In the online travel agency (OTA) business, Expedia offers the cheapest price for airline tickets or hotel rooms.
This article discusses how Expedia can sell its tickets and packages at such a steep discount.
Expedia Buys Bulk Tickets
Expedia is a massive business. Each year they sell billions of worth of airline tickets and hotel reservations. Thus they have bargaining power over airlines, hotels, cruise ships, and car rental companies.
Expedia buys bulk tickets from Airlines and other companies at a discount. The discount depends on airlines, routes, locations, and time of the year.
Expedia buys those tickets and rooms at wholesale prices, then sells them at retail prices to customers.
To stay competitive, they price their ticket lower than airlines or competitors.
They have been in the business since the 1990s. Therefore, they have a lot of data. Consequently, they can predict the airline, hotels, or travel market well and use it to their advantage.
Competition
Expedia is a conglomerate with more than 20 businesses. VRBO, Orbitz, Travelocity, Wotif, Trivago, Hotels.com, Hotwire.com, and CarRentals.com are a few companies that Expedia owns.
Their main competition is Bookings Holdings, which has more than 10 businesses. Booking.com, OpenTable, RentalCars.com, Priceline, Agoda, Kayak, and Cheapflights are a few companies Bookings Holdings own.
These two companies are in fierce competition.
Expedia and Bookings check each other’s websites to provide the lowest ticket price. Expedia is a bigger company with more resources, so they can undercut bookings to offer cheap tickets.
Lower Commission
Expedia and other booking agencies have a commission on top of the actual price. Sometimes the commission can be up to 30%.
In order to get business, Expedia takes less commission than its competitors and sells its airlines, hotels, and other tickets at a low price.
Sales Trick – Anchoring
Nowadays, whatever we do online is being tracked across websites. If we search for an airline or a hotel room on one website, that information will be available to others within seconds.
Every website and the mobile app tracks this data.
The modern tracking algorithm is very sophisticated. It can decipher our intention accurately.
If we are searching for airline tickets and moving around from one website to another, Expedia can see that. It also has history on which websites we previously visited, what were our search terms, what price those websites provided us, and did we buy those tickets or not.
Using this information, Expedia tries to attract potential customers by giving them instant sales which other customers would not see.
Expedia uses dynamic pricing. It means the price of tickets on their website depends on customers, their sex, occupation, location, and financial situation.
Using the algorithm, they can predict at what price we will be enticed to buy the ticket, and they will show the price to us.
It’s a marketing trick that Expedia uses to get customers. These offers do vary depending on customers. Thus, even though you may get a sweet deal, others will not get the same price.
It’s similar to the Google search algorithm. The search results vary depending on the user. Similarly, at Expedia, the price may vary depending on the customer.
Must Sell Inventory
Expedia makes a wholesale purchase of rooms and tickets from hotels, cruises, and airlines. Due to bulk pricing, they get a steep discount.
However, as Expedia already bought those tickets and hotel rooms, they are on the hook to sell their inventory at any cost. At Expedia, it’s better to sell cheaper than to sell nothing.
It’s why most of the time, at the last moment, you will see the discount at airlines and hotels.
Expedia Provides After-sales Service
In the airline and travel agency business, those selling the tickets at retail give all the after-sales service.
If the airline sells the ticket, they will give all the service; if Expedia sells the ticket, they will provide it.
For most airlines, it’s better for them if the after-sales service is given by a third-party travel agency such as Expedia. It saves them a lot of money.
Therefore, these airlines do long-term deals that allow Expedia to sell airline and other tickets at a low price compared to the airlines’ website.
The airlines keep the price on their website intentionally high. So, people would buy those tickets from Expedia. Thus, you get all the customer service from Expedia once you buy a ticket from them. It saves a lot of resources and money from airlines. Because of these deals, Expedia can sell cheap tickets.
However, there are exceptions, such as RyanAir.
RyanAir doesn’t allow any company to sell their tickets cheaper than they do on their website. You can purchase the airline ticket from Expedia, but in this case, you will save money if you directly buy the ticket from RyanAir.
Economy of Scale
Expedia has been in the travel business for more than two decades. Over time they have created a system to sell tickets and manage bookings.
The underlying management system costs the same whether Expedia sells 100 or 1 million tickets. Therefore, as more and more businesses they can capture, their operating costs become even lower.
Due to this economy of scale, they can leverage it to lower their ticket price than their competitor.
There are Restrictions
Expedia sells airline tickets and hotel rooms at a lower price doesn’t mean it is always better.
There could be a lot of restrictions with those tickets, such as no cancellations, no refund, or no change. Always read the fine print before you purchase airline tickets with Expedia.
For hotel rooms, make sure no amenities are missing.
Sometimes Expedia will sell you a room that doesn’t have a microwave oven, TV, fridge, or no breakfast. It happened to us a few times. We thought we were getting a good deal, only to find out amenities were missing in the room.
Is Expedia Always Cheaper?
Expedia, however, isn’t always cheaper. There are cases where you will get more affordable flights and hotel room prices directly from the airlines or hotel’s website.
Always check and compare prices between Expedia, Booking.com, and Google flights. Sometimes, Booking.com or other third-party websites have better deals than Expedia.
Bottom Line
Expedia is an online travel agency. It’s no different than the brick-and-mortar travel agency in cities.
The only difference is that they are doing business online, and they were the first company to introduce such a feature to people in the 1990s after the dot com boom.
Therefore, always do your due diligence before purchasing a ticket from Expedia.
Expedia provides cheaper flights. However, after each booking, always call all the parties in your booking – airlines, hotels, or cruise ships to make sure that they have your reservation.
Sometimes, they won’t get your booking in their system due to system errors.
If you have 2 or more flights, call them or check online to make sure both of them got your reservation.