The UNWTO defines tourism as “a social, cultural, and economic phenomenon that entails the movement of people to countries or places outside their usual environment for personal or business/professional purposes.” In simple terms, anyone who leaves their hometown becomes a tourist, whether for personal or professional reasons.

International tourism only started to take off around the 1960s and 1970s and quickly grew, with 1,8 billion international tourism arrivals expected in 2030. While the growth in international tourism is often associated with negative impacts on environmental, social, and economic sustainability, it can, in fact, be a powerful force in achieving the United Nations’ Sustainable Development Goals (SDGs)

Back in the day, travellers went to a travel agency that would arrange someone's travel plans for a fixed markup or commission. However, as the number of tourists grew and the world digitalised, Online Travel Agencies (OTAs) became the standard.

OTAs are internet-based marketplaces where travellers can research and book travel products such as hotels, flights, cars, cruises, and activities. The leading OTAs are Booking.com, Expedia, Airbnb, Trip.com, and TripAdvisor. In addition to their main brands, these leading OTAs often also operate other smaller OTA brands. Booking Holdings, the parent company of Booking.com, for example, also owns flight meta-search engine Kayak, restaurant booking platform OpenTable, Rentalcars.com, and travel discounter Priceline.

So, how do these travel giants make their money?

There are four distinct models for OTAs to earn money, and OTAs might combine various models:

Arregator/Agency Model → OTAs using this model have direct partnerships with inventory providers such as airlines, car rental companies, and accommodations. They facilitate the booking and payment process between travelers and providers and take a commission or markup.
Merchant Model → OTAs using a merchant model are less common and often sell package trips rather than individual components. In this model, inventory is often pre-purchased from inventory providers in bulk, resulting in discounts or directly via Global Distribution Systems (GDS). These products are then sold to travellers according to the OTA's own pricing system.
Advertising Model → This one is very straightforward, and you might not even consider a real OTA. In an advertising model, travel products are promoted but not directly sold. The OTA earns money from promoting these products. The exact payment structure might vary. Some earn based on clicks or impressions, while others earn through affiliate commissions.
Metaseach Model → Metasearch engines, such as Google Flights, Skyscanner, or Kayak, search multiple search engines for and aggregate all results for travelers to choose from. Metasearch engines can earn something from these referrals, but in most cases, their real product is data, which they can sell to, for example, airlines who will use it to optimise their route networks.

In most cases, OTAs are in a two-sided business, requiring the industry to gain inventory (B2B) and consumers to sell the inventory (B2C). This makes it sometimes difficult to answer the question of who the real customer is. Ultimately, consumer demand is required to have industry demand, and vice versa.

The Future: Artificial Intelligence and Social Commerce

As with many things, artificial intelligence is also said to change the game for OTAs. Only time will tell how this will exactly look. Large Language Models (LLMs) such as ChatGPT or Gemini can browse the internet efficiently and become our personal AI Travel Agent, boosting direct bookings rather than bookings via OTAs, which poses a threat to the OTA business model. Another possibility is that AI turns travel inspiration on social media into bookable travel itineraries, as social media platforms are becoming more relevant in the travel planning process—something Expedia has been actively pursuing recently in partnership with Beautiful Destination.