How would you feel about letting a guest stay on credit? How about they stay at your property no questions asked and you receive payment sometime during the following month? No security deposit, no payment at all, just good old fashioned good faith. What do you think? Are you happy with that? Can a business really survive on that or take that risk?
I think the answer from most of you would be a resounding “no!” It is not just a lack of faith in human nature that would cause most of us to answer “no” to this question. Of course, you would run the risk of being taken advantage of by the unscrupulous types who never had any intention of paying, those who consider it quite acceptable to take advantage of your good nature from the outset. But in this day and age there is more to it than that. In the current economic climate, it would not be unusual for people to find themselves in a position where they were unable to pay. Whether because of bad planning or bad luck, they may find that they simply are unable to meet the commitment they had made. If their financial situation was to take a sudden turn for the worst, or other crucial and unexpected costs come to the fore, you may find yourself at the bottom of their priority list.
This is not rocket science and you are probably wondering why we are putting such emphasis on this idea. I doubt that there would be any savvy business owners out there who would be prepared to take this risk.
Why is it then accepted and expected that accommodation operators are prepared to do exactly this on a daily basis when it comes to dealing with Online Travel Agents. Many of these OTA’s have very little substance, they spring up one day and are gone the next. HiRUM is approached on a regular basis by “entrepreneurs” who believe this is easy money and want to use our technology to get them the stock to sell. They see accommodation operators as easy prey as despite there being several online providers going in to receivership in the last year alone, resulting in many resorts losing substantial amounts of money, operators still agree to the same terms of credit. Send us the people and pay us later.
It shouldn’t matter how well known the OTA is, they are just as much of a credit risk as Joe Bloggs off the street is. Perhaps even more of a risk when you dig into the financials of the company itself. It’s time the operators dictated their own terms of trade no matter who they are dealing with. Don’t be afraid to negotiate with them. At the end of the day, without your stock, they don’t have anything to sell.
Remember, generally they have already collected payment, and readily take a cancellation fee or booking alteration fee for themselves if the guest pulls out last minute, but the accommodation provider is sometimes left with nothing, …..just an empty room and no income for the manager or the owner! Worse still, if the OTA finds itself in financial hot water, you may end up missing out on payment even though the guest has already stayed. You just need to look at Check-In.com and World Tourism in recent times to see how quickly and easily this can happen.
There are many good OTA’s that do not collect money from the client, allowing you to collect it upon arrival or even prior under your own terms. These are the ones that you should focus on as any risk associated with their own business security is not borne by you or your owners.
Watch this space…..there may be better alternatives on the way…
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