How the Travel Agency & Tour Operator Industries Work

To illustrate the industry dynamics, we profile three major global players: Expedia Group, Booking Holdings, and TUI Group. These companies represent different models (OTA conglomerate vs OTA pure-play vs integrated tour operator) and each holds a significant market position.

Expedia Group

Revenue Model & Brands: Expedia Group is a U.S.-based OTA conglomerate operating a portfolio of brands – Expedia.com, Hotels.com, Orbitz, Travelocity, Vrbo (home rentals), Hotwire, Cheaptickets, CarRentals.com, and more, plus the B2B arm Expedia Partner Solutions. Expedia’s model historically blends merchant and agency bookings. In the merchant model, Expedia negotiates net rates (for hotels, etc.), collects customer payment, and then pays the supplier, earning the margin – this is common for hotels and packages. In the agency model, Expedia earns a commission but the customer pays the supplier (used in some hotel cases and most airline bookings). Expedia also earns advertising revenue via Trivago (which is majority-owned by Expedia) and other media. Notably, Expedia’s revenue streams are dominated by accommodation bookings – lodging made up about 75% of Expedia’s revenue in 2021​. Air travel is a small single-digit percent (in 2022, air was ~3%​). The remainder comes from car rentals, travel insurance, fees, and advertising​. This mix shows Expedia’s heavy reliance on hotel commissions.

Customer Base & Regions: Expedia has a global footprint but is especially strong in North America and Europe. Brands like Expedia.com and Hotels.com are well-known in the U.S., Canada, UK, etc., while it leverages regional brands (e.g., Agoda is a Booking Holdings brand, but Expedia has partnerships in Asia and a stake in Traveloka). It serves primarily leisure travelers and small businesses/DIY business travelers. Expedia sold its corporate travel arm (Egencia) in 2021​, but continues to power some corporate booking tools via its B2B API. The company reports serving tens of millions of travelers, and its platforms list over 3 million lodging properties including hotels and alternative accommodations. Expedia’s customer strategy has recently emphasized consolidating loyalty across brands – its One Key loyalty program unites Expedia, Hotels.com, and Vrbo, aiming to encourage cross-brand usage and repeat direct bookings.

Strategic Differentiators: Expedia’s key differentiator is its broad product breadth and technology stack. It offers “one-stop-shop” capability – a customer can book everything from a flight to a rental home to a rental car on Expedia platforms. The Group has invested heavily in tech, including AI for customer service, and is building a new platform strategy (Expedia Group Open World) to unify its infrastructure and also offer services to partners. Its B2B segment (Expedia Partner Solutions) is a notable differentiator – Expedia powers travel bookings for numerous third-party sites (e.g., airline package add-ons, credit card travel portals) using its API, which adds revenue streams. Financially, Expedia recovered from pandemic losses and hit $12.84 billion in revenue in 2023​ (slightly above 2019 levels), with gross bookings (total transaction volume) over $104 billion​. Net income for 2023 was about $1.2 billion​, indicating a net margin around 9%. Expedia’s focus in recent years has been on improving profitability (trimming unprofitable ventures, e.g. selling Egencia, and optimizing marketing spend) and modernizing its tech to be more nimble. The company’s strategy for growth includes deeper personalization, app engagement (its app usage is rising), and leveraging Traveler Preference data to improve conversion. It also is differentiating through package offerings (where it traditionally has strength) and the integration of Vrbo inventory to meet the demand for vacation rentals.

Financial Performance: Expedia Group is publicly traded (NASDAQ: EXPE). After a pandemic hit in 2020 (revenues fell sharply), it rebounded: 2022 revenue was $11.7B and 2023 was $12.8B​, and 2024 reached a record ~$13.7B​ according to Statista. Operating income in 2023 was $1.09B​, reflecting an operating margin of ~8.5%. These figures are lower in margin than Booking Holdings, highlighting the more cost-intensive nature of Expedia’s operations (partly due to more merchant model which carries revenue but also cost of revenue, and its marketing spend). Still, Expedia generates healthy cash flow and has been returning value through share repurchases and recently reinstated a dividend​. In summary, Expedia is a top-tier OTA group balancing multiple brands and revenue streams, with a strategy tuned to broad coverage of travel needs and B2B partnerships.

Booking Holdings

Revenue Model & Portfolio: Booking Holdings (NASDAQ: BKNG), based in the U.S., is the world’s largest OTA group by gross bookings. Its flagship brand is Booking.com, which started in Europe and is the global leader in accommodation booking. Other major brands under Booking Holdings include Priceline (OTA serving primarily North America, known for Name-Your-Own-Price originally), Agoda (Asia-focused OTA), Rentalcars.com, Kayak (metasearch for flights/hotels), and OpenTable (restaurant reservations). Booking’s revenue model is predominantly agency commission – historically, Booking.com let customers pay the hotel at checkout and then collected a commission from the hotel (agency model). This allowed rapid expansion with an inventory of hotels (as hotels prefer not having to give inventory at wholesale rates). Over time, Booking introduced more merchant/prepaid model options (customers pay via Booking and Booking then pays the hotel) especially for its Agoda brand and for markets like the US. In 2024, Booking’s revenues were derived about 60% from merchant bookings and 36% agency, with ~4% from advertising/other​ (indicative split based on recent filings). The vast majority of Booking’s revenue comes from accommodations – it reported 1.049 billion room nights booked in 2023​, an astounding volume. Booking is less diversified in product mix than Expedia – it does offer rental cars and airline tickets (Priceline and Agoda sell flights, and Booking.com has been building flight offerings via its partnership with eTraveli), but hotels remain the core driver. Advertising/other revenue (from Kayak, OpenTable, etc.) is relatively small (~$1+ billion).

Customer Base & Reach: Booking.com is truly global, with a particularly strong presence in Europe (where it originated in the Netherlands) and a growing footprint in the U.S. and Asia. It serves primarily leisure travelers and independent business travelers. Booking has a very broad customer base, from budget travelers booking hostels to luxury travelers booking 5-star resorts (the platform carries a wide range of property types). It is known for its localized approach – over 40 languages, strong presence in markets via local offices to sign hotel partners. Agoda gives Booking Holdings a strong brand in Southeast Asia, and Priceline remains a known brand in the U.S. (though the Booking.com brand has been aggressively marketed in the U.S. too in recent years). Booking’s customers benefit from the Genius loyalty program, which offers Level 1, 2, etc. discounts at participating hotels – this has driven many repeat customers to stick with Booking.com for savings.

Strategic Differentiators: Booking Holdings’ key differentiator is its focus on accommodations and a very high-margin business model. By being the go-to platform for lodging, it achieves scale and inventory breadth unparalleled by others. It has more direct relationships with hotels (including many small independent hotels) than perhaps any competitor, making it hard to replicate. Strategically, Booking emphasizes the “Connected Trip” vision – expanding beyond hotels to cover flights, attractions, dining (OpenTable), and ground transport, all linked in one user experience. It made a large attempt to acquire eTraveli (European flight OTA) to bolster its flight capabilities​, though that deal faced regulatory hurdles. Nonetheless, adding flights (even at low margin) is strategic to keep customers on their platform for all trip needs. Another differentiator: Booking has historically relied less on paid search than Expedia, thanks in part to its dominance in Europe and strong brand recall – this gave it superior margins. It is also innovative in payments: establishing its own fintech unit to handle transactions (offering options like Pay by Bank, installment pay, etc., to cater to global users). Additionally, Booking’s metasearch (Kayak) and restaurant booking (OpenTable) allow cross-pollination of travel inspiration and ancillary services.

Financial Performance: Booking Holdings is a financial powerhouse. In 2023, it generated $17 billion in revenue (2022 was about $11 billion, 2023 jumped significantly as travel rebounded). By 2024, revenue hit $23.7 billion​, with a net income of $5.8 billion​, demonstrating net margins around 25%. Its gross bookings (total value of travel booked) in 2024 were about $166 billion​, making it the largest in the world (for comparison, that’s larger than the GDP of some countries). Booking’s asset-light model and strong brand have resulted in high returns on invested capital. It has also been returning cash to shareholders via stock buybacks over the years. The company’s stock has performed exceedingly well long-term, reflecting investor belief in its dominance. Strategically, Booking is using its cash and scale to invest in new areas: for example, ramping up its experiences segment (with a partnership with TUI’s Musement for tours), and building a proprietary travel advertising business to monetize the traffic on its sites with travel-related ads. It’s also worth noting Booking Holdings has virtually no debt and significant liquidity, giving it flexibility for acquisitions or weathering downturns. In summary, Booking Holdings stands out for its commission-driven, high-margin lodging business, global span, and vision to encapsulate the traveler’s entire journey on its platform.

TUI Group

Business Model & Services: TUI Group (Touristik Union International) is a Germany and UK-listed company and one of the world’s largest integrated tour operators. TUI’s model is markedly different from the OTAs above: it is vertically integrated, owning and operating significant travel assets. Its lines of business include Charter Airlines (operating ~130 aircraft across several European countries under TUI fly and TUI Airways​), Tour Operations/Travel Agencies (selling package holidays under the TUI brand primarily in Europe), Hotels and Resorts (it owns or manages over 300 hotels​, often under TUI or RIU brands), and Cruises (operating cruise ships via TUI Cruises, Marella Cruises, etc. with a fleet of 16 ships​). TUI packages typically bundle TUI-owned or contracted flights with TUI-owned or partner hotels in destinations (beach destinations in Spain, Turkey, Caribbean, etc., as well as tours). A customer might walk into a TUI travel agency or go to a TUI website/app and book a one- or two-week all-inclusive vacation; TUI then flies them on a TUI plane, they stay at a TUI resort, and perhaps go on excursions run by TUI’s destination services. This end-to-end service is a hallmark of classic European tour operators. TUI’s revenue therefore comes from holiday package sales, which are essentially the sum of all those components. Unlike an OTA that shows you other companies’ products, TUI often is selling its own products (or at least inventory it has leased/chartered). It still will sell some third-party hotels or flights as needed to complete offerings, but a large portion is integrated.

Customer Base & Geography: TUI’s primary customers are leisure travelers seeking complete holiday packages. Its core markets are Germany, UK, and Europe at large – it is very well-known in those markets, with a legacy of trust (people booking with TUI know they’re getting a packaged deal and travel rep support). It caters a lot to family and couple vacationers on seasonal holiday schedules. Destinations are typically sun & sand or tour circuits – e.g. Mediterranean beach resorts in summer, Canary Islands in winter, guided tours in Asia/Africa, etc. TUI also has a significant cruise customer base in UK/Germany. It does relatively little in the U.S. or Asia outbound markets; it’s more focused on European outbound travel and some inbound via its destination services. The customer demographic often skews to middle and upper-middle income travelers who prefer a hassle-free package (flights, transfers, hotel, meals often included). TUI also serves groups and specialty segments through its sub-brands (it had youth-oriented brands, luxury brands, etc., though many have been consolidated under the single TUI identity in recent years).

Strategic Differentiators: TUI’s differentiator is its tight integration and control over the holiday experience. This allows it to ensure quality and reliability – for instance, if an airline it owns has an issue, it can directly manage re-accommodation; if a hotel isn’t up to standard, it can address it on the ground. It also allows cost synergy – filling its own planes with customers who will stay at its own hotels means it can spread costs and avoid paying third-party margins. Another differentiator is exclusive product – TUI often offers certain resorts or experiences exclusively to its customers (no other OTA sells it), which draws customers. TUI has also been investing in digital transformation: it launched the TUI app that acts as a companion for customers (with booking info, destination tips, etc.), and is increasingly selling modular products online (for example, you can now book just hotels or excursions on TUI’s site, not only full packages). Post-pandemic, TUI has emphasized a more flexible model (allowing dynamic packaging on its website in addition to pre-set packages). It’s also leveraging its brand strength to enter new markets – e.g., expanding in Asia via joint ventures. Sustainability is a part of TUI’s strategy too; they highlight efforts in sustainable tourism (important as some criticize mass tourism environmental impact).

Financial Performance: TUI Group’s finances were severely affected by COVID-19 – as a largely offline tour operator with flights and cruises, it needed government bailouts to survive travel shutdowns. However, it rebounded as travel resumed. For the full year 2023 (ending September), TUI reported €20.7 billion in revenue​, a 25% increase over 2022 (which was €16.5b). 2024 saw further growth to €23.2 billion​. Pre-pandemic (2019) revenue was ~€18.9b​, so TUI has exceeded that now, indicating strong pent-up demand for packaged holidays. In 2023 it returned to a net profit of €306 million​ after two years of heavy losses, but this is a slim margin (net ~1.5%). TUI’s operating profit margins are traditionally low single-digit in good years and it carries significant debt from the pandemic rescue loans. In terms of scale, TUI serves ~20+ million customers annually and had ~65,000 employees​, reflecting its labor-intensive operations (pilots, hotel staff, cruise crew, travel reps, etc.). The company’s strategy now is to reduce debt, restore margins (via cost cuts and more digitization to sell directly online), and capitalize on the resurgence of leisure travel. It is also focusing on growing its cruise and hotel brands profitably, and continuing a pivot to more year-round products (winter cruises, etc.) to smooth seasonality. For investors, TUI represents a very different risk/reward profile compared to OTAs – it can have higher revenue (because it captures full trip spend) but lower profit relative to that revenue, and it’s more exposed to external shocks like fuel prices or geopolitical events in its destination markets.

Comparison Table – Major Players: Below is a comparison of Expedia, Booking, and TUI on key metrics and characteristics: