Commission or no commission? This is often the question of what business model to adopt to give your destination platform more punch.
Commission is a "classic" way of generating self-financing income for your organisation, but this model is becoming less and less efficient, depending on the following factors:
commission can have a "push-back" effect on your destination'sprofessionals, who are tired of already paying commission to OTAs. What's more, some of them feel that they are already paying something to your organisation, either through their membership, or via the tourist tax, or both ... In this case, some professionals simply decide not to join the platform,
the commission is less and less profitable because it is 'based' on the volumes you generate on your site(s) and, where applicable, on your counters. On the web, in any case, a commission-based model is only profitable and feasible if your volumes are high and growing. If this is not the case, not only does it bring in nothing but, by having a 'push-back' effect on professionals, it impoverishes your 'catalogue' offering; which, in the medium term, reduces the volume potential of your booking engine,
it is no longer possible to collect the commission "at source", given the increase in cancellations; this means that the pro has to be reimbursed for the commission unduly received (unless it is earned regardless of the outcome of the booking...). In any case, collecting commission remains a tedious and costly task, the cost of which must be deducted from your platform's net revenue; depending on the volumes involved, this task can very quickly become an unbalancing burden for your business.
The service fee model has been designed with an eye to the major models currently in use in the online booking world. As we explain in our slides for territories, the business model is first and foremost "a matter of faith".
There are 3 types, widely popularised by the 'big players' in the sector:
Booking, which has based its business on volume, operates on commission (as does Expedia),
Vrbo (formerly HomeAway) has based its model on subscriptions, selling services,
AirBnB has based its main business model on "service fees" (and a very small commission),
Choosing one model or another presupposes faith in the company's ability ... either to generate volume (commissions), or to have an "original catalogue" so that customers are prepared to pay "service fees", or else in the quality of the services (technology, visibility with no guarantee of conversion, etc.) when the model is based on subscription.
If the commissions are paid by the pros, the service fees are paid by the end customer:
- as is the case with AirBnB, where the guest pays 12% in service charges, whereas the pro pays only 3% in commission. This formula has the advantage of attracting professionals on a zero or low commission basis and of "taking its service charges" from the end customer.
- as is the case with private sales sites, where the customer agrees to pay these service charges if they feel that, in exchange, they benefit either from a catalogue and offers that cannot be found elsewhere, or from valuable support (this is the case with counter sales) or that these service charges provide them with an additional guarantee and/or security ("we're there if anything goes wrong, etc.")
How does it work?
1. You must have a TDR Principal or TDR ++. (Note: This function is not available to Standard TDRs)
2. You must then set up your service charges in the Account menu (1), at the top right of your screen (note that you must be logged in as the TDR administrator). Select the Service charges function (2), which will take you to the relevant tab,
3. You can define service charges according to the thresholds reached in the basket (4) (e.g. 6% for a basket of less than €100 and 4% above €100, or "free service charges" above €300, for example). You can also set charges either as an absolute value (€) or as a relative value (%),
4. The service charges are calculated on the entire basket, and an example is given in real time (5),
5. Service charges are "deducted at source" (like tax) and are credited to your bank account only if you use the PayBox or Stripe option. Without this option activated, the service charges are not operational.
6. On the front, customers will see the service charges billed to them and debited from their bank card.
Nota :
Via the elloha checkout (the elloha checkout can no longer be activated from 12 October 2023), you can also grant discounts or freebies on service charges; this allows you to clearly display your future "commercial gesture".
It is not possible to refund service charges via Stripe or PayBox or any other function in elloha (individual or TDR). This type of operation can only be carried out manually.