Reservation system companies for tour and activity operators generally offer one of two types of pricing models: fee per booking or subscription.
Sounds simple, right? Well, it’s not. There is quite a bit of variation from one company to another, and the best fit for any operator will depend greatly on several factors, such as their booking volume and sales and distribution strategy.
In this article, we outline the different models and the pluses and minuses of each to both operators and the res system companies. We also layout the terms of some of the more popular booking systems.
Fee per Booking Model
Also referred to as transaction-based pricing or “pay as you go,” this model typically charges a commission, or percentage of each booking. This model tends to benefit smaller operators who don’t want to be tied to fixed expenses, especially during low season, and it ensures that they only pay when they bookings.
However, res system companies take very different approaches with this model, and operators need to know the difference. There are four key areas of variation: payment processing charges, merchant of record, consumer fee vs. operator fee, and the fees themselves.
Payment processing: some companies, such as FareHarbor, Peek and Xola, including credit card merchant fees in the overall booking fee. For other companies, such as Bokun, Checkfront and Rezgo, merchant fees are not included in their booking fee.
Merchant of record: the MoR is the entity authorized to process payments and assumes all liabilities around those payments. Some booking systems act as the merchant of record. This can be convenient for operators who don’t want to bother with setting up and managing their own payment gateway and merchant account. However it also means that the operator is limited to payment options available from the booking system.
Booking system companies who act as the MoR also found themselves under pressure this past March and April amid the global travel lockdown. They quickly became responsible for issuing refunds for the tsunami of cancellations from the pandemic. EzTix is one company that was still reported to be delayed in issuing refunds well into the summer.
Consumer fee vs. operator fee: some res systems give operators the option of making the booking fee either an add-on fee that the customer pays on top of the tour price, or making it a part of the overall tour price. By describing the booking fee as a “consumer fee,” several res system companies market their technology as free to the operator.
We see this as semantics. Ultimately, someone has to pay the fee. Each operator will have to evaluate their own pricing tactics vs. their competitors and decide whether to tack it on as a consumer booking fee, or bundle it within the price of their products. For example, travelers may be put off by having to pay extra to book online versus the walk-up price. Operators should consider testing both approaches to see which works best.
The fees: different booking systems charge different fees. Some charge a single flat fee only for website bookings. Others charge one fee for website bookings and another fee for bookings through other channels such as the front desk. Still others charge a mix of subscription fees plus booking fees, such as in Bokun’s new model. Some companies will even work with operators to set up the fee as a higher consumer booking fee and share some of the revenue back with the operator.
So hold on to your hat, and check out the table of pricing models below.
A subscription fee model, also sometimes referred to as SaaS, or software-as-a-service, is typically a monthly or annual fee. Services such as Dropbox, Google’s GSuite (Gmail, GDocs, Drive, etc.) and Slack are all examples of SaaS.
This approach means your technology will be a fixed cost, rather than a variable cost. It enables operators to more accurately budget annual technology expenses, and the costs remain steady (for the most part) even when bookings rise. This also provides more predictable revenues for the res system companies, and gives them a more stable revenue stream during downturns.
The downside, of course, is operators must pay a fixed fee during low season or when bookings are soft. This is a risk to smaller operators, and the rapid growth of small and startup operators over the past decade has helped fuel the popularity of fee-based pricing models. However, with most starter pricing terms at $40-$50 per month, that only adds up to $500-$600 per year.
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As with the fee-based model, subscription models aren’t so cut and dry. Most companies offer tiered pricing, with less functionality and limits on booking volume and number of users for lower tiers. TourCMS, for example, only permits 30 bookings per month for its “Small” tier for $49 monthly. Some companies also charge transaction fees on top of the monthly fees, and those transaction fees tend to be highest with the lowest subscription tiers, but decline with higher tiers.
Fee per Booking vs. Subscription: the Bottom Line
Here’s the bottom line:
Fee per booking
Pro: no fixed costs for smaller and start-up operators who want to tie expenses to their booking volume
Con: costs rise with business growth. This is a negative for larger operators.
Bonus tip: operators that do not do a lot of consumer website bookings may also want to consider systems that only charge fees on website bookings.
Pro: great for businesses that want predictability in their technology costs.
Con: those costs are still there during downturns and low seasons.
The fine print: there is a lot of variation in subscription models, so it will be essential to read the fine print and calculate the total cost of ownership.
Negotiation: It Never Hurts to Ask
Do not ever hesitate to reach out to your account manager and try to negotiate. We have heard from many operators who have negotiated more favorable terms with several of the res system companies listed below. We also know that many of these companies have been providing waivers or fee reductions during the travel lockdown. And as your business grows, you become more valuable to your reservation system provider. So don’t ever hesitate to ask for more.
Pricing Models by Companies
Here are two charts that lay out some of the basic pricing terms for some of the leading technology providers in our industry. For the subscription models table, note that the monthly fees are based on the “starter” or lowest price tier. Costs are higher for companies that need tiers with more functionality or with higher booking volumes.
Pricing Models by Companies
Fee per Booking Models:
|Company||Website Booking Fee||Booking Fee for Other Channels||Learn More|
** Rezdy and Zaui say they offer a booking fee model similar to FareHarbor, Peek, and Xola, however, the terms and rates are variable.
*** TrekkSoft charges a one-time setup fee, however, the company is waiving it due to the pandemic’s impact on operators.
|Company||Monthly Fee (starts at)||Website Booking Fee (starts at)||Booking Fee Other Channels||System Fee||Learn More|
* Bokun offers a free version that offers access to Viator and offline bookings but does not allow operators to take bookings on their own website.
** bookingkit charges a 3% fee for each booking, and an additional 3% fee for website bookings.
Delve into Res Tech at Arival 360
Are you considering new technology for your operation? Join us at Arival 360 for a special workshop: How One Operator Chose Their Booking Tech, led by industry veteran Jason Hackett of SL Green and Vanderbilt One.