 rooms because at once). Then as all in one place to book everything related to tourism in Hawaii, they contact the airline for booking 200 seats (here they will either have a small discount or no discount). The package will be for $1700 for two people. How the travel company earned profit here? The customer went for this booking website as it is $130 less than the hotel website price and the travel booking website is happy because they only paid $1550 and sold it for $1700. And in total they sold 100 couples at $1700 each. Everyone wins.
Commission Fees
Another way travel websites make money is on commission based. Small scale hoteliers don’t have enough budget for marketing and can’t go outside their locality to market themselves. They depend on foot traffic to fill up their hotel rooms. But travel booking websites have the global reach and budget to market those hoteliers in exchange for some commission for the booking. Hoteliers benefit from the traffic that travel websites are gaining.
Travel booking websites have a certain percentage of commission, in our experience as travel app development specialists, major websites have somewhere between 20 – 25% commission. Unlike bulk booking where rooms are booked on behalf of travel websites, here travel websites only charge when a room is sold via their platform. If a room is booked for $100, then hoteliers get $75 and rest to travel booking websites. The fees can be customer service, enhancing the website or can be entirely profit margin.
Ads & Information Selling
At a time when travel websites become significant players in the travel industry for booking and related services. You start dominating the industry, you will start acquiring smaller businesses to your branch. When the traffic on your website becomes so much larger, you will have an ad displaying opportunities for other brands.
In today’s world of data, there is another way how travel website generates revenue. Enterprise sells user information to other related, not direct competitors but related or substitute industries the data. For example if a person is showing interest in traveling to Hawaii, another organization will be happy to buy the info of users when they are coming to Hawaii and can sell for say yachts, surf boats, etc. As a travel website that organization is not your competitor but with the help of your huge traffic and their information can benefit his/her business as the beneficiary or dependent of your business.
The Bottom Line
The travel industry is growing with technology and people who are using those assets. Travel booking websites are no longer a place where you can book only rooms, they are becoming the single hub to plan your whole trip with a single payment.
We have been developing travel websites, apps for the past 12 years, and from every client we have agreed that moving from a traditional reservation system to a new app-based booking system has benefited their profits and has put them in front of the customer’s face.
