Why Tour Operators Should Ditch Hidden Fees
As tour operators ramp up for high season, it’s time to make predictions for what 2015 will bring. Last year, I noticed more and more providers with extra charges added to the end of their online checkouts. Yet, data shows that adding hidden fees destroys your checkout conversion rates. It’s time to leave behind these fees that hurt your customers and your bottom line.
Checkout Abandonment: The Basics
Hidden fees are the leading cause of checkout abandonment. But before we dive much deeper into that, let’s first define our terms:
Checkout abandonment happens when a visitor on your sitebegins a checkout, but fails to complete her purchase. The greater your checkout abandonment, the lower your checkout conversion rate, which means fewer online customers. Of course, as more buyers do their research and purchase tours online, checkout abandonment can significantly affect your revenue.
For all you sports fans out there, think about it this way: In baseball, if you’re only getting on base 2 out of 10 times, that’s a sign of “incompetent” hitting. You can’t win a World Series batting under .200, and you can’t grow a business with a failing online checkout.
Added Fees Sabotage Online Checkouts
Many tour providers, however, don’t have full control over their online checkouts, and therefore, their checkout abandonments. Checkouts are often designed by the software companies that manage your online bookings. As far as online checkouts go, one of the most influential decisions your booking software can have on your business is whether it passes along hidden fees to your customers.
According to research done by VoucherCloud, a coupon and discount site, adding surprise charges to the end of your checkout never ends well.
And by not well, I mean downright terrible.
Of the 2-3 people out of 10 that actually make it to your checkout, another 40% will rule out your tour because of hidden charges. Surprise costs catch customers off-guard. We’ve all been there. Know the feeling of buying $30 concert tickets only to find that there’s a $15 service fee?
Despite these abysmal returns, I’ve noticed a growing incidence of providers in 2014 with almost 10% in taxes and fees added to their checkouts!
Do the Math
Hidden fees not only anger your customers, but they also make your tour more expensive. If the consumer has to pick up that cost, he’ll demand fewer tickets, fewer trips, fewer boats, etc. Or worse yet, maybe he forgets you all together and books with your competitor down the road that’s offering more transparent pricing. It’s Econ 101.
Here’s where this equation really doesn’t add up. While tour providers bear the brunt of fewer customers, and guests carry the weight of paying for a more expensive tour, only the reservation system profits from tacking on hidden fees. The software company gets all of the extra costs while both you and your customers pay the price.
The tradeoff is that booking companies usually levy these hidden fees rather than charge tour providers a monthly subscription. But what costs more: a software subscription or an inefficient online checkout, not to mention the unhappy customers that will come with it? More on that in a bit.
Sign of the Times
Sellers like Ticketmaster and StubHub are notorious for exorbitant fees tacked on to the end of online checkouts. But these sites are singing a different tune in 2015.
Notice anything different about these two Ticketmaster checkouts?
In the top one, the convenience charge, plus the processing charge, amounts to almost ⅓ of the original price!
But in the bottom one, the convenience fees are bundled into the price at the outset. That makes the purchasing process more transparent because the customer knows exactly what to expect at the time of checkout.
There’s one more difference: the date. The bottom screenshot was taken this year, while the top was taken back in 2009. In a short span, this industry has gone from adding 33% in hidden fees to the bill to $0.
If the biggest companies in ticketing and events are getting rid of hidden fees, your booking system should too.
If you’re still not convinced that these surprise fees hurt business, then you probably could stand to profit from raising your prices.
If customers will still pay up to 10% more for your tour, imagine what that could do to your business if you pocketed all that extra change, and not your booking software. In that case, your customers would be happier knowing the sticker price up front, and you’d make more per tour.
How Not to Fall for More Hidden Fees
If you don’t know whether your software provider charges fees to your customers, your first resource should be the Terms & Conditions. Use the “Find” command on your web browser to search for any words relating to “fees,” “service charges,” etc.
Or, simpler yet, make a test booking on your own website!
Put Your Best Foot Forward in High Season
All the data says that hidden fees are bad for your bottom line. Now, industry leaders in events and ticketing are starting to catch on. I’m betting that in 2015, tour operators will be the next in line to wise up about hidden fees.