What is the net transaction value?

Understanding Net Transaction Value: A Key Metric for Travel Merchants

Definition

The net transaction value (NTV) is a crucial metric in the travel industry. It represents the actual amount of money paid by a customer for a qualifying travel service, excluding any ancillary charges such as booking fees and stay-related taxes.

Components of NTV

NTV is calculated by subtracting the following items from the total customer payment:

• Booking fees
• Hotel resort fees
• Taxes (e.g., sales tax, VAT)
• Service charges
• Any other non-refundable charges that are not directly related to the core travel service being purchased

Importance of NTV

NTV is a valuable metric for travel merchants because it provides insights into:

• Customer value: It reflects the actual amount of revenue generated from each customer transaction.
• Pricing optimization: By understanding the NTV, merchants can adjust their pricing strategies to maximize revenue while maintaining customer satisfaction.
• Commission calculation: Many travel booking platforms and agents charge commissions based on NTV, so merchants need to know this value to ensure accurate commission payments.
• Fraud detection: Discrepancies between the total customer payment and the NTV can indicate potential fraudulent activity.

Qualifying Travel Services

To be included in NTV, a travel service must typically meet certain criteria, such as:

• Must be booked and paid for online
• Must be a specific travel product (e.g., hotel stay, airline tickets)
• Must not include add-ons or services that are not essential to the core travel experience

Example

Assume a customer books a hotel stay for $150, including a $20 booking fee and $15 in taxes. The NTV for this transaction would be:

NTV = $150 - $20 - $15 = $115

Conclusion

Net transaction value is a fundamental metric for travel merchants. It provides essential insights into customer value, pricing optimization, commission calculations, and fraud detection. Understanding NTV allows travel businesses to maximize revenue, enhance customer satisfaction, and mitigate risks associated with online travel transactions.