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Extra Charges & Discounts- Should you charge for extras, include them or even discount for unused things?

Written by Simon Tolson on

Holiday cottages often have extras and all have features that some guests don’t use.  Today I’m going to consider presentation of prices rather than the level they should be set at.  Basically there are three ways to price things- you can make an additional charge, include it or offer a reduction if it’s not used.  Common examples in our industry would be a charge for a dog, electricity included or a discount for a couple in a larger property.

Regular readers will know that I am a big fan of using data to prove things but this is an area where it is difficult to measure things precisely and my conclusions are as much about gut feel as pure calculation.  One thing that isn’t helpful is to ask your customers!  I know that what people say and what they do online are not the same thing but the main point is that you are asking a self selecting sample- people have said to me that their guests are happy to pay extra for the dog but the problem is that the people who weren’t didn’t come.

What we do know is that multiple charges will definitely hurt your bookings- if there’s a deposit, electricity charge, extra for a dog and then the option to buy logs you will definitely lose customers during the online booking process.  At the moment we have no more than one additional charge on any of our properties and I would be reluctant to add any more.

So let’s take a look at some potential charges and how I think they are best dealt with:

Extra Accommodation

We have several places that have an annexe, extra building or extension that can be locked up if not used.  In this case it’s definitely OK for there to be a separate charge- you can see what you are paying for and the price can be quite high so would affect bookings from smaller parties if it was just included.

Hot Tubs

Again everybody understands that there is a significant cost to using a hot tub- it has to be drained cleaned and sanitised and maintained during the week.  There is a clear and separate benefit which you can choose not to use.  We have found that around £100 is an acceptable extra charge.

Heating & Electricity

Whatever the economics my feeling is that the expectation of the market nowadays is that heating and electricity are included and making a charge is a bit like having a £1 meter in the cottage.  (If you’ve still got one of those then stop reading right now, pick up the phone and arrange to have it removed!).  You can’t stay without using the electricity and the uncertainty of what the cost might be will definitely hurt your bookings.

Linen

Linen comes into the same category as electricity- I appreciate that you can bring your own so it isn’t technically compulsory but you simply have to supply it nowadays.

Towels

There are some quite high end properties that still don’t supply towels and if they are well established with regular customers it doesn’t seem to affect their bookings.  Of course we could argue that it just means they are too cheap but it’s hard to measure this.  I certainly wouldn’t want to start from scratch and offer a new property with no towels

WiFi

Don’t even go there!  WiFi is like electricity only more important.  Get an unlimited package at the fastest speed available and include it.  This is probably the feature than can get you the most extra bookings for the least investment.

Dogs

Now we are getting into more nuanced territory- there are plenty of cottages that charge for dogs and many guests accept this so we need to try and make a judgement.  First of all if you are going to make a charge the level obviously makes a difference.  There is always a resistance to paying any charge so it’s certainly not worth making it nominal- if it’s not at least £15 a week then don’t bother.  Equally if it’s too high you will definitely lose bookings- if you had to pin me down I would say £25 is the maximum.

The more relevant question however is whether charging for the dog ever results in a lost booking and if it does is the revenue from the dog charges greater than the loss?

Very difficult to measure this but I’m actually in a reasonable position to try as I now run two agencies, one which charges for dogs and one which doesn’t.  A quick look at a few that charge for dogs sees an average of 12 out of 30 weeks with dogs generating about £250 in revenue from charges, where there is no charge for dogs the average number of guests with dogs goes up to 18 out of 30 weeks so there is definitely an effect.

Even an additional out of season booking is likely to be worth £300+ after expenses so the calculation is that if you get one extra booking a year you are better off and so I am now firmly of the opinion that it’s better not to charge.

Couples Discount

This is an interesting one, I often field a phone call from somebody asking for a discount on a sleeps 4 cottage because there’s just the two of them.  No problem I say- just tell us which half of the bath you want to use and I’ll sort it out for you.  The point here is that apart from a fractionally lower linen cost there is no saving for an owner but that doesn’t mean that we should ignore the marketing opportunity.  Offering a discount can make your place stand out and we also use it as an excuse to list a sleeps four cottage in the ‘Just for two’ section on the site.

The problem is that you have to weigh up the cost of giving the discount to people who would have booked anyway against additional revenue from extra bookings.  Here’s how a recent calculation went as an example.

We were looking at ways to boost bookings on a property and considering a couples discount.  Analysis of the previous year’s bookings showed £6,500 worth of bookings from couples so if we had had a 10% couples discount we would have give away £650 unnecessarily.  So the question is would we have had an extra £650 of value after expenses if we offered a discount.  This was a more balanced decision- I thought it would but in the end the owner decided not to do it.

Just like the rise of all inclusive package holidays my suspicion is that we will move towards fewer extra charges and simple online booking will become increasingly important in maximising bookings.

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