How Do Online Travel Agencies Make Money?

If you traveled back in time when there was no internet, it had not yet been created and was not even a figment of someone’s imagination.

Planning a trip, e.g., making all the arrangements for airline tickets, hotel accommodations, car rentals, had to go through a travel agent and the services the agency provided came with exorbitant fees and commissions. The price of plane tickets alone back in those days was “huge.”

But, as technology flourished, the manual airline travel booking process slowly increased as consumers could do it themselves online.

People nowadays can easily pick and book travel tickets on their own anytime they want to go on a trip.

This has become the dilemma for travel agencies on how they can revive their business and turn it around into a money-maker once again.

Of course, there are ways for this industry to swing back and use the Internet in their favor.

Even though the Internet plays a huge part in people’s daily lives and almost everything is instantly provided. This realm has a lot of beneficial outputs for all industries. Online travel agencies, for instance, are now using the Internet’s capability to help them continue with the business and gain back their revenue even better. Through a great relationship and customer service, the online travel business can proceed with their digital process and move forward to provide service to travelers.

Before the Internet had dominated the traditional traveling industry, travel agents relied on massive commissions and service fees. At this present time, these two points are no longer the basis of travel agencies to earn and make money.

TRAVEL AGENCIES STILL MAKING A PROFIT

Here’s a simple breakdown of how the majority of the online travel agencies survived and are still surviving the competition:

  • A traveler communicates with an online travel agency and closes the deal.
  • The travel agency arranges and books the customers itinerary to vendors (airline, tours, car, cruises, hotel, etc.). They either make use of the agency’s website access or call the vendors directly providing them with their accreditation number. The agency may charge the client with a separate service or consultation fee depending on the type of booking and agency.
  • An accreditation number is what makes a travel agency known to vendors. Through that accreditation number, vendors can already access the travel agency’s information, their commission level, and the address where the commission should be sent.
  • Final travel booking is to be finalized by the agency and is certified by an accreditation number.
  • Commissions are paid directly to the travel agency. In most cases, commissions are paid by the vendor after the customer arrives from the trip. Whereas in cruises, travel agencies are paid after the customer’s final payment.

The abovementioned steps and process on how online travel agents make a profit are just to provide an idea of how it works and, as this article continues, you will have a better picture of how this industry continues to make it.

Time For A Game-Changer

With the decrease in commission and fees, travelers learned how to book online; airline ticket selling was no longer profitable for most travel agencies who couldn’t adapt to the sudden change in the travel industry and were forced to close the business. It was tragic, to be honest, and quite devastating, but like what they always say there’s a rainbow after the storm and many, in this business were still hopeful and looking forward to something.

Here’s how the travel agent community found its major game-changer:

The Work-from-Home Venture

When the travel enterprise thought that it was going to be the end of their glory days, an influx just happened that totally turned the business into a 360 degrees spin of events. A new strategy, technique, and approach, but keeping the standards of the business – the rise of the work-from-home framework. It was way back in 2013 when the travel agency scenario had taken the risk to clean slate everything and save the industry. This remote work set up was booming and was not only dominating the travel industry but almost all kinds of a business venture.

By using the advantages of the Internet, it now provides more convenience and flexibility to work around and present the kind of service travelers get even without physically and personally seeing their agent. The home-based milieu that the travel industry created was the best move they could have made, which is now a very popular “remote or online agency.”

Taking A Step To Deviate Earning Profits

In due course of time, the online travel agency industry – both for business and leisure purposes, is getting used to no longer relying on commissions because it is much lower now compared to what it was in the past.

So their option now to earn revenue with the commission being way lower is to modify the income and start charging fees from other services. This system greatly uplifted the travel business to diverge from its reliance on commissions from vendors and to stand their ground to make the business even better than it was in the golden ages.

Still, all travel agencies face the challenge of major cruise liners which offer ‘non-commission-based’ fees and services. Even miscellaneous fees are non-commissionable, too.

HOW ONLINE TRAVEL AGENCIES COLLECT THEIR GAIN

Travel agencies increase their revenues in so many different ways and keep on using their reliable solutions to service all sectors in all fields – using the online realm.

Here’s a breakdown based on various questions about how travel agencies increase their business earnings. And this is based on the four main types of travel agencies: the corporate, the leisure, the custom, and ‘the big players.’

Let’s begin.

The Corporate Travel Agency

  • For corporate agencies, their personification is airline tickets. With the loss of airline commissions to offset it, the corporate travel business enforces travel service fees every time a business trip is successfully booked online.

Other than air trip bookings, these corporate agencies also earn commissions from hotel and car bookings that are related to business travels. They also gain profit from net/private fares, service fees, and airline commissions. Since most airline tickets don’t shell out commissions, travel agencies secure contracts to collect commissions from travel tickets that fall under certain service or routing classifications.

The Leisure Travel Agency

  • With much less travel commission, recreational-related travels get to pay travel agencies with a certain percentage of their commission which is essentially cruises and vacation travel packages. By and large, leisure travel agencies gain their revenue from commissions from travel-based vendors who compensate them from cruises, vacation packages, and other exclusive and customized add-ons. Consultation and service fees are much more common since travel agencies no longer depend so much on commissions from suppliers.

Fees being charged to customers help travel agency boost their revenue and make sure to have guaranteed clients that will book travel tickets. Other travel agencies charge an up-front fee for flight and accommodation research, which will automatically be charged when the booking is final. While other agencies automatically charge a non-refundable fee for every consultation service they provide to their clients.

The Custom Travel Agency

  • Some trips are designed and arranged based on travelers’ personal preferences and requests. Like group travels in cruises, bus tours retreats in resorts and hotels; itineraries are usually customized by what travel agencies call it FIT package or Flexible Independent Travel. This type of travel package is not for everyone.

Personalized itineraries are more time-consuming and, more often than not, include booking places that do not pay commissions. Agencies who arrange FIT package get to charge higher consultation fees, service fees, and travel planning fees to compensate for the exclusive service.

Most FIT travel agencies also make extra revenue via mark-up pricing and commissions from various vendors where they get to book.

The ‘Big’ Travel Agency

  • The word ‘Big’ here pertains to an agency that is considered ‘big player’ because they have tens of thousands or even millions in revenue to spend. There’s no pressure in hitting specific targets or being borderline in paying their bills, but the fact is, once you are part of the parade, you’ll be able to find out more about it.

As it is with most travel agencies that take advantage of commission-based profits, these ‘big-time players’ net from their revenue itself. The moment they see a potential market or business sales, vendors are obliged to compensate them. These potential sales may come from various vendors such as cruise lines, airlines, tour operators, GDSs, car rental, and a lot more.

Travel Agency Suppliers

To be able to provide sought-after travel services and offers, online travel agencies, may they be small, independent or large, see to it that what they are creating is worth every travelers’ spending. So who are the suppliers that will be paying them commissions after a travel booking has been finalized?

  • Hotels
  • Tours and extras
  • Airlines
  • Insurance
  • Marketing Partners
  • Plane ticket portals
  • Fees for booking a flight
  • VIP travel services

CONCLUSION

Whether you are a travel blogger or just a nomad who wants to explore the world, now you should be fully aware of why having a travel agency is your best option to having a perfect and memorable travel experience. The other side of this is that you are now more knowledgeable about where online travel agencies get their revenue. At least in the future, you will become a more responsible traveler that knows how the traveling business works – online or otherwise.

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