How do travel agencies make profits?

Question

How do travel agencies make profits?

Answer 1

I believe that when they broker a sale of a package, they get kickbacks from the parties whose services were sold.

Answer 2

The same way most businesses make profit - They buy a product or service in at a discount price and sell it at a premium.

Travel agents usually belong to a buying group that can purchase airfares, accommodation and car hire in bulk, or have agreements with those providers that allow them a significant discount over what you or I can get them at.

Then they apply a profit margin when they sell to you.

Answer 3

They have special contract to the hotels. They mark up on the contracted rate but not more than the rack rate. Lets say the travel agent contract to the hotel for Double Room PER ROOM PER NIGHT is USD100 but the rack rate or the normal hotel rate if the guest goes and pay directly to the hotel is USD 130.  The travel agency then sell it at more than USD 100 but not exceed the rack rate of USD 130 otherwise its better for the guest to book directly to hotels rather than through travel agent. Lets say the agent sell it at USD 120, the guest pays USD 120 to the travel agent then the travel agent pays the hotel USD 100 a profit of USD 20 that’s per room per night. So if the guest stays 5 nights USD 20x 5 = USD 100 profit. If the guest stays 5 nights for TWO ROOMS it would be USD 20 x 5 x 2 = a profit of USD 200.

Another thing is through commission basis, the same applies they have a special contracts to the hotel but the only difference is the guest pays directly to the hotel and the hotel pays the travel agent as commission. As per example above lets say the contract is USD 100 the agent sells it at USD 120 and book the room for the guest and advise the guest that they can pay directly to the hotel. They guest pay the hotel USD 120 and the hotels pays commission USD 20 to the agent usually upon guest check out.

Answer 4

They have a deal with hotels they have in their brochures...some even own those hotels.

"I get you 100 guests every month for 50$ a night." A room would cost 60$. The publicity and the 'guaranteed' visitors is reason for a hotel to make that deal.

Travel agents then sell for 60$...(or 70$ or 55$)

Same for the plane tickets. Fill a plane and you get mayor discount. That is their profit.

Answer 5

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