Planning a grand vacation to Europe or a tropical beach getaway has never been easier. With so many travel aggregator sites, like Expedia, Kayak, Priceline, and more, anyone can book a package at a bargain price. But if the customer is getting such impressive savings, how do the sites make any money at all?
Here, you'll find the answer to that question (and other things you didn't know about the online travel industry), pros and cons of online retailers, and some extra tips and tricks to find the best fare for your next vacation.
How Do Travel Sites Work?
Online travel aggregators are big-time money makers, though they typically specialize in discounted fares. How does that work? Well, Priceline might seem like it hasn’t been in business since William Shatner stopped making their commercials, but the Priceline Group is still the largest online travel company in the world. How? They own Booking.com, Agoda.com, Villas.com, and Kayak.com.
Expedia also holds multiple sites. The company owns Hotels.com, Hotwire, Trivago, Orbitz, and Travelocity.
Together, Priceline and Expedia have a firm rule over the online travel world. With such dominance, they can command greater discounts from hotels and airlines who are happy to be associated with the travel giants.
How Do They Make Money?
Whenever a person books a room on their own, they get a typical rate. But, if a person wanted to book a huge block of rooms, they’d get a discount. Sites like Expedia and Priceline always book in large amounts to get rooms at a cheaper rate. Then, they can sell the rooms at less than the advertised price and still keep a little money for themselves. For Expedia, these kind of hotel bookings account for 70 percent of their revenue, according to Investopedia.
Another big money maker for third-party booking sites is commission. Some hotels offer up to a 25 percent commission on every sale. Why would they give away so much money? Well, many hotels don’t have the advertising budget to reach a national audience, and by working with a site like Expedia, with their “Best Price Guarantee,” that hotel can reach a wide array of customers. The customers will go through a site they trust (Expedia) and possibly book a hotel they’d never heard of. So, Expedia gets a commission and the hotel gets a customer they never would have had.
Lastly, the sites make their money the old-fashioned way—selling advertising! Priceline is especially adept at selling ads on all their sites, according to Investopedia. Just that little ad in the background as you plan out your vacation puts a little extra dough in Priceline’s pockets.
The Pros of Using Booking Sites
Since Expedia and Priceline have such a huge influence over the online travel market, many rental car providers, airlines, and especially hotels are willing to give the online retailers—and by extension, you—big discounts. If you search for a hotel on your own, you may only come across the major chains offering out their fully priced rooms. With travel aggregators, you can find hotels big and small and get the very best deal for your needs.
Sure, you could search every individual airline, all of your favorite hotels, and each rental car site on your own, but it’s a lot easier to do it all in one place. On Expedia, you can find a car, hotel, and flight all at once, based on your preferences. If you have minimal time for vacation planning, travel sites can make your trip a lot easier.
Travel prices are constantly changing. You’ve likely felt the sting of buying a flight only to see it drop $100 in price the next day. Sites like Kayak and Hopper offer price prediction so you can avoid paying too much for buying at the wrong time. In an small study done by the Wall Street Journal, Hopper’s accuracy was around 80 percent, while Kayak’s accuracy stays at about 66 percent. It might not be perfect, but at least you get an indication of future price fluctuations.
New Sites Are Bringing Even Bigger Discounts
Though Expedia and Priceline are the biggest names in online travel, they aren’t the only option. Sites like Skiplagged find drastically lowered fares by exploiting airline loopholes.
Let’s say you want to fly from New York to Atlanta. Sometimes, a flight from New York to Las Vegas with a stopover in Atlanta is much cheaper than New York to Atlanta direct. Skiplagged finds these cheaper flights. Then, you just get off the plane at the Atlanta stopover and enjoy your vacation. Skiplagged reports savings of up to $50 each way.
Now, you can only fly one-way on these flights and you can’t check any bags. But that’s the price you pay to save.
Skiplagged’s discounts were so threatening that Orbitz and United sued the then-22-year-old creator of the site. But Skiplagged triumphed in court and has been gaining popularity ever since.
Another new site, Scott’s Cheap Flights, is offering up international flights at huge discounts. The site reports finding a roundtrip flight from New York City to Paris for $260. Normally, that route costs anywhere from $490-$900. On Scott’s Cheap Flights, you’re sent an email with exceptional flight deals as they arise—the site itself doesn’t sell the tickets directly.
If you want to get really fancy, you can book one-way flights on a private jet at extremely discounted rates on Jettly. Since most jets fly their clients one way, you wind up with empty return flights. Jettly lets you fill those empty legs for much less than the average price of a private jet. CEO Justin Crabbe says Jettly’s cheapest flight to date was from New York to Boston for $800:
That is less than the cost of a first class ticket in some cases, and that is strictly because it's an empty leg where the plane is flying empty anyway...$800 for an entire jet? Not bad.
The Cons of Using Booking Sites
Lack of Transparency
A customer can spend a lot of time searching Orbitz, Travelocity, and Hotwire, when really they’re all under the Expedia umbrella. Plus, Consumer Reports found some pricing anomalies. The researchers found a number of instances where they were given different prices for identical travel itineraries, even when searches were performed at the same time from different browsers. The questionable and unpredictable pricing is annoying at best, and costs you time and money at worst.
You Might Lose Your Seat
Getting bumped from a flight or getting to a hotel to find out there’s not enough room is a vacation nightmare. Sadly, your lower-priced ticket gives you a greater chance of experiencing one of these terrible scenarios. Flight attendant Celessa Dietzel told Business Insider that airlines often bump the people who paid the least for their tickets if a flight is overbooked. If you used a third-party booking site, that could be you.
A similar problem can occur with hotels. Though they won’t kick you out of your room, people who book with third-party sites are less likely to get upgrades and more likely to get worse service, according to Forbes. So, you may get a less-than-ideal room simply because you booked through a travel aggregator.
Customer Service Might Cost You
If you need to make a change to your reservation after booking through a place like Expedia, things immediately get complicated. You have to reach the site’s customer service, which may in turn just refer you to the airline or hotel itself. Travel expert and author Monya Williams worked with American Airlines for years, and she says that “most airlines have caught on to the fact that they are doing most of the customer service for these booking agents and are now charging $50 to $100 just help a customer with their seats or any changes.”
Since you’ve added an extra party to your travel reservation, it means there’s a greater chance of mistakes and miscommunications. Williams found that many customers don’t include a phone number with their flight booking when using third-party sites. So, if there’s a change or delay, the airline can’t get in touch with the customer. They arrive at the airport to find their flight has been cancelled. Not a good way to start a vacation.
Sadly, there are also horror stories of customers getting bumped at the last minute, getting a standard room when they paid for a premium stay, or showing up to hotels with paid reservations and no rooms. Priceline has a one-star rating on Consumer Affairs with over 2700 customer complaints. Though the major travel aggregators are doing their best to keep all their customers happy, more than a few are left unsatisfied.
Other Tips And Tricks Of The Online Travel World
Always Check The Airlines
Certain airlines, like Southwest, don’t show up on any travel aggregator sites. According to Keyes, you should always search Southwest to see if they offer a better price or itinerary.
Plus, Southwest offers two free checked bags per customer, a deal that no other airline comes close to beating.
You Can Change Your Flight For Free
Rishi Modi, founder of Canadian travel site Next Departure, gives a little known secret about changing your travel reservation:
Priceline and Expedia allow you to cancel your flights within 24 hours of booking. They'll issue you with a full refund, hassle free!
So, if you made a mistake or suddenly found a better deal, don’t hesitate to contact Expedia to cancel. Even if it’s been slightly more than 24 hours (but less than 48), they may still allow you to change your reservation, according to Keyes. It’s not guaranteed, but if you’re especially nice, Expedia might make an acception.
Using Native Currency Can Save You Dollars
Modi has another great, little known tip:
In some cases, booking in a different currency can lower the price of your flight by $20 to $30. For example, if you're booking a flight to China on Expedia, you can switch the country to China and keep the language [as] English, you'll see the price of the flight lower in local currency than paying in USD.
Google Translate makes this an easy option that often brings about a good amount of savings.
There’s No Perfect Time To Buy
According to the e-book How to Find Cheap Flights by Scott Keyes (of Scott’s Cheap Flights), there’s no magic hour to buy tickets. Though you may hear that Tuesday at 3 p.m. is the best, it really doesn’t matter. He does, however, recommend buying domestic tickets 1-3 months in advance for best rates. If you’re traveling during a busy holiday, Keyes advises booking six months before the date.