Staying ahead of platform policy changes is crucial for maintaining a competitive edge in hospitality. Booking.com has announced a significant shift in their prepayment policies, specifically affecting Ireland, Greece, and Poland. Booking.com continues its dominance, bringing in the highest booking revenue to hotels in the UK and Ireland.
Understanding the policy change
Starting in 2024, Booking.com will discontinue supporting prepayment policies for some partners who charge guests directly. This means that hotels currently offering prepaid rates will no longer be able to do so unless they use Payments by Booking.com.
Prepayment policies have been an integral part of revenue management strategies, offering a way to secure bookings, manage cash flow, and reduce cancellation rates..
Why is Booking.com making this change?
Booking.com states that this move aims “to help improve transactional security and create a more trusted platform for guests and partners.”
However, industry experts suggest that another motive could be gaining control over prepayment funds. By holding onto these funds, Booking.com stands to benefit financially, earning interest
Implications
Prepayment rates, typically 10-20% below the Best Available Rate (BAR), have been an effective tool for securing early bookings and managing cancellations. Without this option, hoteliers might face increased uncertainty and potential revenue fluctuations.
Here’s a closer look at the key implications:
Cash flow management: Prepayment policies provide a steady cash flow, helping hotels manage operational costs more effectively.
Cancellation rates: Prepaid rates often come with strict no-refund policies, which deter cancellations. Removing these could lead to higher cancellation rates.
Price sensitivity: Prepaid rates attract price-sensitive customers. Losing this segment could affect overall booking volumes.
How to adapt and thrive
While this policy change presents challenges, it provides an opportunity to strengthen direct booking channels and shift relationships with the customers to a direct one.
Promote advanced booking rates: Although Booking.com will limit prepayment policies, you can still offer advanced booking rates on your direct channels. Promote advanced booking rates at 15%-20% discount to BAR to bring price-conscious customers through your website.
Enhance your direct booking strategy: Encourage guests to book directly through your website by offering exclusive discounts or added value packages. Highlight the benefits of booking directly, such as flexible cancellation policies, loyalty programs, and personalised services.
Enhance digital marketing efforts: Invest in targeted digital marketing campaigns to promote direct advanced booking rates. Leverage social media platforms, email marketing, and pay-per-click (PPC) advertising to reach a broader audience and drive traffic to your website.
Optimise your website for direct bookings: Make your website the go-to platform for guests by offering an engaging online experience. Ensure your website is user-friendly, mobile-optimised, and visually appealing, a seamless integration between your website and online booking tool is essential.
Increase revenue per booking: Allow guests to book their entire hotel experience; room, restaurant reservation, spa treatments and more, all through one single checkout. Effortlessly offer extras and upgrades and allow your guests to customise their bookings, to further increase the average spend of your guests.
Booking.com’s policy change on prepayment rates is a significant shift for hoteliers. While it poses challenges, it also offers an opportunity to strengthen your direct relationship with the guest.
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