Industry News

Are Fixed Term Contracts a Good Thing, or a Red Flag?

It’s time we talked about contracts. So let’s compare fixed term PMS contracts with simple month-to-month user agreements.

FROM THE SERVICE PROVIDER’S VIEWPOINT

As a service provider, I’d prefer that all my clients were locked in to a fixed term contract. 24 months is good. 36 months is better. It provides a stable and predictable income for the SaaS provider. It’s also the conventional way business is done. However, tricky issues can arise during any fixed term. Perhaps service delivery starts well but after time it deteriorates. It’s no longer as impressive as the pre-signing sales pitch said it would be. 

What then? 

Seeking a resolution can be time consuming and burdensome. Efforts to do so may be only partially successful. If so, dis-satisfaction will creep in and erode the client-provider relationship. None of that is good. 

As a buyer of said service, what do you do when the provider doesn't deliver what was promised? Negotiate? Sweet talk? Nag? Threaten legal action? Or just put up with it? Whichever way you go, it’s unsatisfactory and it’s difficult. Mighty difficult. 

FROM THE CLIENT’S VIEWPOINT

As a buyer, I’d very much prefer not to be locked into a multi-year contract. So if the service standards drop and my negotiations with the company are fruitless, I’m free to walk away. 

Of course, where there is only one service provider, buyers are stuck because of the monopoly situation. Happily buyers of Property Management Services (PMS) are spoilt for choice. There’s no need to be tied down by a long fixed term contract unless you want to be. 

Which is my cue to tell you how things work at Resly. 

THE RESLY BUSINESS MODEL… REFRESHINGLY DIFFERENT

From the very beginning, when Sam and Rico were shaping the business concept, they wanted Resly to be different. The whole question of “contracts or not” is something they considered very early on.  And what they decided has worked out very well, both for their clients and for the company. When I asked him why they chose to run the business without lock-in contracts, co-founder Sam Steel put it this way:

Often we hear about hotels signing an agreement with another supplier after being promised the world, then once they go live nothing happens and it turns out the promises of new features and new functionality were heavily exaggerated. But the supplier doesn't have to worry about that because they’ve got the client locked in for 24 months or longer.

In researching for this article, I ran across something that American consumer advocate Clark Howard said. He hit the nail right on the head. 

Companies that do a really good job at customer service virtually never require you to sign a contract. Their whole culture is about making you happy, while the lousy companies just try to loop you in to a multi-month agreement. (Clark.com

That’s what the Resly business model is all about. Making clients happy. That’s the focus there. As Sam put it, 

“We are so confident of our product and service that we don’t have  fixed term contracts.” 

At Resly, the clients are in the driver’s seat. As a no-contract service provider, if they let the standards slip, clients can walk. There’s no legal document to lock them in. Their user agreements are month-to-month with no minimum term so if Resly fails to deliver, they are free to go, with no financial penalty. 

As Sam said, “It keeps us on our toes.” 

So I asked him one last question. 

“Ever had a client walk away?”

“Nope. We’ve been blessed with 100% retention.”

No wonder! 

Switch Hotel Solutions takes the same approach, none of our contracts are locked in for our clients. We back ourselves to provide the best service for each and every client. Its the new age approach - if your provider locks in you, you should be asking the question why!


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