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Non-refundable hotel rates and advance bookings are returning

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Data and anecdotal evidence from a range of companies in the accommodation distribution eco-system shows that perhaps both are true – but that there are some challenges, including on the technical side.

But is this because travellers are becoming more confident they can fulfill their journeys? Or are hoteliers just getting better at marketing non-refundable rooms for advanced booking? 

Rikin Wu, Founder and CEO of DidaTravel, a global bedbank with over 23,000 B2B clients such as travel agents and tour operators buying hotel accommodation, comments: “We are seeing two very important trends emerge this year that might have seen unthinkable until only recently: firstly, non-refundable rates are making a come-back and secondly travellers are starting to book further in advance again.

“In the January to May 2019 period non-refundable was making up around 59% of our sales but that fell to just 26% in 2021. This year so far we’re seeing that figure at 32% and expect to see it steadily grow.

“Meanwhile advanced bookings in the 8-30 and 30+ days range in the January to April 2019 period were around 32% and 23% respectively, falling to just 10% and 2% in 2021. This year during those dates we’re seeing those figures back up to 14% and 7% respectively, with 20% and 7% in May – so still well below 2019, but massively up on last year.

“All of this is a strong reflection of the desire to travel from consumers and their confidence that they can fulfill a journey, based on conversations with our B2B buying clients such as travel agents and tour operators.

“But to a smaller extent credit must go to hoteliers for putting together compelling deals and pricing to entice the traveller back again – they are keen to see non-refundable rates return to pre-COVID levels and are we are seeing them pushing hard for this in our conversations with them.”

Ernesto Sigg, founder and partner at Fitbooktravel, a consultancy specialized in the hotel accommodation distribution space, adds that: “Evidently there has always been demand on the hotelier side to return to non-refundable rates ASAP, but from the B2B distribution side of things – the bedbanks, wholesalers, business to agent platforms, re-sellers, channel managers and connectivity tech suppliers that make up the whole ecosystem of how the vast majority of hotel rooms are sold – there is a certain level of reluctance to do this.

“Why? Firstly as many still have unresolved disputes as to who will foot the bill for the 2020 no-shows on non-refundable rates – the OTAs and tour operators are claiming force majeure. So they don’t want to risk getting back into further disputes and potential liabilities, taking on that risk is definitely not in their model really.

“But from a tech perspective there’s also some challenges too. Switching off non-refundable wasn’t so easy, but they eventually worked out how to do it. Two years of software patches, upgrades, mergers and acquisitions resulting in transferring to new systems, integrations of new partners, new CIOs and so on later…well switching this back on isn’t so easy.

“Slowly but surely though non-refundable is creeping back as buyers such as travel agents and OTAs are open to that conversation again, but not least as hoteliers are pushing for it very hard. Generally speaking we’re seeing this crop up more and more in conversations with people asking us ‘how do I get the mix right and not miss out?’.”

Spencer Hanlon, Head of Travel at Nium, a payments technology provider helping OTAs, airlines and hotels with B2B payments, adds: “We are now seeing the lowest levels of cancellations since COVID started. There were months in 2021 when that rate went over 40%, but this year it has been steadily declining and is now at just 1.74% – that is comparable to 2019.

“Let’s keep in mind that cancellations aren’t just a problem for a hotel because they don’t get paid or have to find another guest at short notice. In fact the whole refunding and updating their inventory challenge is a back-office pain that one-way-or-another costs them money and reduces certainty.

“So it’s no surprise really that now stability in cancellations has returned many want to go back to a model they’d been using for decades and they are finding ways to incentivize travellers to non-refundable rates via great deals and prices. We are likely to see more of this assuming there’s not more volatility from COVID or anything else rocking consumer desire to travel.”

Fabian Gonzalez, the founder and organizer of Forward_MAD, a luxury tourism conference that takes place in Madrid each year, comments that: “Luxury hoteliers everywhere are definitely starting to push non-refundable rates again via deals and promotions as they would like to see the percentage return to pre-COVID levels – not least as in the luxury space travellers really can change plans quickly, leaving full-booked hotels suddenly fully empty for no apparent reason. 

“The challenge these days is to minimize the impact of free cancellation policies 24h prior to arrival. This is going to be a difficult challenge however as such luxury travellers have become used to refundable / pay on arrival rates and generally speaking as used to ‘pay on demand’ services for everything nowadays, including for transport.

“We will see an increase in ABS (Attribute Based Selling) strategies, and a mixture of pricing and exclusivity incentives is probably the way to go, for example there’s only one ‘Presidential Suite’ and if you don’t guarantee the hotel you´ll pay, they can’t guarantee you´ll get it! This is going to be a hot topic on the agenda at our upcoming conference for sure.”

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