It's me back from the dead! Been a long time and still at it - though have not launched anything yet :(
I'm trying to start-up a small travel company, web-based for a niche market. I have realized that trying to sell travel products (flights, hotels, car rentals and packages) directly to the consumer is too competitive for a start-up and costs are too high (technology, resource, marketing...).
However, I am still determined to go ahead with my idea, but not have direct contracts with the travel suppliers, rather be an "agent of the Travel Agency". What am I talking about? Travel Agency affiliate programs.
So my question is, as a business model, are affiliate programs financially viable?
I need some hard facts and figures, so I can put these in my business plan to show potential investors or even myself, if I am going to start this on a shoe-string.
Potential Travel Agency affiliate programs that I could join are Booking.com, expedia.com and other OTA affiliate program.
The margins on flight is negligible, so let's stick to hotels for now. I know booking.com has the following commision structure:
But that doesn't allow me to work out how much I could potentially make, because I don't know how much they make from the hotels.
I suppose, it would be difficult to gain this information - that is: booking.com's contract rates with the hotels, but aren't there standard or ball park figures of how much hotels pay to OTA. Is it 10% for each night/booking as the industry standard?
So if one night rate is £100 -the OTA (say booking.com) would make £10 and I would get anywhere between 25%-40% of booking.com's profit of £10 depending on my volume of sale.
Can someone help me, with figures, even if they are not 100% correct - what I would like is rough estimate for my business plan, just to find out, whether affiliate programs are financially viable. They must be because so many non-transactional sites (non OTA e.g. travelmuse, gogobot, lonelyplanet, kayak and many others do this) do this.
I do have ADR, revPar and other hotel figures for my niche market but these do not allow me to work out my profit since, these are internal hotel rates, of which I don't know how much they distribute to OTAs and further I don't know how much the OTA give to affiliate programs.
Is there anyone else who has affiliate program experience or any related feedback would be greatly appreciated.
Many, many thanks for your responses in advance.
Lost - indeed a small fish in the big travel ocean.
I guess no responses, no problem. However I did find some other related threads here pertaining to my question. I even got some of the information from Kerry which was very useful -thanks once again.
Here are some related topics for anyone searching in the future:
http://www.smallfishbigocean.com/forum/topics/2010148:Topic:1923 (very good topic, though a few years old....didn't come to a conclusion I believe).
It really depends what you sell, how you treat the affiliates and how much they get paid. If thinking of using an affiliate program to increase business sales, Affiliate programs and relationships take a lot of time
Times and Efforts are Required: Affiliate marketing definitely works if you put the time and efforts .
Find Right person: If you can find good affiliates (people who actively promote what you sell) and run a fair affiliate scheme with a decent reward structure then yes, it can be very profitable indeed. Ideally you would need to join an affiliate network which will then marry you with suitable affiliates, but these can be quite expensive
Travel affiliate programs are affiliations with travel companies to promote their services in exchange for commission.
Few top profitable programs you can get involved in to jump start your success in the travel business is listed up with travelerrr.com; you can follow one of them if interested.
I'm and affiliate with booking.com and know that booking.com makes 25% on each booking.
The commision structure is therefore:
Hope this helps, good luck with your business!
PS if you are interested you I am promoting a complete affiliate based travel website setup which you can have up and running in 72 hours for $295 at www.ownatravelbusiness.com
Just an update.
Our starter package is now just $82.45 with our 15% discount Coupon Code at www.ownatravelbusiness.com
From experience it is best to focus on a niche resort and provide detailed local information and a personalized service rather than trying to compete with the large catch all online travel agents.
Like any other business, you must prepare a business plan.
To do that you must define your customer's needs and how you can satisfy those needs.
You must define your customer profile; age group, status, where they live, how often they travel and how big that potential customer base is.
You must estimate how many of those potential customers will visit your website, how many will request information about trips that you offer and how many will book with you.
You need to know how you will market your product.
Once you have estimated the potential customer uptake, you can budget for business costs.
What margin will you make from each customer?
What overheads will you incur in a year.
What will your monthly cash flow look like - will there be months in the year when you may have negative cash flow.
how much money do you need to take out of the business to live on.
What taxes will you have to pay, income tax; VAT; PAYE
What do you need to put aside for unexpected problems.
How will you find more customers who keep coming back because they love the service you provide.
When you have done that homework, you are ready to do some serious business planning. It is a lot to do.
I would be pleased to help you to plan to set up a successful business.
Good luck - Ronnie
Good teaching Ronnie. I find out these are very things to do for start-ups but for entrepreneurs, ha ha, a confusion.