Individuals and companies sign up as affiliates with major Online Travel Agents (OTAs) to sell their travel content for a share of the commission earned. Here's how it works.
The affiliate is a business or individual that re-sells online Travel Agents content. The affiliate saves a lot of work in not having to deal with hotels for contracts, updating rates, customer support, etc. Take Expedia for example: The hotel signs a net rate agreement with Expedia and the hotel is sold on Expedia.com, Hotels.com, and thousands of other websites on the Internet that re-sell Expedia's inventory. The Expedia Affiliate Network has been very successful in the online travel business. Reservations aren't under the Travel Agents name but Expedia.
www.cheaprooms.com was one of Expedia's largest affiliates in 2010. In 2010 independent estimates suggest that Expedia earned between 20% and 30% on each booking. A share of this is credited to the affiliate that brought the booking to Expedia. The more business the affiliate brings to Expedia, the higher the percentage they earn on each booking. Cheaprooms.com for example, was probably earning 15% on each booking in 2010, that if correct meant they earned more on the booking than Expedia!
There are thousands of these affiliates. Expedia handles all customer service, transaction processing, and contracts with hotels
In 2013 Travelocity announced they would cease all customer service and signing hotel agreements and work towards becoming an Expedia affiliate. A major cost saving for Travelocity!
The video below provides an overview on one such program courtesy of Splendia.