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When looking at the top 50 TMCs (Travel Management Companies) worldwide, who we know are managing the majority of corporate travel, I want to know how many of them use each type of revenue model when booking hotels for their corporate clients. There are two types of revenue models for agents in hotels: Net fares that they get from suppliers/aggregators, which they then mark-up with a fixed fee. The other one is % gross commission, which means they get a fixed % in commission from the price of the booking they closed.
Hi there! Thanks for sending in your question about the revenue models used by the top travel management companies worldwide. Here's the short version: most of the top 16 TMCs use a percent gross commission revenue model. The very biggest TMCs also have some net fare revenue, but the majority of their business is still percent gross commission. Read on for the full picture!
METHODOLOGY
To see which companies to include on the list, I looked around at travel industry publications. Travel Weekly publishes an annual power ranking of TMCs, so I used that as a jumping-off point. Since your note mentioned needing a bit more than 10 companies, I've included all 16 companies on TW's list.
From there, I searched around to find each company's revenue model and compiled that information into my final spreadsheet. For those companies that had public earnings reports, I was able to search inside each document for "commission," "revenue" or "business model."
FINDINGS:
I compiled a spreadsheet of the top 16 TMCs, their size by 2015 revenue and the revenue model they use.
CONCLUSION
The vast majority of the top 16 TMCs use a percent gross commission model for revenue -- 14 of them, in fact. I wasn't able to find a solid source for the revenue model for World Travel, Inc., so I couldn't be sure which one they use. I believe they use a % gross commission model, though couldn't find confirmation of that. Expedia, Priceline, and Travel Leaders Group all seem to use a combination of the commission model and the aggregator/net fare model, and HRG North America prides themselves on not using a commission-based model.
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