Costco is best known for $1.50 hot dogs and bulk paper towels, not Caribbean cruises and Hawaiian resorts. Yet Costco Travel has quietly grown into a major player in the leisure travel market for its members in the United States, Canada and the United Kingdom.
Behind the eye-catching member-only packages and shop card bonuses is a business that must still generate profit for Costco and its partners, even while projecting a relentless focus on value.
That balance is built into Costco Travel’s pricing and value model, which explains how the company can offer competitive deals while sustaining its broader membership-driven strategy.
Inside Costco Travel’s Role in the Travel Ecosystem
Costco Travel is not an airline, hotel chain or cruise line. It is a branded travel agency and wholesaler that negotiates with major suppliers to package and sell their products under the Costco name.
Operationally, it functions much like an online travel agency, but with one crucial difference: it only serves Costco members and operates as a division of Costco Wholesale rather than as a standalone travel company.
Suppliers such as hotel brands, cruise lines, rental car companies and tour operators provide inventory to Costco Travel at contracted wholesale rates. Costco then turns those rates into member-facing offers that may bundle rooms, transportation, resort credits, car rentals and digital shop cards.
Because Costco’s core business is membership-based, travel becomes another channel for deepening member loyalty rather than the sole profit center. That allows Costco Travel to focus on fewer but higher-value suppliers while promising them large volumes of loyal, relatively high-spend customers.
Costco Travel’s positioning hinges on trust and simplicity. On its “About” pages, Costco emphasizes that it presents total pricing clearly and alerts members whenever extra fees may apply, underscoring its broader corporate promise of transparency and value.
This approach reduces comparison-shopping fatigue for members and builds confidence that a Costco-branded package will be competitive, even if it is not always the single cheapest option on the market.
In practical terms, Costco Travel acts as a funnel, directing member demand toward a curated set of partners. Suppliers gain access to Costco’s enormous membership base without having to discount as heavily in the general public market, while Costco earns revenue through commissions and incentives that are largely invisible to the customer.
The Commission Engine: How Costco Gets Paid on Each Booking
The backbone of Costco Travel’s revenue model is agency commission. Like traditional travel agencies and online travel platforms, Costco earns a percentage of the booking value from suppliers. That cut varies widely by product type and supplier agreement, but industry norms provide a useful guide.
Cruise lines often pay agencies double-digit percentage commissions on the cruise fare. Major hotel chains and package operators pay lower but still meaningful commissions on room nights and bundled vacations. Car rental companies and theme park partners typically offer smaller percentages but rely on volume.
Unlike retailers that mark up a product before selling it to consumers, Costco generally appears to work from a low-margin, high-volume commission strategy that mirrors its warehouse stores.
Publicly, Costco stresses that members receive the same posted base travel rates, regardless of membership level, and that it does not charge booking fees on most travel. Executive Members may receive extra benefits, but the underlying travel rate is the same. That implies Costco is making its money on the back end, from suppliers that have already factored commissions and marketing value into the net rates they offer.
Because Costco can deliver large, predictable volumes of customers, it has leverage to negotiate favorable commission tiers and marketing support. In some cases, suppliers may provide extra margin in exchange for prominent placement under “featured deals” or limited-time promotions.
Costco, in turn, can choose whether to pass most of that extra value back to members in the form of shop cards, onboard credits or food and beverage allowances, or to retain a portion to shore up its own margins. The company’s overall low-margin culture suggests that a meaningful share is returned to members, but the precise splits are not publicly disclosed.
Over time, as Costco Travel scales, its commission engine benefits from operating leverage. The more bookings flow through its call centers and online platforms, the more revenue it can generate on a relatively stable cost base of staff, technology and support. That makes incremental bookings highly attractive and explains why Costco continually promotes travel offers alongside traditional merchandise and services.
Packaging Power: Bundles, Shop Cards and Invisible Margin
While core commissions explain much of Costco Travel’s revenue, the way those commissions are packaged creates additional room for profit. The classic Costco Travel offer is not just a hotel room.
It is a “value-loaded” package that might include daily breakfast, a resort credit, a rental car and a digital Costco Shop Card, along with potential room upgrades or waived resort fees. For the member, the value proposition is simple: one bundled price that appears better than or at least comparable to booking each component separately.
The economics behind the scenes are more complex. Suppliers may be willing to offer Costco lower net rates or extra perks that do not cost them full face value. For example, a resort might provide a $400 resort credit that historically goes only partially redeemed. A hotel may include breakfast at an incremental food cost far below the retail menu price.
A rental car company can supply a vehicle at a contracted daily rate, counting on overall fleet utilization to make the deal profitable. Costco then combines these elements into a visually compelling package that looks like a member is getting hundreds of dollars in extras “for free.”
Digital Costco Shop Cards, which frequently appear as part of packages and cruise deals, add another layer. When Costco includes a shop card as part of a travel purchase, that card is an incentive funded out of the total economics of the deal. Some of the commission from the travel partner helps pay for the card.
Some of the card’s face value may never be spent in full or may be spent on items with attractive margins for Costco. In both cases, the cost to Costco of issuing the shop card is likely lower than the perceived value to the member.
By building margin into bundles rather than into a visible booking fee or obvious markup, Costco keeps its “no hidden fees” message largely intact while still ensuring profitability.
The member sees a strong headline price, sweetened by perks and credits. The travel partner maintains rate integrity in public channels. Costco earns a commission plus whatever incremental benefit flows from ancillary features like shop cards and add-ons, all without eroding its reputation for value.
Membership and Rewards: Travel as a Loyalty Flywheel
Another key piece of the revenue puzzle lies outside of travel itself. Costco Travel is tightly integrated into the company’s membership and rewards system, which includes standard and Executive memberships plus credit card rewards.
While Costco Travel may operate on very lean direct margins, it plays an outsized role in keeping members loyal, motivated to upgrade and engaged across multiple Costco channels.
All Costco members generally see the same base travel prices, but Executive Members receive extra travel-related benefits. Costco’s own guidance notes that Executive Members can earn a 2 percent annual reward on select Costco Travel purchases, in addition to potential room upgrades, resort credits and other exclusive extras. Those rewards are issued after travel is completed and can be redeemed on future purchases in the warehouse or converted to a shop card.
The 2 percent Executive reward on travel is not a loss leader. It is funded by Costco’s overall economics on the membership program and on the travel deals themselves. Executive membership costs more than a standard membership, and the reward is capped each year, ensuring Costco can manage its liability.
When a member books a large trip through Costco Travel, that member moves closer to recouping the cost of their Executive upgrade, making renewal more attractive. The company, in turn, benefits from that higher annual membership fee and from future shopping trips that the reward certificate helps to trigger.
Costco’s co-branded credit card adds a further loop to this flywheel. Cardholders earn elevated cash back on travel, including bookings made through Costco Travel. That creates another incentive for members to route major vacations through Costco, where they can stack Executive rewards, card rewards and package perks.
Each of those layers deepens the customer’s relationship with the Costco ecosystem. Even if the direct margin on a given trip is modest, the lifetime value of a loyal, high-spend member can be significant for Costco’s broader retail and services business.
Why Costco Travel Deals Often Look So Good
Travel-savvy consumers frequently compare sample trips across Costco Travel and direct bookings, and many find that Costco packages come out ahead, especially when extras are fully valued.
Independent comparisons have shown examples where a five-night resort stay with car rental and bundled credits costs slightly less through Costco Travel while also providing a sizable digital shop card and daily breakfast credits. On paper, the member appears to be getting hundreds of dollars in additional value at a lower or similar price point.
These outcomes are not accidental. Costco Travel’s negotiating leverage and member-only distribution enable it to craft deals that look compelling even under careful scrutiny. Because suppliers know that Costco members tend to be relatively price-conscious but also loyal, they can structure promotions that emphasize perceived value in a controlled environment.
Free breakfast, resort credits, shop cards and waived fees all help differentiate Costco packages from standard public rates without permanently undercutting published prices on hotel or cruise websites.
For Costco, the headline savings serve as marketing for the entire brand. When a member feels they secured an excellent deal on a Hawaii or Europe package, that positive experience reinforces the idea that Costco delivers value in all categories, from electronics to gasoline.
The member is more likely to renew, upgrade and recommend Costco to friends and family. Costco Travel thus acts as both a revenue generator and a powerful story-telling device that supports the company’s broader value narrative.
The flip side is that Costco Travel is not necessarily the best option for every traveler. Solo travelers, backpackers or those seeking ultra-budget accommodations may not find the same level of savings, since Costco tends to focus on midscale to premium properties and bundled extras.
For that audience, commissions and packaging economics may not deliver a clear advantage. Costco accepts that trade-off in exchange for serving its core demographic: families, couples and value-seeking travelers willing to spend more overall, but who want to feel that they are buying smart.
Risk Management, Scale and Supplier Relationships
Costco Travel’s money-making model also depends on operational discipline and carefully managed supplier relationships. Travel is a complex business that involves cancellations, schedule changes, weather events and shifting consumer tastes.
To maintain thin margins profitably, Costco must manage these risks at scale, investing in customer service, contracts and technology to ensure that each booking can be serviced efficiently.
One advantage is Costco’s selective approach to suppliers. Rather than listing thousands of hotels or every major airline under the sun, Costco Travel focuses on a curated list of partners that meet its standards for reliability, service and value.
This curation simplifies operations and concentrates volume, which in turn strengthens Costco’s negotiating hand. A cruise line or resort group that knows Costco can deliver consistent bookings season after season is more likely to offer favorable rates and cooperative solutions when disruptions occur.
Another factor is Costco’s willingness to adjust offerings based on economics and strategy. Travel products can come and go depending on contract terms, performance and strategic focus. When certain theme park or resort packages are discontinued, as has occurred with some high-profile attractions, it can spark frustration among members who loved those deals.
Yet such moves also highlight that Costco Travel is constantly optimizing its portfolio. If a product no longer aligns with Costco’s margin targets or the value story it wants to tell, the company may quietly step back rather than dilute its brand with weaker offers.
Finally, Costco Travel benefits from Costco’s scale in non-travel categories. The brand equity built through groceries, fuel, appliances and pharmacy services gives Costco an enormous trust advantage when expanding into travel. That trust reduces customer acquisition costs.
Instead of spending heavily on advertising across search engines and social networks, Costco can market travel via its warehouses, website, apps and membership communications. Lower marketing spend per booking leaves more room within commissions for either member savings or Costco’s own bottom line.
What Travelers Should Know About the Economics Behind Their Booking
For members contemplating a Costco Travel booking, understanding the underlying economics can be empowering. When you see a package advertising a digital Costco Shop Card, complimentary breakfast and resort credits, you are looking at the visible expression of the commission structure and supplier incentives.
These extras are not purely altruistic; they are funded out of negotiated economics between Costco and its partners. Yet when the value stacks in your favor, you can benefit directly from the scale Costco brings to the table.
The fact that all Costco members generally receive the same travel rates regardless of membership level also matters. Executive Members do not get lower sticker prices; instead, they receive rewards and additional benefits layered on top.
That means you should evaluate Executive upgrades by looking at your total projected Costco spend, including travel. If you plan a major vacation and regular warehouse shopping in the same year, the 2 percent Executive reward and other perks may cover or exceed the difference in membership cost.
From Costco’s perspective, that math drives higher membership revenue and stickiness, while you enjoy enhanced value from a purchase you were going to make anyway.
It is also important to recognize where Costco Travel may not be the strongest option. Highly specialized itineraries, ultra-luxury bespoke trips or extreme budget travel may be better served through niche agencies or direct bookings. Costco’s model relies on standardization and scale.
Where your needs align with the types of packages Costco is optimized to sell, the economics work in your favor. Where they do not, Costco Travel may still be convenient, but not necessarily the cheapest or most flexible choice.
Ultimately, Costco Travel makes money when it channels large numbers of members into a concentrated set of supplier relationships, earning commissions and incentives that are partially recycled into visible perks.
The better members understand that system, the more effectively they can decide when to lean into Costco Travel and when to look elsewhere, maximizing their own value while navigating a marketplace built on negotiated margins and bundled benefits.
The Takeaway
Costco Travel operates at the intersection of wholesale buying power, membership economics and traditional travel agency commissions. It earns money primarily through supplier-paid commissions that are embedded in the net rates for cruises, hotels, rental cars and packages.
Those commissions are then repackaged into bundles that feature resort credits, digital shop cards, complimentary meals and upgrades, which both delight members and help preserve Costco’s low-margin, high-volume ethos.
At the same time, Costco Travel is a powerful tool for strengthening the broader Costco ecosystem. Every major vacation booked through Costco encourages members to upgrade to Executive, use the co-branded credit card and redeem reward certificates in the warehouse, deepening loyalty and lifetime spending. Travel is not an isolated business line, but part of a larger flywheel that uses strong perceived value to keep members engaged.
For travelers, the result is a set of deals that often stand up well to comparison against direct bookings, particularly for families and couples seeking midscale to premium experiences with meaningful extras. By understanding how Costco Travel makes money, members can better evaluate when a package really does offer an edge and when a different booking channel may be a better fit.
In a crowded travel marketplace, Costco’s disciplined, member-centric approach has turned vacations into one more arena where its scale and negotiating power can work to both its own advantage and, when used thoughtfully, to the advantage of its members.
FAQ
Q1. Does Costco Travel charge booking fees to customers?
Costco Travel generally does not add separate booking fees on top of the advertised package price. Instead, Costco earns its money primarily through commissions and incentives paid by travel suppliers such as hotels, cruise lines and rental car companies, which are already built into the total price you see.
Q2. If all members see the same travel rates, how does Executive status matter?
All Costco members typically receive the same base travel pricing, but Executive Members earn a 2 percent annual reward on select Costco Travel purchases and may receive extra benefits like resort credits or room upgrades on certain packages. The value difference shows up in rewards and perks rather than a lower sticker price.
Q3. Are Costco Travel packages always cheaper than booking directly with a hotel or cruise line?
Not always. Costco Travel is often competitive and can be cheaper once you factor in extras such as shop cards, resort credits and included meals, but in some cases direct booking or other platforms may offer better rates or promotions. It is wise to compare total trip cost, including extras and taxes, before deciding.
Q4. How does Costco make money on the digital Costco Shop Cards included with some trips?
Shop cards offered as part of travel deals are funded from the overall economics of the package, including supplier commissions. The effective cost of issuing a card is often lower than its face value because some balances go unused or are spent on merchandise where Costco still earns a margin, so the card can both reward the member and remain profitable for Costco.
Q5. Do travel purchases count toward the 2 percent Executive reward?
Eligible travel purchases made directly through Costco Travel can earn the 2 percent Executive reward, which is calculated after travel is completed and subject to certain exclusions such as taxes, fees and some third-party add-ons. Those rewards are later issued as a certificate that can be redeemed at Costco or converted to a shop card.
Q6. How do cruise lines and resorts benefit from working with Costco Travel?
Suppliers gain access to Costco’s large and loyal membership base, which can deliver high volumes of bookings with relatively low marketing costs. They can offer targeted promotions and value-added perks through Costco without broadly discounting public rates, helping them fill cabins and rooms efficiently.
Q7. Why does Costco Travel focus so heavily on packages instead of simple hotel-only bookings?
Packages that combine lodging, transportation, credits and extras create more room for negotiated value than a simple room night. By bundling items, Costco can use supplier incentives and back-end commissions to construct offers that look and feel like strong deals to members while still achieving acceptable margins.
Q8. Is Costco Travel a good option for budget backpackers or solo travelers?
Costco Travel tends to focus on midscale to premium experiences and family or couple-oriented packages. While solo or ultra-budget travelers might occasionally find value, they may not benefit as much from bundled extras or car rentals, and other channels may sometimes offer cheaper, no-frills options.
Q9. What happens to my Executive reward if a Costco Travel trip gets canceled?
Because the 2 percent Executive reward on travel is applied only after travel is completed, a canceled or fully refunded trip would not normally generate reward earnings. If your plans change after partial payments or credits, the handling of rewards follows Costco’s standard policies at the time, so you should confirm details when modifying or canceling.
Q10. How can I tell if a Costco Travel deal is genuinely good value for me?
The best approach is to price out the same or similar trip directly with the hotel, cruise line or car rental company, including taxes, fees and any extras like breakfast or resort credits. Then compare that total to the Costco Travel package, accounting for Executive rewards, shop cards and included perks. If the Costco option delivers the experience you want at a lower or comparable total cost with meaningful extras, it is likely a strong value.