How do travel sites like Make My Trip, Ease My Trip and Yatra, make money on Travel Commissions and Advertising?
I am sure whenever you are planning a holiday, the first thing you do is check on online portals. Since smartphones became handy and everyone launched their so-called apps to give you access to information, you can check it anywhere and anytime. We always check rates on 3-4 different portals and even sometimes call the hotel to check rates or get in touch with a local agent to compare. And then we finalize the booking.
Sometimes you will find rates cheaper on one portal and next time on another portal. Have you ever thought about how these so-called online travel agents (OTA) make money? Even after offering huge discounts, what is their source of revenue? Let’s talk about it.
AIR TICKETS – Major source of income of all major OTA’s is flight tickets. Earlier there were times when airlines used to offer huge commissions (8-9% of the basic fare). Gradually it started reducing. And now it’s close to 1% or on some airlines is 0 or target based business. Now you will think, then what is the benefit of working for such a small amount. Whenever you book tickets online or cancel “CONVENIENCE FEE” is applicable, which is not charged by the airlines but the agency. So either you book a ticket or cancel portals are making money. Second, the airline gives them quarterly targets, and if they achieve the same they get 1-2% on the business generated. That’s a huge amount considering the customer reach.
HOTELS – Not all hotels are sold cheap on portals. And you will always find the different prices for the same hotel on different portals. How does this happen? For example, if you are a regular and bulk buyer then the hotels will offer you the wholesale price with the best discount, the same way if the OTA is giving regular and more booking to a hotel they give you a better rate than others. So, basically, if an OTA is bringing big business to a hotel, it will bound to get better discounts and hence, will earn more commission.
TOUR PACKAGES – Same as mentioned OTA are big players and they invest a huge amount in packages i.e. group departures. As they book hotels in bulk and for a longer period with advance payment, in return hotel gives them the best-discounted price than others. This gives them fair play with costing. And this in return generates better revenue for them.
But pandemic has created havoc on the tourism industry and in the past year, many small hotels and tour operators have closed down their operations. Many layoffs have been done by Make-My –trip, Yatra, and Thomas Cook, etc. to save cost as business prospects are very minimal. Things were looking to normalize after Oct-2020, but the second wave of Corona hit the business again after Feb-2021. Now, currently, only cancellations are coming and no fresh booking is happening. Everyone is struggling with either a big OTA or a small agent or the hotels. The last year has been the toughest phase for the industry. Hope the conditions improve and people start traveling like earlier.