COVID-19 has changed guest’s expectations in respect to travel. The uncertainty experienced during the pandemic has resulted in a desire for flexible booking arrangements and an assurance that cancellations will not incur unnecessary costs.
Before COVID-19, guests agreed to make a total or partial payment in advance to receive discounted rates for their reservations. Guests were made aware and accepted that the advanced payments were either non-refundable or perhaps had stringent cancellation clauses. Hotels offered the discounts to increase reservations online and to speed up their own cash flow, with payments being processed via the booking engine of the hotel website or through Online Travel Agents (OTA’s).
When COVID-19 struck, governments restricted travel and imposed lockdowns, making it impossible for guests to stay at the properties they had booked. This resulted in requests for all refundable and non-refundable payments to be reimbursed. Some OTAs and hotels stuck to the non-refundable clause and no payments were refunded to guests. Most hotels did a relatively good job at refunding reservations made via their website, or by at least offering a credit for a future stay, but those reservations booked through OTAs, were often not dealt with in a timely manner.
Guests had bad experiences with the OTAs because it took a long time for them to be serviced due to their lack of capacity to handle so many cases at the same time. It is doubtful that the OTAs will be able to regain the confidence that guests, as well as hoteliers, had in them. Many publications are advising guests to avoid intermediaries (OTAs) in the future and book directly with hotels with flexible booking options.
How and when the COVID-19 pandemic will be controlled is unpredictable because, as the press informs every day, its recurrence and impact is unexpected. Furthermore, could there potentially be another COVID?
The uncertainty surrounding the pandemic has definitely influenced guest behaviour. Confronting a doubtful future, guests are unlikely to follow past practices as described above. Now they not only want but insist upon, flexible booking and worry-free reservations.
It is a reservation that costs nothing to make or cancel. It doesn’t have any pre-payments and it can be cancelled at any time before arrival without penalty. If guests cannot stay and they advise the property that they cannot proceed with the booking, no payment or penalty is applied.
In the new normal, hotels would have to offer worry-free reservations to persuade guests to reserve online. This is a tough decision, but if not taken, the profitability and sustainability of the business could be at stake.
Create additional rate plans that:
The days of full non-refundable advance payments are probably temporarily gone. Properties that continue to ask for them will have few, if any, reservations unless they are in a high demand area. Those that ask for refundable advance payments with time-bound cancellation clauses, will also have reduced reservations.
The trade-off between advance and non-advance payments is cash flow for those properties not operating a trust account. Any reduction in advanced payments will undoubtedly impact cash flow. However, what is the best outcome? To have reduced cash flow or to have no cash flow at all? Furthermore, payments made at the time of arrival at the hotel will eliminate potential refunds and their subsequent processing costs.
Time-bound cancellations are usually imposed in order to avoid having empty rooms during periods of full occupancy. However, when occupancy is low, offering flexible booking with free cancellations could make the difference between winning the reservation or losing it altogether. This has become such an important point that even Google has introduced a filter to show the listing of only those hotels that offer free cancellation.
Rates negating the requirement for advance payment and which offer free cancellation are very easy to implement. These should at least be tested over a period of time to determine whether they result in increased occupancy.
The accommodation environment is certainly very different today than it was 8 months ago and no one would imagine that this would be something to consider. But times have changed and until the world of travel changes once more, accommodation providers need to adapt their prior business model accordingly.
By Carlos Zulberti
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