How to Make More Per Booking Without Raising Your Rate

Our first client that reached out to me was all the way from Australia. They had 600 properties and FAR was the biggest issue. They said, "I want your software like yesterday." I'm a user first with my own product. We use my own portfolio. Before things get released to the public and at scale, we were doing about $20,000 that we're losing chargebacks a year. Wow. And it literally went down to to to zero. I don't trust people. I trust process. 17% loss when you don't have the

payment method on file and conversion. If you have the card on file, you're converting 17% more, which is huge. So that booking might have been a $2,000 booking. By the end, that state end up become a $3,000 state. Anybody from any PMS can use pretty much any payment pelor in the globe. Well, welcome back everyone to the Short-Term Rental Riches podcast. I'm happy to be seated here virtually with yet another founder, a tech founder and a company we actually personally use in our portfolio today. We've

got Thomas TW with us and he is the CEO and founder of Charge Automation. Welcome to the show, Thomas. Thank you. Thank you, Tim. And uh thank you for supporting Charge Automation, trusting in Charge Automation, been a customer. So happy to hear that. Yeah. Yeah. And we've been happy. I know uh we've given you a few shoutouts on the podcast before. You know the the podcast is really just about how we've been operating our personal portfolio and growing and you know changing with the times and

technology is one of those pieces that's always changing especially today. I mean it's at like warp speed but would love to hear a little bit about your background and how you got to be where you are today. So, I think my background is very similar to a lot of people how they end up in this industry. Almost accidental when I've discovered that renting a property short-term is way more profitable than long-term. I used to be a real estate agent prior to that. So, I've had some

property and real estate experience. And this is u way back in 2011. Airbnb was just a year or two years old. So, it was new industry. Most people didn't understand or they have never heard of Airbnb, the word. I um had some investment properties that I started doing short-term rental on uh quite early. Once I kind of discovered that it was a good profitable business, I scaled it up doing rent arbitrage model. We've scaled to as much as 200 properties very rapidly. And with scale comes

bottlenecks and processes. And the disadvantage that we have as property managers is that we don't we're not like hotels where we have everything in one building. We have scattered locations. So you can't meet all your guests all at once when they're checking in or different times of the day. It's just not scalable. One of the biggest challenges that we were having at the time was Airbnb was growing, but Booking.com was already established. I put my properties on Booking.com and we start getting a lot of reservations.

So unlike Airbnb, with Booking.com, you do have to process the guest credit card yourself. Processing the credit card also comes a lot of frauds and chargebacks, things that you're not really exposed to primarily with Airbnb, right? And given that I'm a software engineer by education, I built a a tool to help me collect the payment automatically for my guest and at the same time do an extra authentication or verification process when collecting the payment. And that kind of eliminated our far charger back and we literally

at scale we were doing about $20,000 that we're losing in chargebacks a year. It literally went down to zero and we've added a little more gu verification process along the way. So that kind of reduced a lot of our issues that we're having with our guests and frauds. And that was pretty much the beginning. And when other post in the community kind of discovered about my tool that was having the same issue, hey, you know, can I use your software cuz I'll have the same issue.

And funny enough is our first client person that reached out to me was all the way from Australia. I'm in Canada and they had 600 properties and FAR was the biggest issue they had and they said, I want your software like yesterday. Did a bit of modification for them to be able to use it. And we did that and the revenue you know from that customer was about 10,000 a month which was pretty exciting and I I realized that okay there's something here that people need

and want I start really to focus on the software component of it building you know that's what start as a payments and verification component that but then the customers start saying hey since you already have the credit card on file since you already have you know doing all these things can I also have ability to sell extra services like airport pickup early checkin late checkout services and then we've added that component and then they say hey you're already doing this can I also ask them a

little more questions about why they come into my property before they arrive then we added ability to add some custom questions as a part of the checking process and then they said okay you've got all of this that's amazing but once they do all of that can I have like a guide book where they can read the check-in instruction and get the access code and then we added a guest portal or guide book and there was no definition of what we're building at the time was

brand new it is what's known as right now guest experience software so we kind of built accidental but also productled growth where our customers are requesting what they want software to be and and they built it and this is what it is now. It's a full guest experience solution that handles everything from checking to check out once a guest makes a reservation. Exactly. And so yeah, you built it first for your own portfolio, solved some problems. Obviously lots of other people in the industry have the

same problems and now here you are. You're a software company. Exactly. At a software company. So yeah, such a long answer for a short question but No, but but your guys' tool really does a great job. bit, you know, facilitating all of that. And you mentioned, you know, one of the big things chargebacks and maybe, you know, for the operators out there that are just getting started or they maybe have one or two properties and haven't made it onto Booking.com or they haven't made it onto

these direct booking platforms where we always take the payments, maybe chargebacks doesn't seem like a big thing, but once you get to that stage and if you're planning on growing your portfolio, I mean, they are dramatic. You know, someone stays at your property and essentially the charge back is they go to the credit card company and say, "Hey, this was fraudulent or whatever." They dispute the charge and the credit card company gives them the money back and you had someone stay at your property potentially and

uh they stay there for free. It makes a massive impact. It is. And I I mean I've had many many stories and it's not just a chargeback. I mean that's one component of it. So one is obviously the guests stayed enjoyed their stay and then they file a charge back. Now you lost that money. But then typically those kind of guests are also trouble. So they will smoke in the unit. They will throw a party in the unit. They will they will yeah destroy the place.

Your cost is not even the charge. That's the whole process. Then you have to block the property for a certain period of time. You've got to cancel the next booking. It is extremely painful. So if you can prevent it and most people think that if I can just um have all the evidence, I have pictures that this person stayed in my property, I'm going to win this charge back. Unfortunately, you know, 99% of the times you don't win those chargebacks and if they're fraud, it's 100%

you don't win. It's better to avoid than trying to win it back, right? Exactly. Yeah. They often are not your most favorite guest. Yeah. So, having that guest authentication up front uh really goes a long way. You know, payment gateways and sort of automating that. I think the reality is is that there isn't unfortunately a single tool out there that does everything perfectly or everything in the most efficient way. And so one of the reasons we came to charge automation also was for your just payment

gateway, you know, to have a a more reasonable fee for processing charge charges with Stripe. Can can you talk about kind of what that payment gateway is for those of our audience who probably don't know? Yeah, I'm glad you touched on that point. So I think most PMSs typically support one or two payment processors, usually Stripe plus somebody else. If you're using Stripe, obviously you can use charge automation to be able to be able to collect the payment and avoid far chargebacks and save some fee

along the way. But let's say you're in a country where Stripe is not operating or you're in a country where Stripe has banned you or you know closed your account for whatever reason that may be. So now you're stuck. Now you you need to work with another payment processor. But the problem is that payment processor you want to work with does not work with your PMS. And this is almost accidental also how we we how we got into this because a customer came to us said,

"Hey, Stripe closed my account. Here's the payment processor I want to use. Here's the PMS I want to use. You know, can you do this for me? Connect connect this to." And then we've pretty much be able to integrate that new payment processor where we connect the PMS and the payment processor with a bridge and the logic in there. Pretty much every customer that came in requested for another one and for another one and for another one. Before we know it, we have over 120 payment

processor integrations. Now, anybody from any PMS can use pretty much any payment processor in the globe, which is, like I said, it's accidental, but it opens a lot of um opportunity for people to be able to choose the PMS they want to use and the payment processor they want to use without having to compromise either one of them. Yeah, that's amazing. Wow. So, you guys work with 130 payment processors? Yes, under 30 plus now at this stage. Wow, that seems like a lot to keep track

of. Uh I'm sure some of them are more commonly used than others, but how how do you guys manage all that? When you're building it, you don't realize it. And then when when we have to maintain update the APIs and changes, it's really it becomes um a handful, I would say. And we've kind of I mean after building so many, you do have a process and some of them are just one-offs cuz you know one customer with a large number of you know protocol properties wants

to use it and some of them are like concentrated where a lot of people use it in certain countries. We don't keep and maintain all of them. we we see the the activity, the usage, and they're they're still customers using it. Then we continue to to make updates. But some of them customers don't use them anymore. They just, you know, stay in there. So those ones we just kind of, you know, keep them um off the shelf until a customer wants to use it. Then we

may have to, you know, update some of the content. Gotcha. Gotcha. Okay. Well, most of our audience is in the US and most of the short-term rental operators, owners, investors are using Stripe. curious to hear from you. What are maybe like the top three payment processors that you see out there in terms of functionality, flexibility, and and maybe pricing, you know, what are the best ones? Well, I would say I think like I said, Stripe is a default one because it's it's already available in the

PMS. It is the easiest one to get an account with, but it's also not the cheapest. So, most most people go with that as a default. But once you scale up and once you start doing some serious volume then that extra you know 1% that extra half a percent you're paying becomes significant uh when you when you do the total and that's where then people start evaluating what other options you know are there in US you know obviously authorized.net net is a you know a second

probably most popular one um in the industry but also a lot of like big payment processors whether it's Chase payments or there's elevon a handful um I mean a quick Google search will probably give you those ones but these are some of the popular ones that that we work with most people usually switch from stripe if they if if cost savings becomes an important factor and we're the pretty much I would say the only company in the industry that's solving that problem at the moment yeah

the more properties you add and the more direct bookings you do or the more, you know, bookings you do outside of Airbnb or if you're taking payments directly on Booking.com, the more important these these little percentages uh become, you know, and that's just another way for us in the industry to be more efficient and to have more net profit. And I think a lot of people out in the industry right now are there's a lot of buzz about upsells, you know. Uh I think just because

the industry's gotten so competitive and people are trying to find ways to you know squeeze a few extra dollars out but this is one of the things that charge automation does really well uh and helps facilitate. Can you tell us a little bit more about you know what you guys have built and you know chargebacks in general or not chargebacks I'm sorry but yeah so there's a general shift in the industry because it's gotten very competitive now the old school way is you know let me

maximize my ADR right but I think how you have to think about the new way of thinking is not about you know how much you're making for that booking but it's how much you're making for that stay so you may be competitive on the rate but then you have holds additional ancillary revenue opportunities where you maximize that booking. So that booking might have been a $2,000 booking but by the end that stay end up becoming a $3,000 state because the guest has spent on a few

different items whereas you might have lost that customer if you had priced your daily rate at very high but not have any upsells. So it is a competitive strategy and it is the modern way of competing in in the in the competitive SDR industry even the hotel space. So having said that that's where then you want to see you want to optimize your upsells. You know how do you drive maximum conversion upsell and one of the biggest friction point in upsells is when you present the

guest uh an opportunity to buy upselles. A you don't want to bombard them with hundreds of upsells or like some third party website where you just load up everything. It has to be very curated and then from the curated point of view once they want to select you want to show the credit card that they already use with the reservation on at the same level. So you give the Amazon experience where when they see the payment methods already attached, it becomes a one-click upsell where you

just add and complete the payment, right? But if you ask a guest to pull out their card and enter the numbers again to complete that payment statistically uh and this is a data that was done on research is it's about uh 17% loss when you don't have the payment method on file and the conversion. So now if you have the card on file, you're converting 17% more, which is huge. So you're giving the Amazon checkout experience. And then the second part is you have guests coming

from different parts of the world. They're used to paying the way they they pay locally. So you want to give that local payment experience. So if they're used to paying by Apple Pay, give them Apple Pay option, Google Pay. If they are from Brazil, then let's say they they want to pay by Pix. If they from um uh let's say some place in Europe like Holland, uh it's they pay by ideal. That's the way of people how have people pay. So not everybody picks just raw

credit card numbers as a way of payment. So adding that and I can't remember the conversion but I think it gives you another 7 8% better conversion. And that's what we do with charge automation is that we give the guest ability to pay. You could be using stripe you could be using any payment processor. We give the guests a chance to pay through all preferred payment methods and based on where they are and based on their browsers and location will load up the payment method that

is used by the guest. So, he was more likely to convert and pay that upsell. And with that, uh, what we looked at is so far our customers are spending over $180 per reservation in additional upsell revenue, which is huge. And if it, you know, so if a property is taking uh four or five reservations for the month and you're already at a,000 plus in upsell income, but all these little optimizations is where you maximize, not having, hey, I have an upsell, I can sell it,

but it's how you sell it, how you convert it is the most important part. We've spent years and years, you know, optimizing those things and looking at the data and what's working, what's not working, AB testing to say this is how customers are converting. So using professional tools is what helps you convert more upsell. Yeah, some excellent points there. I I know there's just over the years, over the last decade, there's been so many guide book options that have come out and, you know, they're all

helpful for the guests and the guests like to see extra information, but removing those steps basically. You know, making it easier for someone to to add things on. I think getting the reservation in the first place is one thing, you know, and yes, you've got to have competitive pricing and make sure you know what you're doing with your revenue management, know what your market's doing, but then it does create a whole bunch of opportunity after you already have someone. And I'm sure, you know, depending on

your market, you you could come up with some data on, you know, how likely it is for people to purchase the airport transfer, how likely it is for people to to purchase the chef service or whatever it happens to be to really raise the overall net income, right? Yes. And so, yeah, making that easy is uh is a big part. I know before we were with Charge Automation, we we tried a lot of different things. You know, the PMS's have their own versions of upsells. Uh

there's other options out there, but storing the credit card information, like you said, making it easy goes a long way. Indeed. Indeed. And also, when people are on vacation or in a business trip, I know they're not there to read paragraphs of your your guide or, you know, a long information. The old way of doing it was like know once a guest books you know they will receive five messages no and it will be like hey here's a link to complete your check-in here's a link

to do uh ID verification and that's a separate one oh and if you want to read our about property here's a link for it and if you want to buy some services here's another link so now you give me four or five different links and as a guest I I don't want to think I just want to do what I have to do without much thinking so kind of combining all that you know fragmented experience for the guests into like one smooth process where They don't

think they just click click click and and they're done with it is the way like I said the last component of the the checkin is once they complete that process they do I know online checking they pay their secure deposit or the balance they buy some extra services and then the last step is give them access to the guide book where they can see the information without changing the links without going somewhere else just keep it in in the same journey. Mhm. Yeah. It's a big

part of the guest journey what you guys have tackled, you know, from payment to sales to guide books. What's next for charge automation? I mean, what's the next big uh thing to tackle? Good question. We have a lot of exciting stuff that that we're working on. I can't just talk about yet. In terms of uh the product, um you know, we've been at it for quite some time, you know, I think almost 10 years now. So, it is very mature product from that point of view.

But at the same time, we are still a company that's working like we're an early startup. We add I think in every sprint which is our sprints about know about a month or so. And each every sprint know we're adding about 50 60 improvements or features to our product and it's changing drastically every time. And this at this point it's not more one of the big things but it's more like on the micro little things that really impact the guest experience. How do you make everything

extremely smooth without you know any friction at all? And it's just Yeah. So it's a the micro fine-tuning our solution is what we're focusing on because we've tackled all the big important items and then making it to work very seamlessly with your PMS. So you know you're not spending too much time switching tabs. Everything is readily available to you. So all this little increments incremental improvements that we're doing is our focus at stage. Yeah. Well, I know software is just gotten easier to make now. You

know what I mean? It's exciting. We can use AI to help us code and and do things much faster. I'm not a developer, but I I do like technology and I I try to stay up to date with things. How do you see our industry playing out? You know, as someone who's been in the software side of things for the last 10 years, knowing that there's lots of operators out there, especially the larger operators, trying to do some of these things inhouse, you know, or maybe

they're just like you have done over the last 10 years have have solved one little problem and then that turns into two or three. How do you see that changing just the software landscape I guess in our industry? Yeah, and this is this is much bigger question because literally I was talking about like you know how does how's AI going to change our industry because that's how things have gotten much easier and faster to build and we have some customers have also you know built some

aspects of our product in in-house. What's going to happen with with our industry is that a lot of hosts uh who built their own little product and they want to expand it. You might be able to do 80% of the work fairly quickly, but then for the last 20% or all the little incremental changes that you're going to do, that's where really where it begin. The way to give you an example is like if you're building a house, you know, you can easily just put out

the brick, you know, or the concrete pretty easily. But now you got to do the wirings and uh you know, the drainage, all the little things, you know, the tiling and there all this extra finishing that is going to take you a lot more time. So they might kind of save money by doing in house but in the end they will have to hire someone they have to maintain it. So I don't think it will become cheaper. You might say you know I'm going to take

in house and build it but I don't think it will be cheaper necessarily. So it's not a cost-saving strategy. uh if you have a plan to sell that product to somebody else maybe you know there's a bigger picture but to build it in house and to continue to maintain it and remember I mean there's also security issue there's you know maintaining servers know devops I mean it's a much bigger project so companies who are doing it like you know again if you want to build software

tech company yeah you know you can build things uh faster and then keep investing but I look at from the outside you know you know we use AI in all our developments at the stage and we're building things and doing a lot faster but I cannot I see how it would be cost-saving for someone to bring it in house. Yeah. Yeah. Gotcha. Not quite there yet. I'd love to hear you have your own personal portfolio that you had you mentioned and that's kind of where things

have started. How do you mind talking about your personal portfolio just for a few minutes and and kind of how that's changed and what you're doing to to stay competitive? Yeah. So because I'm I'm a user first and you know with my own product we we use before things get released to the public you know we use my own portfolio product uh and it used to be about 200 postco you know I went down to to about uh you know 80 or so and we use

this as as a testing ground for a lot what we built um and I I really experienced everything firsthand and everything that we we built it is to you know benefit my operation which means I know by in turn I'm benefiting other companies as well because everyone has the same issue and also yeah I'm at the stage where also I've been a host for about you know almost 15 years now I have a lot of deep deep experience in the operation and I live it every

day so to me uh optimizing every single component of the journey is is what's important and the maximizing the revenue it's got very competitive and I realized it would not get easier but now you have to think of creatively how to do this obviously I mean there's a pricing tools and the upsells how do you want to test it out does it make sense at then how much do I make so I'm doing a lot of this research uh internally with with my own before you

know concluding if this is a better way to do it. I don't know if you if you have any specific questions about how I'm doing anything else but generally I think what I'm building is what the product charge automation is is direct outcome of my own operation. Well, a lot of good points there. I mean, yeah, the industry's definitely gotten harder and and returns used to be really good and now they're getting smaller and smaller, you know, as more people discovered short-term rentals. And so we

have to learn ways to be more efficient. We have to embrace technology and we have to learn ways to create better guest experiences. And then outside of that, I mean there's a supply and demand equation, you know, and a lot of these markets have seen a lot of supply growth. And you know, my my philosophy in my operation is I don't trust people. Um I trust process because I've been through a lot of stuff. People, you know, people get sick, people leave, quit, people do different

things. So you can't build a business around people. There has to be a process whether that person is there or not. Business has to keep going and I've built um no the automation is really that doesn't rely on a person's knowledge or experience. It's really a process and I and my goal is how do I create a business that can operate whether that person is here or is not there and how can I operate with as little people as possible because that saves you money that

saves you headache and in a competitive uh space you know human labor is the most expensive thing and if you can save that then you're you know then you can you can stay competitive in in this uh in this tough and competitive industry. Yeah for sure. Yeah, those are we share a lot of those same ideas. I mean that's our idea behind Cororsley is you know making things more efficient using more technology and excited to see where you take things with your software companies and with

your portfolio and we'd love to stay connected. Uh how can how can people find you and what's the best way to get in touch? So best way to get in touch again we have uh by email thomaschargeamation.com is the best way to reach us or our website chargemation.com where you can find and learn about our product as well. Uh and I really want to say yeah Nathan know thank you for giving us this opportunity and you know it's it's very very good and to see a

customer that's using our our product and also you know to describe that you have a podcast and be part of it is quite exciting. So I would like to say thank you for this as well. Yeah, you're welcome. Thanks for coming on and and look forward to staying in touch. Thank you. Cheers. Thanks Thomas. Bye-bye.