3 Great Reasons To Be Merchant of Record

By Michelle Marquis, Chief Revenue Officer at Lexicon Travel Technologies

There’s an old joke about the Golden Rule: Whomever has the gold makes the rules. 

Okay, sure. But what does that mean for a property management company? Your job is to make homeowners and guests happy, not to process their transactions. Right? 

Not so fast. In fact, it’s because you have to please both homeowners and guests that being merchant of record, or MOR, might be just the ticket. If you already take bookings directly through a payment portal on your website, then effectively you already are an MOR. But there are ways to extend your MOR status through the OTAs, effectively retaining that control and flexibility. At a minimum, it’s useful to understand how OTAs settle payments. 

This article discusses the advantages of being MOR.
 
What is a Merchant of Record? 

Simply put, the merchant of record in an online transaction is the party that processes and distributes the actual payment for a product or service. For example, large e-commerce companies usually are their own MORs, while smaller ones (or those who don’t want to deal with the hassle) rely on third parties such as PayPal or Venmo to handle it. 

Being MOR can narrow the gap between you and your customers and give you more control over your fate than you ever thought possible. Any channel manager that requires all payments to be processed through them merits scrutiny. Point being, don’t be too quick to surrender the control and flexibility that being MOR offers. 

So, without further ado, we present three good reasons to be merchant of record. 

Reason One: Control 
Not only do you have homeowners to pay — you also have your own costs. Employees, supplies, office lease, etc. But when the money handling is outsourced, that puts your primary revenue source (and cash flow) in someone else’s hands. In other words, you wind up on someone else’s schedule. That’s the difference between riding the bus or taking your own vehicle. One isn’t necessarily better than the other, but there’s no question which is more convenient. 

If you’re not MOR, what happens if your homeowners don’t happen to like the payment schedule forced on you by whatever party IS your MOR? Unless you want to get off-cycle and put yourself in a precarious cash-flow position, your hands are tied. But if you’re MOR, you can set the terms yourself to suit your own accounting preferences and those of your homeowners. That’s pretty cool. 

Another aspect of control is related to inventory. OTAs don’t actually process credit card transactions at the time of booking, but the unit disappears from your inventory just the same. If that transaction later goes bad — and many do — then you might lose that booking without ever getting the chance to fill it. By the same token, you can’t see which bookings get flagged for an error like a transposed credit card number, and therefore can’t reach out to the guest to get it straightened out. The MOR has to do that. 

Bottom line: If you like being in control, being MOR helps you keep it. It’s an added responsibility, but if you like being at the helm, it’s worth considering. 

Reason Two: Guest and Homeowner Service 
Taking care of guests and homeowners is pretty much why you get up every morning, right? So why would you accept any compromise that imperils those relationships? 

Let’s say a large group books a 5BR/4BA for a holiday weekend. The weather’s terrible over the weekend so they want to extend by a day. It’s available, so one of the guests walks in with flip flops and a towel over their shoulder, whips out their credit card and says, “Let’s do it. One more night, please.” 

If you’re not MOR, you can’t just run that transaction. In fact, there’s not much you can do at all but ask that they either book the extra night through an OTA or do it through your website. 

Is that the kind of situation you’d want to be in? A guest is standing in front of you with $500 of juicy revenue that you can’t just take? It’s embarrassing and time-consuming, but if you were MOR, it wouldn’t be necessary. You could just run that credit card while they wait, hand it back, and wait for the receipt to print. Instead, you and the guest have to jump through a bunch of irritating hoops. 

Consider a situation where your cancellation policy is too restrictive for most guests because it’s based on the distribution cycle of your MORs. Could you change it even if it disrupted your cash flow? That’s the kind of flexibility being MOR gives you. 

Reason Three: Branding 
Brand and reputation play a big role in property management. If you spend decades building a customer base that knows and trusts you, then what happens if third-party MORs are responsible for processing transactions and distributing the very funds you use to keep your business alive? 

Imagine you take all your vehicles to the Al’s Auto, and have for years. But now, instead of paying Al, you pay someone called RepairBank LLC because they’re MOR and they had cheaper fees. Suddenly, RepairBank LLC is part of your brand chain. If they screw up, it reflects badly on you but it doesn’t really work the other way around. You’re at their mercy. 

Being MOR keeps it all “in the family,” so to speak. If integrity and stellar service are a big part of your brand reputation, do you want to mortgage any of that to a third-party MOR that may not share those values? If you’re a buck-stops-here kind of person, being MOR might be just the ticket. 

Automating Aspects of MOR Operations 

As you might have guessed, becoming MOR carries with it some extra responsibility. In your world, that might be the last thing you want. But being MOR doesn’t necessarily mean switching from Funyuns to Responsibilityuns. 

Contacting OTAs to report bad transactions and get a property back in inventory right away, for example, can be automated (a feature built into Lexicon’s software). Once you take that out of the equation, then setting up a merchant account is pretty straightforward. Yes, you have to do more accounting but for small to medium businesses, that’s never been easier. 

A quick note on OTAs: Because they also work with large hotel chains who prefer to be MOR for all bookings, most OTAs offer partners the flexibility of processing their own payments, either through a virtual credit card or simply passing along the full credit card information to the vendor at the time of booking. Sometimes it’s up to the guest; in the case of international guests, the OTA might be the only option for payment processing. 

Expedia, for example, calls this “Hotel Collect.” The details of these programs fall outside the scope of this article, but if you want to be MOR for most of your bookings, it’s definitely worth looking into. Don’t give up being MOR if you don’t have to. 

Summary 

Being merchant of record for your company across the board (or at least, as much as possible) comes with many caveats, but we believe the benefits are worth the effort. Control is reason enough, but guest service and branding are pretty compelling reasons, too.
 
When you really think about it, many of the solutions out there today sell convenience and efficiency at the expense of control and agency. And, indeed, sometimes that’s a fair trade to make. But MOR isn’t something you should give up lightly. Ideally, the choice should be yours. 

But what’s convenient for you isn’t necessarily convenient for your customers, and vice-versa. Only you can know what payment-processing model fits your business.