DRIVING WITH THE HANDBRAKE ON: Navigating the Hosted Accommodation Business
In the dynamic world of hosted accommodation, owners often find themselves facing challenges that can either accelerate or impede their success. One practice that some accommodation providers employ is staying under the sales tax threshold to avoid taxes.
This was the topic of discussion in a group that I’m a part of. It certainly isn’t the first time I’ve heard of a business owner limiting their earnings to avoid the tax man.
In this blog, we will explore this strategy and draw parallels with the concept of driving with the handbrake on. Emphasising the importance of embracing commissions as a vital aspect of marketing. And taxes as necessary cost of doing business.
The Handbrake Analogy
Imagine cruising down the highway with the handbrake engaged. The vehicle struggles to reach its full potential, expending unnecessary energy and hindering overall performance. Similarly, some hosted accommodation owners attempt to operate under the sales tax threshold to sidestep taxes. This approach can be likened to driving with the handbrake on, limiting the business's growth potential and hindering its ability to thrive in a competitive market.
Understanding Commissions
Commissions, often viewed as a necessary evil, are better understood as a strategic investment in the business's growth. While it may seem tempting to avoid these fees, especially for smaller establishments, they play a crucial role in amplifying the property's visibility and reach. Commissions can be reframed as a marketing fee, paid to businesses that act as valuable intermediaries, effectively advertising and promoting your accommodation to a broader audience.
Commissions as Marketing Fees
Consider commissions as a partnership with marketing experts who specialize in promoting accommodation businesses. By partnering with online travel agencies (OTAs) or other platforms, owners can tap into a vast network of potential guests actively searching for accommodation. The commission paid is essentially a fee for marketing services, ensuring that the property is prominently featured, reaching a wider audience and driving bookings.
The Pitfalls of Avoiding Commissions
Attempting to stay away from third party bookings to bypass expenses incurred with commissions may seem like a cost-effective strategy, but it comes with its own set of pitfalls. Limited visibility, reduced booking opportunities, and a narrower audience reach are just a few consequences of driving with the handbrake on. In the long run, the potential loss in revenue and growth opportunities far outweigh the perceived savings.
Unlocking Growth Potential
Instead of viewing commissions as a burden, hosted accommodation owners should recognise them as a valuable tool for unlocking growth potential. Embracing commissions means embracing strategic partnerships with online platforms that can elevate your property's visibility, attract more guests, and ultimately contribute to sustained success.
CONCLUSION
In the hosted accommodation business, driving with the handbrake on, metaphorically represented by avoiding commissions and not paying tax, hampers growth and limits opportunities. Commissions, when seen as marketing fees, play a crucial role in expanding reach and driving bookings. Rather than viewing them as obstacles, accommodation owners should embrace commissions as an essential component of a successful marketing strategy, propelling their businesses forward in a competitive landscape. By releasing the handbrake and navigating the road with a clear strategy, hosting accommodation providers can unlock their full potential and enjoy a smoother journey to success.
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