As we all agreed on in our previous article: “COVID-20: Surviving Global Business Pandemic”, in the post-corona age, when uncertainty becomes the silent killer that continues the devastating work of destroying travel businesses, the amount of a time a business can carry its losses becomes a major factor in determining its survival.
The longer a guesthouse can use its available finances to cover its loss of income the longer it can survive. Cutting expenses at this stage becomes a priority for every holiday business regardless of size or position within the industry.
Given the variables, the fees paid by hoteliers to online booking platforms are one area where expenses can be drastically cut. In many cases, the cut can mean a saving of up to 25% of all marketing expenses.
This makes a booking platform’s service fees vital in determining a host’s chances of survival. Apart from the obvious advantage of money saved, not paying a service fee would allow for price flexibility, allowing you to reduce your price to match current demand. This allows you to use your lower rate as a tool to attract more guests, allowing you to be fully booked. Booking rooms in this way, is like booking through your own website – saving considerably on marketing expenses.
However, before you jump into a comparison of service fees of available providers, it is important to understand how the charges are formed by those platforms and how they affect your final pricing. The outcome might surprise you.
Let us begin with Booking.com. They claim 15% service fee on every booking received through the platform. An enormous fee, in our view, but at the least it is flat, predictable and stable. Let’s leave it for now.
Airbnb.com, another major player introduced a 3% service fee charge that included VAT at the opening. Later this became a “3% plus VAT” but the change went unnoticed by many. After the inclusion of boutique hotels to the platform the fee rocketed to 15%.
Now hosts can choose between paying the charge themselves, in so doing they include it in the final price of a listing, or they can make it the guest’s responsibility by allowing the booking platform to charge the guests this fee. Either which way, the final price is 15% higher and the platform claims its profit.
Those hosts who joined the platform before the “boutique event” avoided the increase in charges and were allowed to continue paying 3% service fee, saving them 12%. However, what Airbnb failed to announce is that the missing 12 % now has to be paid by the guests who use the platform.
“The price seemed to be another one…Knowing how expensive *city can be, but….. it’s not as cheap as it should be”.
G. [ an Airbnb guest ]
In fact, guests are made to pay 16% fee for the platform use. This, when taken together with the host’s 3%, makes the Airbnb.com the most expensive booking platform. It’s that simple! And this is exactly why you, as a host, have to reconsider your standard pricing in order to keep it competitive.
“… For 2 days, the price looks a bit expensive. That’s ok no problem.”
S. [ and Airbnb guest ]
Standing vacant for too long is a place in the market for a ‘good’ booking platform. Thegoldenmoon.com was established as the first booking platform to consider the needs of hosts. Created by hosts, for hosts, The GM made “protecting the interests of hosts” its main priority. When it came to fees, they went back to the pre-boutique hotel era and established a 3% service fee (including VAT) with a bold statement that declares “on this platform, hosts will never be charged more”.
And this might be a direct answer on the question raised at the beginning: How to save on the service fee of online booking platforms. One can argue that 3% fee still remains 3% out of the host’s profit, and that during this difficult time the fee could be less if the company proclaims itself to be ‘truly’ in favour of hosts. In this case, it might serve you well to have a closer look and see if the company’s promises go hand in hand with their actions.
Find out what are the others life-saving options TheGM has available for you in our next article: “Booking Platforms: Time for Reconsidering Priorities”. [COMING SOON]