To find prices and the availability of vacation offers, travelers no longer meet travel agents face to face. They don’t even search for options across numerous websites. Instead, 70% of all travelers browse an online travel agency website that aggregates the best deals on flights, hotels, and tours in one place. Through aggregators like Expedia, travelers from around the globe make 148.3 million bookings yearly.
If you own an offline travel business, these statistics should encourage you to reshape your business processes. The first step is to figure out how to start an online travel agency.
Source: App Store
Why is Expedia not like other online travel agencies (OTAs)?
Shifting from offline to online requires a complete transformation of business processes. Unfortunately, some businesses see their online presence only as extra space for advertising. Expedia does more than advertising by providing:
- Useful travel content to generate leads: travel guides, real reviews and ratings, exclusive tours, and more
- An online flight reservation system where users can search for, compare, and book flights across multiple airlines and check routes and fares
- An online accommodation reservation system with hotel descriptions and information about costs
- Extra tools for car rentals, insurance, and special offers for those traveling alone
Usefulness, ease of search, and trustworthiness are the factors that best characterize Expedia and make it one of the top online travel agencies (OTAs). The aggregator’s popularity is demonstrated in the graph below.
Steelkiwi’s note: The start of the pandemic in 2019 decreased Expedia Group’s gross bookings from almost $108 billion in 2019 to $36.8 billion in 2020.
Online travel agencies as the best investment of 2021
The rise of the first travel agency, Cox & Kings, in 1758, marked the beginning of a new era of travel in which travelers could shift the burden of preparations to travel agents.
The 1800s and the first quarter of the twentieth century were fertile ground for travel agency development. The industry suffered greatly during World War II but rose again in the 1950s with the appearance of Helloworld Travel in Australia and Henderson Travel Service in the USA.
With the founding of the Hotel Reservation Network (the predecessor of Hotels.com), the industry reached a new digital level. Today, the industry is represented by heavy online hitters including Expedia, Hotels.com, Airbnb, and HotelTonight.
By 2019, digital agencies shared the market with offline agencies. But with the outbreak of the global pandemic, offline businesses were forced to undertake speedy online travel agency website development. Moving online allows travel businesses to reach the maximum number of consumers who are researching, planning, and booking their next trip.
In 2020, the global economic slowdown decreased the profits of the online travel sector. But during the next three years, the sector is expected to grow to $820 billion.
Now that the world is slowly recovering and some borders are reopening, travel is expected to look different than it did pre-pandemic. This is in part due to physical distance and safety measures and in part due to the rise of websites like Expedia.
In times of crisis, most investments carry greater than average risk. A diversified investment strategy can protect investors’ money against risks. Investing in an online travel agency is one possible diversification strategy for a travel agency, since OTAs advertise or directly sell airline tickets, cruises, tours, vacation packages, hotel bookings, and car reservations. Working across several industries, OTAs are sheltered from isolated risk events.
The Expedia travel app’s business model
Online travel agencies use three monetization models: the commission model, merchant model, and advertising model.
- Commission model — OTAs act as mediators between industry operators and customers. An agency charges industry operators a commission on every reservation customers make.
- Merchant model — OTAs buy up available hotel rooms at wholesale prices. They then market these purchased rooms at their agency’s rate and allow travelers to complete all reservations through their web or mobile application.
- Advertising model — OTAs redirect travelers to hotel, airline, or car rental websites where they can book the best deals. For every referral, OTAs get a few cents.
How does Expedia make money, and what models does this aggregator use? Expedia successfully combines two business models, with the merchant model accounting for around 70% of total revenue. Look at the example below.
Expedia contacts a hotel on one of the Caribbean islands to buy up a block of their rooms (from 50 to 100). Then, Expedia buys a bulk of plane tickets going to the same island. The aggregator advertises a ten-night all-inclusive tour to this Caribbean island at a cost that is lower than through other similar websites. Travelers grab the opportunity to have a ten-day vacation at a lower price and make reservations.
Since buying in bulk is cheaper, Expedia gets rooms and plane tickets at discount prices and sells them as a part of a tour at higher rates.
A commission fee is the second largest driver of revenue for Expedia, accounting for 20% to 30% of total revenue.
The hotel contacts Expedia as a mediator to reach more customers. Expedia lists the hotel’s room on its platform. When a hotel room is booked through the platform, Expedia collects its fee for customer service and marketing.
Below, you can check out Expedia’s business model canvas with details about partners and key activities.
There are extra fees charged by service providers that advertise services through Expedia. The fees are neither hidden nor put directly in front of customers:
- Cancelation fees (if a reservation is canceled more than 24 hours after it’s placed)
- Wi-Fi fees
- Overweight baggage fees
- Meal fees
- Off-resort travel fees
- Extra charges for spas and pools
- Parking fees
These extra charges are essentially hidden hotel and airline fees. Expedia always puts hotels and airlines that charge hidden fees lower on the platform’s search results.
Starting an online travel agency like Expedia
Developing an online travel agency system requires attention to several important aspects.
Before aggregators like Expedia and Booking.com entered the market, travelers had to visit as many as seven to ten websites or more to arrange their trips. Aggregators reshaped the tourism and travel industry. In 2021, users’ booking and reservation experiences will be simplified, since they can use all-in-one platforms to cover all their travel needs.
Large travel marketplaces are very much open to sharing data. Connecting multiple data streams between various applications, APIs have become control panels used by developers to link software components without intruding on the source code.
When developing an online travel agency website system, you need to integrate many APIs so your users can reserve hotel rooms, book flights, and rent cars straight from your app.
Websites like Expedia need APIs that focus on five basic types of reservations: flights, hotel rooms and other forms of accommodation; cruises and ferries; car rentals; and railways. Global distribution systems, or GDSs, are the number one source for OTAs to collect travel data from multiple industry operators. GDSs allow online travel agencies to forgo direct connections with hotels, airlines, railway stations, and tour providers in order to obtain data.
GDSs provide agencies with APIs that let travelers place online reservations through a single aggregator instead of using many apps.
The main global distribution systems are Amadeus, Sabre, and Travelport. Look at the number of airlines, hotels, and car rentals they can connect your online travel agency to:
Steelkiwi’s tip: GDSs are used to connect OTAs to general data on all modes of transport and accomodation. Small online travel agencies offering one or two types of services (car rentals, hotel reservations) should concentrate on more dedicated systems.
- For flight reservations: Innovata flight API or OAG for flight schedules, flight statuses, and delays
- For hotel reservations: Hotelbeds, Hotel Content API, JackTravel, DOTW, HotelsPro, Travco
- For content and property mapping: GIATA, Leonardo APIs, Mapping.Works
- For car rentals: Rentalcars.com, CarTrawler
- For business travel management: Concur, Tripit
- For reviews and ratings: TripAdvisor Content API
With Expedia, online booking becomes personal thanks to the tools and features the aggregator offers. This is how Expedia looked back in 1996:
And this is how it looks twenty-five years later, in 2021.
The evolution is obvious. Back in 1996, the aggregator-to-be offered only a few features, while today the feature set is wide enough to make it easy to plan any trip.
The Expedia app asks users to enter a city and how long they plan to stay. Within seconds, it shares a list of accomodation options that can be filtered by hotel, breakfast or parking included, and other characteristics. The list can also be sorted by recommended, price, deals, star or guest ratings, and distance from downtown. Additionally, users can specify the number of adult and younger travelers.
After clicking on an accomodation option in the list, users are redirected to the hotel’s page, where they can check out rooms, locations, amenities, hotel policies, reviews, and real photos. They also can explore the area near the hotel and make a reservation.
After specifying departure and arrival points and travel dates, users get access to data on available flights. They can filter options by flexible change policies, airlines, stops, departure and arrival times, and airports.
After clicking on an option, a user sees a right-hand sidebar with detailed flight information and can continue to book the flight.
To rent a car, a user needs to choose the pick-up and drop-off locations, dates, and times and Expedia will find available cars.
Users can filter cars by type, capacity, daily price, payment options, and rental car company, or they can sort by customer ratings and distance. From this page, users can proceed to make a reservation.
Expedia offers travelers multiple holiday vacation packages: flight and hotel, flight and car, hotel and car, or all three. The web app is packed with numerous filters to help users find what they want and can afford. For example, hotels can be sorted by price, property class, distance from downtown, guest ratings, and discounts.
5. Things to do
Alongside choosing a hotel and renting a car, Expedia users can learn about what to do while traveling. It’s enough to specify a city and dates to let the platform list the top ten things to do, share sightseeing options, find museum tickets, and offer sunset cruises. Everything can be filtered according to travelers’ preferences.
After selecting a cruise destination and choosing dates, users are redirected to a page with all cruises available. After filtering by cruise line and length, departure port, and cabin experience, travelers can book a cruise online.
In addition to the features above, Expedia offers the following:
- Personal profiles — Through personal profiles, travelers can access their lists of favorites and user feedback.
- Property listings — To target more guests, hoteliers can list their properties on Expedia.
- Languages — For users’ convenience, travelers can specify the language for trip information.
- Support — Users can get in touch with Expedia’s virtual agent for a real-time chat.
What’s more, through its main page, Expedia helps travelers find their next destination through useful blog posts.
Take control of Expedia-like website development today!
It’s time to move from asking about how to create a website like Expedia to the actual development process. By now, you know why developing a booking application is a good investment, what features an aggregator should incorporate, and what APIs you need to integrate. Your next step is choosing a travel website development company with experience and expertise.
Get in touch with our sales team representatives. They will share our company’s experience and expertise, and help you evaluate our team’s hard and soft skills — everything that will help you see that we are the right fit for developing your Expedia-like online travel agency.
This article was originally published on Steelkiwi.com