How Much Does It Cost to Build a Hotel Booking Website?

Description

The hotel booking market represents the activity of potential travelers visiting a website or using a mobile application to search for hotel deals online—rather than the traditional approach of consulting with travel agencies.

Many OTAs deliver more value to customers by also featuring car rental offers, discounted vacation packages, and cheap flight deals.

Industry size

IBISWorld estimated that the online hotel booking industry in the US was worth approximately $28.6 billion based on 2021 revenue figures and would grow by 34% in 2022.

Statistica valued the global online travel market at $433.2 billion in their report published in May 2022. It indicated that online sales accounted for 66% of sales in the travel and tourism industry.

Key players

The following list represents market leaders based on 2021 revenue figures:

• Bookings.com – $10.95 billion
• Expedia – $8.59 billion
• Airbnb – $5.99 billion
• Trip.com – $2.7 billion
• Trivago – $42 million
• eDreams – $33 million
• MakeMyTrip – $27 million
• Despegar – $25 million
• Lastminute – $17 million

Online hotel booking statistics

• In 2018, the number of online travel bookings was 148 million, with 82% occurring without any human interaction;
  By 2023, it’s expected that 700 million people will make their hotel bookings online;
• Most of the online bookings take place through a desktop with a 2.7% conversion rate compared to mobile devices at 0.7%.
• While some online travel agencies have a booking feature, about 2 in 3 bookings still take place through the hotel’s official website.

Covid-19 impact & recovery

The hotel industry was among the hardest hit during the covid-19 crisis owing to restrictions on travel and shutdowns witnessed in 2020.

McKinsey projects that it may take up to 2023 for the industry to fully recover. An assessment by Hotel Asset Value Enhancement projected that the recovery will take about five years, basing their predictions on past SARS outbreaks and the 2008 financial crisis.

The recovery has been underway since 2021, picking up speed in the summer of 2022. For instance, Britain has experienced massive airport delays caused by the huge numbers of summer travelers and inadequate staffing by airlines.

1. An app for travel agencies (OTAs)

An online travel agency serves as a marketplace, where travelers can explore and compare multiple properties and find other travel products including car rentals, flights, activities, cruises, etc.

Many platforms offer property owners unique tools to showcase their offering, including photos, videos, and even 3D walkthroughs. They can also collect and respond to reviews.

Note that a booking site or online travel agency maintains direct partnerships with property owners. It may adopt various revenue models, for instance:

• Commission-based – Customer pays the hotel, and the hotel pays a commission to the OTA;
• Merchant model – Customers pay the OTA, and the OTA pays the hotel.

Still, property owners list their locations at no cost. The platform collects its revenue share after successful bookings and checkouts.

On some marketplaces, property owners may boost their prominence on search results with paid advertising.

Hotels prefer to get featured on OTAs because of the following tangible benefits:

• Better reach as OTAs spend considerably on marketing efforts, from print ads to digital marketing;
• Increased traffic on the primary website as most customers begin their search on an OTA, before looking up the hotel’s website (this is referred to as the billboard effect);
• Prominent access to high-value clients, as OTAs have data repositories of guests who exhibit certain characteristics such as those who tend to stay longer, and can make targeted recommendations to help the property attain a specific hospitality business goal;
• Availability of quality data and insights, such as market data, competitor comparisons, and periodic performance (number of guests, revenue, etc).

Examples: Bookings.com, Expedia, & Agoda.

2. Hotel aggregator/meta-search engines

Metasearch engines work in conjunction with booking sites/OTAs. They basically aggregate hotel prices across different networks, making it easier for customers to find the cheapest deal.

When users click on a deal on the metasearch engine, it redirects them to the booking website that may be responsible for the reservation and payment processing. That’s why the primary business model is cost-per-click.

So, the property, e.g., a vacation rental forms the basic layer, followed by an OTA, and the outermost layer is composed of the metasearch engine.

Hotel aggregators may also contain listings by independent properties or hotel chains.

Examples: Trivago, Kayak, and Google Hotel Ads.

3. Property management system

A property management solution handles many different tasks, including administrative activities (scheduling housekeeping), reservation management (front desk or online booking), and payment processing. Modern PMS solutions integrate with OTA channels to synchronize and keep bookings up to date.

PMS solutions are now offered as SaaS solutions by companies such as Sirvoy and Hostway. The enterprise-level solutions may focus on specific niches, for instance, Hostway is specially built for vacation rental owners.

Individual property owners can build their PMS if they can’t find the features in existing solutions. Entrepreneurs can also identify an underserved niche and introduce a program or app targeted at hotel managers.

So, if you’re figuring out how to build a hotel booking app for property management, some top features to focus on include:

• Payment processing
• Administrative tasks
• CRM & lead management
• Hotel reservation system
• Marketing tools (coupon manager, website builder, etc.)
• Channel management (integrations with OTAs).

4. Reservation module on a hotel website

Source: Dribbble

The reservation module is a website booking engine offered as part of a Property Management System (PMS) or separately developed and integrated with a legacy PMS.

The module provides functions such as:

• Hotel rooms inventory management and allocation
• Synchronizing all data available on room availability from different channels and preventing double booking
• Sending of emails to confirm the reservation
• Reservation of other activities
• Hotel channel manager for two-way API connections to leading OTA.

1. Commissions-based model

It mimics the traditional agency model, where the OTA serves as an intermediary (agent) between property owners and customers trying to secure a reservation.

Under this model, guests make reservations on the hotel’s website, and the agreement is between the customer and the property. Hotels then pay a commission for all reservations generated by the agent.

The commissions may be paid at the end of the month. You can prepare an invoice that details the commission amount based on all complete reservations. Partners may also pay commissions on income from cancellation fees.

On average, the commission ranges from 10 to 30% and should be listed on the contract. Booking.com famously uses this model.

2. Merchant model

Customers make payments directly to the OTA or agent. Afterward, the OTA distributes a portion of the payment to the property owner. For the model to work, the hotel provides a net room rate (price without markup) to the OTA, as part of the distribution agreement.

The OTA applies its markup and sells the rooms. The Expedia Group, Airbnb, and Priceline (where users place bids on accommodations) utilize this model for their partners.

3. Advertising & paid subscriptions

OTAs and metasearch engines can allow property owners to list their properties for free. Additionally, they can provide paid promotional packages that can give businesses prominence in their search results. For instance, TripAdvisor has sponsored placements, an advertising solution that delivers targeted ads to a highly qualified audience.

Individual hotel sites may also supplement income from direct sales with advertising revenue.

4. Cost-per-click model

The revenue model is mostly used by metasearch engines, where OTAs and property owners pay for every click generated through the platform. There are two types of cost-per-click models:

• Pay-per-click (PPC): The OTA pays for every click, irrespective of whether the guest makes a successful booking.
• Pay-per-stay: The OTA or property only pays for a click that leads to a successful reservation.

5. Direct sales model

Under this model, bed & breakfasts, vacation properties, or inns develop booking applications for use by their target audience. So, they generate income from direct sales to customers. The development can be justified if the app increases the number of online bookings.

1. Form a clear vision of your hotel booking website idea

A successful booking website solves a unique problem in a more efficient way compared to its competitors. Ideas should be properly validated, and this entails gathering evidence to make factual and less-risky decisions.

Take the following steps to validate the idea:

• Define the goal
• Come up with a hypothesis of the market
• Perform user and market research from primary and secondary data sources
• Test the hypothesis and assumptions based on evidence
• Revise the idea to conform to user needs and preferences

For market and competitor research:

• Identify profitable market segments and undercapitalized niches
• Pinpoint the main competitors
• Analyze their online presence, unique selling points, and market share
• Perform a critical analysis of their products, checking what users like and don’t like from past reviews
• Tweak the product and business strategy to capitalize on competitor weaknesses or to offer innovative features.

After analyzing the market, coming up with a unique UVP, and formulating the main idea, perform the final validation and decide whether to pursue the development.

2. Find developers

The next big stage is finding developers to deliver on the mission. There are different approaches to use — for instance, hiring freelancers, building a dedicated team, or contracting an outsourcing agency.

Each has its advantages and drawbacks, for instance, building an in-house team takes longer and may cost more. However, it offers better control. Outsourcing may be cheaper, and it reduces time to market (Learn how to outsource website development). Still, it may be prone to communication challenges and limited control.

Now, there are different places to check for developers. Top sites include:

When finding potential developers or agencies, check to see if they have relevant development experience. Ask if they’ve ever built a property booking solution. Examine their user reviews, interview the team, and ask for a trial period.

3. Prototypes and design

The development process starts with building the prototype before the final production. Designers should first write user stories, before coming up with rough sketches and building a low-fidelity prototype with limited functionality.

After verifying the design, they should build the high-fidelity prototype and perform developer hand-off, allowing the features to be implemented by code.

4. Build an MVP

Source: Dribbble

The MVP is a minimal viable product that contains core features to validate the idea. It should be built fast and with minimal resources. However, the MVP should be fully functional and appealing to end users to build traction and a raving fan base. The MVP may even go viral.

Now, the selection of core features should be based on market analysis to identify what users care about.

For instance, here are key features for a custom hotel booking website:

Startups should carefully consider the core features and prioritize releasing the MVP as soon as possible to test assumptions with real-world data.

5. Release and improve

Releasing the MVP version is only the beginning. The development team collects data, statistics, and feedback from the first users such as user engagement metrics and other key KPIs. Based on the insights, they make changes to existing features or refine the idea.

1. Design complexity

Source: Dribbble

The cost to design an app may be determined by several factors, including the number of screens required in the application. Many views increase the time spent on the design.

Implementing custom elements takes more time, compared to using pre-built components.
The time spent during various stages of the design process may weigh into the final costs. For instance, the costs may increase if a lot of time is wasted creating high-fidelity prototypes instead of first testing out the design theory with a low-fidelity design.

The following table highlights, approximate design costs depending on the app’s design complexity:

2. Number and complexity of features

Programmers will need time to implement the features in code, for instance, building the booking engine or customer profile.

Complex applications with many features will require more time and cost more since the development cost is basically determined by multiplying the total time spent by the hourly rate.

Now, the following table showcases the approximate time spent on certain features:

*The following figures are base estimates. For accurate quotes, we recommend getting in touch with our team and discussing your specifications because we recognize that every app is unique.
For instance, an MVP for a metasearch engine may not necessarily need a user profile or authorization features.

3. Team location and hourly rates

It’s cheaper to hire developers and agencies in some countries than in others. That’s because they have lower living costs, and this translates to a lower hourly rate. In fact, hiring a development agency in Ukraine may be cheaper than hiring one intermediate-level freelancer based in the US.

4. Target platforms

It’s more expensive to develop native apps for each separate platform, for instance, web, Android, and iOS. Cross-platform development can reduce the cost, as the team can develop a shared code base that can be used across several platforms with minor changes.

4. Tech-stack and integrated services

The cost for development may also differ based on the required tech stack and the number of integrated services. For instance, it takes more time to integrate multiple two-way communication APIs for a custom web booking engine.

Some integrations may require paid services such as hosting, storage, or CDN. When coming up with the MVP, it is advisable to first integrate one service and add more capabilities later.

5. Required team

The software development team composition may influence the cost to develop an online hotel booking website.

For instance, if the website owner has already conducted market research and created a professional business plan, the team may not require the intervention of a business analyst.

If they are willing to assume the responsibilities of a project manager, the team composition may also cost less. Overall the calculation of the cost is determined based on the time each team member spends working on the project.

*When outsourcing, the web development company may offer an option to have a team that fully dedicates its time to the project. It may cost more compared to having a shared team.

So, What is the cost to create a hotel booking website?

From our experience, the minimum cost of developing an MVP is $32k. It also takes about 3 to 4 months to complete the development and release the MVP. But the timelines will all depend on the required functionality.