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 fraud was the biggest issue. They said, I want your software like yesterday. I'm a user first with my own product that 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 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. More, which is huge. So that booking might have been a $2,000 booking. By the end, that stay ended up becoming a $3,000 stay. Anybody from any PMS can use pretty much any payment processor 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 Tewolde with us. And he is the CEO and founder of Charge Automation. Welcome to the show, Thomas.

Thank you. Thank you, Tim. And 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 we've given you a few shoutouts on the podcast before. You know, 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 way back in 2011. Airbnb was just a year or 2 years old, so it was new industry. Most people didn't understand or have never heard of Airbnb, the word. I had some investment properties that I started doing short-term rental on 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's 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 guests and at the same time do an extra authentication or verification process when collecting the payment. And that kind of eliminated our fraud chargeback. And we were literally, I mean, 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 guest verification process along the way. So that kind of reduced a lot of our issues that we're having with our guests. Frauds. And that was pretty much the beginning. And when other hosts in the community kind of discovered about my tool that was having the same issue, hey, you know, can I use your software because I 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 fraud 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, let's start with what started 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 check-in, 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 some custom questions as a part of the check-in process. And then they said, okay, you've got all of this, it's amazing. But once they do all of that, can I have like a guidebook where they can read the check-in instruction and get the access code? And then we added a guest portal or guidebook, and there was no definition of what we're building at the time. It was brand new. It is what's known as right now guest experience software. So we kind of built it accidental, but also product-led growth where our customers are requesting what they want software to be and they built it. And this is what it is now. This is a full guest experience solution that handles everything from check-in to checkout, what's the 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. It is 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 at, you know, facilitating all of that. And you mentioned, you know, one of the big things, chargebacks. Maybe, you know, for the operators out there that are just getting started or they maybe have 1 or 2 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 chargeback 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 they stayed there for free. Makes a massive impact.

It is. And I mean, I've had many, many stories and it's not just the chargeback. I mean, that's one component of it. So one is obviously the guests stayed, enjoyed their stay, and then they file a chargeback. Now you lost that money. But then typically those kind of guests are also trouble. So they will smoke in the unit, they'll throw a party in the unit, they will, they will, yeah, destroy the place. Your cost is not even the chargeback, it's the whole process. Then you have to block the property for a certain period of time. You've gotta cancel the next booking. It is extremely painful. So if you can prevent it And most people think that if I can just have all the evidence, I have pictures that this person stayed in my property, I'm going to win this chargeback. 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 guests. Yeah, so having that guest authentication upfront really goes a long way. You know, payment gateways and sort of automating that, I think the reality 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 more reasonable fee for processing charge charges with Stripe. Can you talk about kind of what that payment gateway is for those of our audience that 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 collect the payment 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 closed your account for whatever reason that may be. So now you're stuck. Now you need to work with another payment processor. But the problem is that payment processor that you want to work with does not work with your PMS. And this is almost accidental also 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. Can you do this for me? 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 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, 130+ now at this stage. Wow.

That seems like a lot to keep track of. I'm sure some of them are more commonly used than others, but how do you guys manage all of that?

When you're building it, you don't realize it. And then when we have to maintain, update the APIs and changes, it's really it becomes 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 because one customer with a large number of portfolio 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 see the activity, the usage, and there's still customers using it. Then we continue to make updates. But some of them, customers don't use them anymore. They just stay in there. So those ones we just kind of keep them off the shelf until a customer wants to use it. Then we may have to 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 3 payment processors that you see out there in terms of functionality, flexibility, and maybe pricing? What are the best ones?

Well, I would say, I think like you said, Stripe, is the default one because 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 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 when you do the total. And that's where then people start evaluating what other options are there in US, obviously Authorize.net is a second, probably most popular one in the industry. But there's also a lot of like big payment processors, whether it's Chase Payments or there's Elavon, a handful. I mean, a quick Google search will probably give you those ones, but these are some of the popular ones that we work with. Most people usually switch from Stripe if cost savings becomes an important factor in whether pretty much I would say the only company in the industry that's solving that problem at the moment. Yeah, yeah, 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 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, 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 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 upsells. Yeah.

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 all these 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 stay because the guest has spent on 3 different items, whereas you might have lost that customer if you had priced your daily rate at very high, but not having the upsells. So it is a competitive strategy and it is the modern way of competing in the competitive STR industry, even the hotel space. So having said that, that's where then you wanna see, you wanna optimize your upsells, you know, how do you drive maximum conversion upsell? And one of the biggest friction points in upsells is when you present the guests an opportunity to buy upsells, A, you don't wanna bombard them with hundreds of upsells or like some third-party website where you just load up everything. That 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 when, when they see the payment method's already attached, it becomes a one-click upsell where you just add and complete the payment, right? But if you ask the guest to pull out their card and enter the numbers again to complete that payment, statistically, and this is a data that was done on research, is it's about 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 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 don't want to pay by Pix, guests, they're from, let's say, someplace in Europe like Holland, it's— they pay by iDEAL. That's the way people— how people pay. So not everybody takes 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 guest a chance to pay through all preferred payment methods. And based on where they are and based on their browsers and location, we'll load up the payment method that is used by the guest, so he's more likely to convert and pay that upsell. And with that, 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— no, so if a property is taking 4 or 5 reservations for the month, and you already had $1,000+ in upsell income, but all these little optimizations is where you maximize. Not having, hey, I have an upsell, I could 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, A/B testing to say this is how customers are converting. So using professional tools is what helps you convert more upsells.

Yeah, some excellent points there. I know there's just over the years, over the last decade, there's been so many guidebook 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, I think getting the reservation in the first place is one thing, you know, and yes, you've gotta 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 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, is a big part. I know before we were with Charge Automation, we, we tried a lot of different things. You know, the PMSs have their own versions of upsells. 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 on a business trip, they're not there to read paragraphs of your guide or a long information. The old way of doing it was like, no, once a guest books, they will receive 5 messages and it will be like, hey, here's a link to complete your check-in, here's a link to do ID verification, and then there'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 4 or 5 different links. Guest. And as a guest, 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 then they're done with it is the way. Like I said, the last component of the check-in is once they complete that process, they do, you know, online check-in, they pay their security deposit or the balance, they buy some extra services. And then the last step is give them access to the guidebook where they can see the information without changing the links, without going somewhere else, just keep it in the same journey.

Yeah, it's big part of the guest journey, what you guys have tackled, you know, from payment to upsells to guidebooks. What's next for Charge Automation? I mean, what's the next big thing to tackle?

Good question. We have a lot of exciting stuff that we're working on. I can't just talk about yet in terms of the product. You know, we've been at it for quite some time, you know, I think almost 10 years now. So it is a very mature product from that point of view. But at the same time, we We are still a company that's working like we're an early startup. We add, I think on every sprint, which is our sprints about, you know, about a month or so, in every sprint we 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 and more on 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 micro fine-tuning our solution is what we're focusing on because we've Called 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 that incremental improvements that we're doing is our focus at the stage. Yeah.

Well, I know software has 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? About, 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 in-house, you know, or maybe they're just like you have done over the last 10 years, have solved one little problem and then that turns into 2 or 3. How do you see that changing just the software landscape, I guess, in our industry?

Yeah, and this is much bigger question because literally I was talking about like, you know, how does, how's AI gonna change our industry? Because that's how things have gotten much easier and faster to build. And we have some customers have also built some aspects of our product in-house. What's going to happen with our industry is that a lot of hosts 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%, for all the little incremental changes that you're going to do, that's where really where it begins. The way to give you an example is like if you're building a house, you know, you can easily just put up the brick or the concrete very easily, but now you got to do the wiring. And, you know, the drainage, all the little things, you know, the tiling and 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, have to maintain it. So I don't think it will become cheaper. You might say, you know, we're taking the house and build it, but I don't think it will be cheaper necessarily. So it's not a cost-saving strategy. 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, to continue to maintain it. And remember, I mean, there's also security issue. There's, you know, maintaining servers, you 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 faster and then keep investing. But I look at it from our side, you know, we use AI in all our developments at this stage and we're building things and doing a lot faster, but I cannot 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 there used to be about 200. Post-COVID, you know, our went down to about, you know, 80 or so. And we use this as a testing ground for a lot of what we build. And I really experienced everything firsthand and everything that we build, 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 I've also, 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, optimizing every single component of the journey is what's important. And then maximizing the revenue. It's gotten 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 pricing tools and the upsells. How do you want to test it out? Does it make sense? And then how much did I make? So I'm doing a lot of this research internally with my own before concluding if this is a better way to do it. I don't know 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. It is direct outcome of my own operation.

Well, a lot of good points there. I mean, yeah, the industry's definitely gotten harder, 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 just seen a lot of supply growth.

And, you know, my philosophy in my operation is I don't I don't trust people, I trust process because I've been through a lot of stuff. 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, the automation is really, that doesn't rely on the person's knowledge or experience. It's really a process. And my goal is how do I create a business that can operate whether that person's here or is not there, and how can I operate it with as little people as possible? Because that saves you money, it saves you headache, and in a competitive 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 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 Coorsly, is, you know, making things more efficient, using more technology, and excited to see where you take things with your your software companies and with your portfolio and would love to stay connected. 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, again, by email, thomas@chargeautomation.com is the best way to reach us, or our website chargeautomation.com where you can find, learn about our product as well. And I really want to say, yeah, thank you for giving us this opportunity. And, you know, it's very good, very good. And to see a customer that's using our product and also to, 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.

You're welcome. Thanks for coming on and look forward to staying in touch.

Thank you.

Cheers. Thanks, Thomas.

Bye-bye.