Directoury
Part 4

Total Cost Analysis

Understanding the True Cost of Ownership

Chapter 8: The Real Economics of Booking Platforms

The Four Cost Categories

1. Platform Costs

  • Monthly/annual subscription fees
  • Per-booking or transaction fees
  • Payment processing fees
  • Overage charges

2. Implementation Costs

  • Setup and configuration fees
  • Data migration services
  • Training and onboarding
  • Custom development

3. Operational Costs

  • Staff time for management
  • Ongoing training needs
  • Integration maintenance
  • Support escalations

4. Hidden Costs

  • Contract exit fees
  • API call limits
  • Storage overages
  • Premium support tiers

Common Pricing Models Decoded

Model 1: Pure Subscription

Fixed monthly fee regardless of booking volume. Predictable but can be expensive for low-volume operators.

Example Calculation (100 bookings/month @ $5,000 AOV):

  • • Monthly platform fee: $299
  • • Payment processing (2.9% + $0.30): $1,480
  • • Total monthly cost: $1,779
  • • Cost per booking: $17.79
  • • Percentage of revenue: 0.36%

Model 2: Commission-Based

Pay per booking or percentage of revenue. Lower barrier to entry but expensive at scale.

Example Calculation (100 bookings/month @ $5,000 AOV):

  • • Platform commission (6%): $3,000
  • • Payment processing included
  • • Total monthly cost: $3,000
  • • Cost per booking: $30
  • • Percentage of revenue: 0.6%

Model 3: Hybrid

Base fee plus transaction charges. Balances predictability with usage-based scaling.

Example Calculation (100 bookings/month @ $5,000 AOV):

  • • Monthly base fee: $149
  • • Per-booking fee ($2): $200
  • • Payment processing (2.9% + $0.30): $1,480
  • • Total monthly cost: $1,829
  • • Cost per booking: $18.29
  • • Percentage of revenue: 0.37%

ROI Calculation Framework

The 5 ROI Drivers

+

Revenue Increases

  • • 24/7 booking capability: +15-30% bookings
  • • Better conversion rates: +10-20% close rate
  • • Upselling features: +5-15% AOV
  • • Distribution expansion: +10-25% reach
+

Cost Reductions

  • • Reduced admin time: -10-20 hours/week
  • • Fewer booking errors: -90% mistakes
  • • Lower no-show rates: -50% reduction
  • • Eliminated double-bookings: -100%
-

Platform Costs

  • • All fees listed above

Typical ROI Timeline:

  • • Month 1-3: -50% ROI (implementation phase)
  • • Month 4-6: Break-even
  • • Month 7-12: +100-200% ROI
  • • Year 2+: +200-500% ROI

Negotiation Tactics That Work

Do This:

  • ✓ Ask for Year 1 discounts
  • ✓ Negotiate setup fees away
  • ✓ Request extended trials
  • ✓ Bundle annual payments
  • ✓ Lock in multi-year rates
  • ✓ Get migration assistance included

Don't Do This:

  • ✗ Sign without reading terms
  • ✗ Accept auto-renewal clauses
  • ✗ Ignore cancellation terms
  • ✗ Skip the fine print on fees
  • ✗ Forget about payment processing
  • ✗ Overlook API limits