How Travel Agencies Make Money on Flights, Hotels and Activities

How do travel agencies make money? The money comes from three places: a commission paid by a supplier, a markup added on top of the price the agency is shown, and a service fee charged for the agency's own work. Most sellers use more than one of the three, and on your own booking website the markup is the one you set and keep.

This guide explains all three, why the room to add a markup is not the same on flights, hotels and activities, and how to pick a number you can say out loud to a customer without flinching. It also shows what a markup looks like on a booking, line by line.

One warning before the numbers start. Every figure in this guide is an illustration with round amounts, chosen because the arithmetic is easy to follow. None of them is a typical result, a forecast, or a statement about what any travel business takes in. Your own prices depend on what you sell, who you sell it to, and what you do for them.

How do travel agencies make money from commission, markup and service fees?

Commission, markup and service fees are three different answers to the same question: who pays the seller, and for what. Commission is paid to the seller by a supplier out of the supplier's own price. A markup is added by the seller on top of the price the seller is shown. A service fee is charged by the seller to the customer for work, separately from the price of the travel.

Commission

Commission is money a supplier pays a seller for bringing a booking. The supplier sets the rate, the seller does not, and the rate can change without the seller having any say. Some suppliers pay commission on some products and nothing on others, and payment often arrives some time after the customer travels.

The practical problem with commission is that it puts someone else in charge of your income. You can sell well for a month and still find the terms have moved underneath you.

Markup

A markup is the amount you add on top of the price you are shown, so the sale pays for your time. You choose it, it is part of the price the customer sees, and it does not depend on a supplier's goodwill. That control is the reason most people who sell travel through their own website think in markup first.

Markup and margin are not the same word. Markup is what you add to the price you are shown. Margin is what is left of the sale after the cost of the booking, which is what you actually keep.

Service fees

A service fee is charged for your work rather than for the travel itself. Sellers who spend hours on research, itineraries or difficult schedules often charge one, and the fee stays earned whether or not the customer books. A service fee is an agreement between you and your customer, so write down what it covers before you charge it.

Most travel sellers mix the three. A booking can carry a markup you set, a commission a supplier pays later, and a fee you charged for planning, all at the same time.

Why do margins differ between flights, hotels and activities?

Margins differ because the three products are compared differently by customers and priced differently at the source. A fare on a popular route is easy for a customer to check in a minute. A room rate with a particular bed type and cancellation policy is harder to line up against anything else, and a two hour activity ticket is rarely compared at all.

Travel agent markup on flights is usually the tightest of the three. Airfares are public, customers check them, and the difference between two prices for the same flight number is obvious. Add to that the mechanics of selling air: fares are held for a limited time (OTA Builder shows a live countdown of how long a fare is held), and fare rules decide what happens if the customer changes plans. The work is real, but so is the customer's ability to compare.

Hotels sit differently. A hotel markup percentage has more room to breathe because two rooms are rarely the same thing: room size, bed type, meals, deposits and the check in window all change what the customer is buying. A customer comparing prices has to compare policies too, which is slower and less exact. That is not a license to add whatever you like. It means the pressure to match a number to the cent is weaker.

Activities are the smallest tickets, so a percentage of a small number is a small number. A ticket type by age on a half day tour will never pay like a long haul booking. What activities do well is fill the gaps around a trip the customer has already decided on, which is why they suit sellers who sell tours, activities and attraction tickets online next to the flight and the hotel.

None of this is a table of standard rates, because no honest one exists. Treat any article that tells you agencies "typically" take a fixed percentage as a guess in a suit.

How do you choose a markup you can defend?

Choose a markup by starting from the customer, not from a spreadsheet. The test is simple: if a customer asked why your price is what it is, could you answer in one sentence without changing the subject? A markup that survives that question is one you can keep using.

Here is a way to work through it.

1. Look at the customer's real alternative. Your customer can search elsewhere. Ask what your price has to be for the booking to still make sense to someone who likes dealing with you.
2. Decide whether you think in cash or in percent. A flat amount treats a $200 booking and a $2,000 booking the same. A percentage scales with the price, which is kinder on small bookings and heavier on large ones.
3. Match the number to the work. A same day rebooking after a schedule change is not the same job as a one click activity ticket, and your pricing can say so.
4. Look at the whole basket, not one line. If a customer books a flight, three nights and two activities on your site, the total is what they feel.
5. Write the sentence. "My price includes help before and after you travel" is a sentence. "Because that is what I charge" is not.
6. Put a review date in your calendar. Prices you set once and never look at again drift out of shape quietly.

If you are still deciding whether to sell on your own site at all, the trade off between running a booking site and pointing people elsewhere is covered in travel affiliate links vs your own booking website. The difference matters here, because an affiliate link hands the pricing decision to someone else.

What does a markup look like on a real booking?

A markup looks like a small addition to a familiar price. The table below shows three illustrations with round figures, so you can see how the same idea behaves on a flight, a hotel and an activity.

These figures are made up for the arithmetic. They are not rates, recommendations or results.

Booking	Price shown to you	Markup you add	Customer pays	Markup as percent of the price shown
Return flight for one passenger	$400	$30	$430	7.5 percent
Hotel, 3 nights	$300	$36	$336	12 percent
Activity ticket for two	$60	$9	$69	15 percent

Read the last column carefully. The flight carries the largest cash amount and the smallest percentage. The activity carries the largest percentage and the smallest cash amount. Both things can be true at once, which is why one rule applied everywhere tends to feel wrong somewhere.

Illustration only, not a typical result.

How to price travel packages is the same exercise repeated, with one extra step: look at the total before you send it. A customer who books a flight, a hotel and an activity in one sitting sees one number at the end, and that number is where the decision happens.

Illustrative figures again, with round numbers.

A customer wants a return flight, four nights in a hotel and one day tour. You are shown $500 for the flight, $400 for the hotel and $80 for the tour, which is $980 in total.

• If you add 8 percent to every line, the customer pays $540, $432 and $86.40, for a total of $1,058.40.
• If you add a flat $30 per line instead, the customer pays $530, $430 and $110, for a total of $1,070.
• If you add 8 percent to the flight and the hotel but a flat $20 to the tour, the customer pays $540, $432 and $100, for a total of $1,072.

The three totals are close. What differs is how each line reads on its own, and the tour line is the one that stands out in the second version.

Illustration only, not a typical result.

Prices that end in awkward decimals are worth rounding to something calm. A total of $1,058.40 is fine on an invoice and clumsy in a quote.

Which pricing mistakes lose customers?

The pricing mistakes that lose customers are almost never about the size of the number. They are about surprise, inconsistency and silence. A customer who sees the real price early and understands it rarely walks away over a small amount.

• Revealing the true total at the last step. A price that grows between the search results and the payment page reads as a trick, even when it is an honest rounding.
• Quoting one price by message and showing another on the site. If you send prices on Instagram or a chat app, quote what your site will actually charge.
• Charging a flat amount that makes small bookings look silly. A $30 addition to a $60 activity ticket is half the ticket again, and the customer can see it.
• Pricing against a comparison you cannot win. Competing on price alone against sites with different economics is a losing habit. Compete on the answer you give at nine in the evening when a flight gets moved.
• Ignoring the fare's rules before you promise anything. Refund and change rules are shown in results where the source provides them, so read them before you tell a customer what happens if plans change. Refunds and changes are where a cheerful promise turns into an expensive afternoon.
• Changing your prices every week. Customers who come back notice, and inconsistency reads as making it up.
• Forgetting the work that follows the sale. The booking is the start of your obligation, not the end of it, and your pricing should account for the time you will spend afterwards.

How do you show prices honestly?

Show prices honestly by putting one clear total in front of the customer early and keeping it there. Your markup is part of the price, in the same way a shop's price includes what the shop adds, and you are not required to itemize your own work for it to be fair. What is not fair is a number that moves after the customer has decided.

Say what the customer is buying. On a hotel, that means the room size, the bed type, the photos and the full policies (check in window, children, pets, meals, deposits). On a flight, it means the fare's refund and change rules where the source provides them. On an activity, it means the ticket type by age. Customers forgive a price they understand far more readily than a cheap one they do not.

Skip the theatre. Struck through prices, invented scarcity and pressure countdowns cost you trust that takes months to rebuild. A real hold timer is different: a live countdown showing how long a fare is held is a fact about the fare, not a sales tactic, and a fare hold running out is a genuine deadline.

Be clear about what the customer receives. Tickets sold through an OTA Builder site are ordinary airline e-tickets, and the PNR is in the passenger's own name, so the passenger can check the booking on the airline's own website. Hotel bookings produce a hotel voucher by email with your site's name on it. Customers who can verify their own booking ask fewer anxious questions.

How do you set your markup on OTA Builder

You set your markup in your OTA Builder account, where markup can be set for flights, hotels and activities. OTA Builder creates a travel booking website under your own brand, name and domain, selling flights from 1,000+ airlines, 5,000,000+ hotels and properties, and 2,500+ activities. The site owner adds their own markup on top of the prices shown and keeps it.

The rest of the mechanics stay out of your way. Your customers search and book on your website, pay online, and receive tickets and vouchers by email. You see your markup settings and your bookings in your account. No coding and no technical team is needed, and you can change your brand name and colors at any time.

Building your website, running it and selling on it are free. The optional bundle is $99 per year. Once you sign up, your site is live within one working day.

If you are setting up for the first time, start with how to start an online travel agency for free, then how to create a flight booking website without coding and how to add hotel booking to your travel website for the two products where pricing decisions bite hardest. If you are wondering what accreditation has to do with any of this, read whether you need IATA accreditation or a license to sell flights online. The full feature list lives on the features page, and the plans are on the pricing page. When you are ready to set your first markup, create your site and price your first booking.