How Does Expedia Make Money?

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The basic Expedia profit model works by purchasing travel services in bulk and reselling them at a cost that is somewhat lower than the consumer would be able to find on their own. Expedia works as a middleman between airlines, car rental services, and hotels and consumers looking for travel services.

According to Market Watch, Expedia is able to secure heavily discounted services by purchasing bulk quantities from service distributors. This is a fairly common business model, but Expedia turns an even greater profit due to the unusually deep discounts in the service industry. Forbes explains that hotel bookings are the backbone of Expedia's business plan, a service that can be secured at an even lower cost due to the supply and demand system of the hospitality industry. Hotels generally have a certain number of vacancies, and unless those rooms are rented out, the hotel takes a loss on each one. Forbes continues to explain how companies like Expedia are then able to secure the rooms at an extremely low cost, creating a situation in which all parties win. The hotel turns a profit rather than facing a loss, the consumer secures a hotel room at well below cost, and Expedia turns a significant profit.