how-does-skyscanner-make-money

How Does Skyscanner Make Money? The Skyscanner Business Model In A Nutshell

  • Skyscanner is a metasearch engine and travel agency founded by information technology professionals Barry Smith, Bonamy Grimes, and Gareth Williams. The idea for the platform came after Williams experienced difficulty in finding cheap flights to ski resorts.
  • Skyscanner earns the bulk of its revenue via commissions from its various car hire, hotel, and airline partners. Whenever a consumer clicks a search listing or makes a purchase, the company is compensated.
  • Skyscanner offers its API to similar platforms wishing to access its data. While the company offers this service for free, it likely retains the right to collect any commissions that result. Skyscanner also sells insurance to travelers and collects a referral fee for every new policy that is created.

Origin Story

Skyscanner is a metasearch engine and travel agency founded in 2003 by information technology professionals Barry Smith, Bonamy Grimes, and Gareth Williams. The platform, which is available in over 30 languages, enables travelers to research and book travel-related products such as hotels, flights, and car hire.

Williams got the idea for Skyscanner after becoming frustrated while searching for cheap flights to ski resorts. To solve this problem, the trio created a spreadsheet which then turned into a search engine comparing the cost of flights across various airlines.

Over the next decade, the company experienced rapid growth and became one of the go-to online travel sites. In 2011, Skyscanner acquired similar platform Zoombu in the European market. The company then expanded into China by partnering with Baidu, China’s largest search engine. Two years later, a new office was opened in Miami, Florida.

In 2016, Skyscanner raised £128 million in venture capital funding – resulting in the company becoming a rare example of a British start-up unicorn. The platform was then acquired by China’s biggest online travel company Ctrip for $1.74 billion in 2017. However, the platform retained operational independence.

Skyscanner surpassed 100 million monthly active users in late 2019, with the company noting it had put more than 172 million flight passengers in the air during the preceding twelve months.

Skyscanner revenue generation

The Skyscanner platform is available online and through an app, with both free to use for consumers searching for travel deals.

So how does the company make money? Let’s take a look below.

Commissions

As an aggregator of travel services, the most significant source of revenue is the commissions earned from airlines, hotels, and car hire businesses. The commission earned may result from cost-per-click (CPC) advertising or cost-per-acquisition (CPA) agreements.

Travel organizations compensate Skyscanner every time a consumer clicks on a search result (CPC) or purchases something through the Skyscanner platform (CPA).

Importantly, Skyscanner has entered into various arrangements with leading airlines to allow travelers to purchase airline tickets directly on its platform. For consumers, this eliminates the need to visit individual airline websites or travel agencies. 

Sponsored placements are simply advertising spots offered for sale on the Skyscanner website. 

They may take the form of sponsored search results or banner ads, with the former likely based on a CPC model and the latter requiring advertisers to pay per impression.

Travel API

Third parties can access Skyscanner’s Travel API to display car, flight, and hotel data on their own platforms. Importantly, the third party can also accept bookings.

The company does not charge for the privilege of using its API. However, it can be assumed Skyscanner collects the same CPC and CPA revenue mentioned above from its vast network of partners.

Insurance

Launched in late 2020, Skyscanner insurance is a relatively new form of revenue generation.

Here, the company has partnered with XCover to offer travel insurance to consumers who can receive an instant quote by providing details of their trip.

For every new policy, XCover compensates Skyscanner with a referral fee.

Connected Business Models

Airbnb

airbnb-business-model
Airbnb is a platform business model making money by charging guests a service fee between 5% and 15% of the reservation, while the commission from hosts is generally 3%. For instance, on a $100 booking per night set by a host, Airbnb might make as much as $15, split between host and guest fees. 
airbnb-competitors
The Airbnb story began in 2008 when two friends shared their accommodation with three travelers looking for a place to stay. Just over a decade later, it is estimated that the company now accounts for over 20% of the vacation rental industry. As a travel platform, Airbnb competes with other brands like Booking.com, VRBO, FlipKey, and given its massive amount of traffic from Google. Also, platforms like Google Travel can be considered potential competitors able to cannibalize part of Airbnb’s market.

Booking

booking-business-model
Booking Holdings is the company the controls six main brands that comprise Booking.com, priceline.com, KAYAK, agoda.com, Rentalcars.com, and OpenTable. Over 76% of the company revenues in 2017 came primarily via travel reservations commissions and travel insurance fees. Almost 17% came from merchant fees, and the remaining revenues came from advertising earned via KAYAK. As a distribution strategy, the company spent over $4.5 billion in performance-based and brand advertising. 

Expedia

trivago-business-model
Trivago is a search and discovery travel platform part of Expedia Group. Trivago is widely known as a trusted hotel comparison service. Trivago doesn’t charge based on bookings but rather through a cost-per-click (CPC) model, monetized when a hotel searcher clicks one of its advertiser listings. This referral revenue comprises most of Trivago’s income. Trivago also has another minor revenue stream via subscriptions to its Business Studio, a tool that helps hoteliers track impression and click data associated with their properties.

Google (Google Travel)

Expedia-business-model
Born in 1996 as a travel platform of Microsoft, it would be spun off later on. Expedia became among the largest online travel agencies (OTAs) which comprise a set of brands that go from Hotels.com, Vrbo, Orbits, CheapTickets, ebookers, Travelocity, Trivago, and others. The company follows a multi-brand strategy.

Kayak

how-does-kayak-make-money
Kayak is an online travel agency and search engine founded in 2004 by Steve Hafner and Paul M. English as a Travel Search Company and acquired by Booking Holdings in 2013 for $2.1 billion. The company makes money via an advertising model based on cost per click, cost per acquisition, and advertising placements.

OpenTable

how-does-opentable-make-money
OpenTable is an American online restaurant reservation system founded by Chuck Templeton. During the late 90s, it provided one of the first automated, real-time reservation systems. The company was acquired by Booking Holding back in 2014, for $2.6 billion. Today OpenTable makes money via subscription plans, referral fees, and in-dining with its first restaurant, as an experiment in Miami, Florida.

Oyo

oyo-business-model
OYO’s business model is a mixture of platform and brand, where the company started primarily as an aggregator of homes across India, and it quickly moved to other verticals, from leisure to co-working and corporate travel. In a sort of octopus business strategy of expansion to cover the whole spectrum of short-term real estate.

Tripadvisor

tripadvisor-business-model
TripAdvisor’s business model matches the demand for people looking for a travel experience with supply from travel partners around the world providing travel accommodations and experiences. When this match is created TripAdvisor collects commission from partners on a CPC and CPM basis. The non-hotel revenue comprises experiences, restaurants, and rentals.

Trivago

trivago-business-model
Trivago is a search and discovery travel platform part of Expedia Group. Trivago is widely known as a trusted hotel comparison service. Trivago doesn’t charge based on bookings but rather through a cost-per-click (CPC) model, monetized when a hotel searcher clicks one of its advertiser listings. This referral revenue comprises most of Trivago’s income. Trivago also has another minor revenue stream via subscriptions to its Business Studio, a tool that helps hoteliers track impression and click data associated with their properties.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"