Is there any business model that rely only on commission fees?
To be more specific is it possible to survive by only selling plane tickets + hotel rooms? Say for example using Amadeus' API for the plane tickets and Booking's API for hotel rooms. What do would you say is the average revenue per reservation using this kind of revenue model? Any information on commissions is welcome as I feel this is often hard to find.
asked Aug 9, 2019
answered Aug 14, 2019
First, this business model is viable. There are hundreds of online travel agencies that work with flights and hotels only.
But it’s actually hard to give absolutely accurate numbers. Why? The thing is, every online travel agency tries to get a competitive edge over others by finding the lowest rates possible to increase their margins. This can be done by negotiating rates with GDSs, suppliers, and consolidators/wholesalers. And, these negotiated deals aren’t usually disclosed.
Traditionally, commissions that large OTAs like Expedia and Booking.com receive range from 15-30 percent in the hotel industry. If you use the Booking.com API as a partner, expect an average commission of about 15 percent going to Booking.com with commissions differing based on the region.
Flights are more complex and commissions there are usually lower. But they will depend on the agreements that you negotiate with providers, GDSs in particular. Also, keep in mind that you won’t be able to issue tickets if you aren’t IATA-certified. This also comes at a cost that will depend on what kind of travel provider you are and the regions you operate in.
Also, a large part of online travel agency success revolves around the search and commission engine that you tweak on your side.
Finally, you have to invest heavily in marketing to jumpstart your traffic.
So, yeah it’s a viable business model if you do a lot of things right.