How To Update Your Rate Plans And Cancellation Policy To Maximise Direct Bookings
Created for small, independent hotels, lodges, b&bs and hostels.
A recent Phocuswire survey¹ states that “83 to 92% of travelers across all markets want clear and easy-to-find information about refunds, cancellations and rebooking options”.
A Booking.com webinar reported the results from a late 2020 traveller sentiment survey that asked the public to rate which factors are the most influential in their decision to travel. Free cancellation and the freedom to change dates rated in the top three decision-making factors, along with enhanced cleaning and hygiene policies.
An industry recovery survey from the US concluded that reducing rate is not the #1 strategy hoteliers are using to win back guests. Adding more flexible cancellation policies is their chosen route.
The Covid pandemic has changed the entire traveller journey. Now, trip research starts sooner, but travellers are waiting to book closer to departure.
What does this mean for your hotel, lodge, b&b or hostel?
Anyone who travels in 2021 will want to be sure they can make last minute changes without being penalised. The message is loud and clear. Your job is to update your Reservation and Cancellation Policy so that it reflects this new customer sentiment.
Of course, flexible booking conditions can generate more cancellations, but this is nothing new. If you have made it this far, you cannot risk elimination from the race now because you are unsure where to start with updating your policies.
Read on to find out more.
In this blog we will:
Learn about Proactive and Reactive rates and when to use them
Offer one simple way to include Responsible Tourism practice in your business
I urge you to see the great opportunity here to take back control of your sales and pricing strategy.
By really understanding how your rate plans and your cancellation and prepayment policies can work for you, you can begin to build confidence in the battle to reduce your commissions and generate more direct bookings.
Who doesn’t want to feel that they confidently use OTAs like Booking.com to their advantage, instead of feeling used by the OTAs?
I am big, huge in fact, on managing a balanced sales and marketing strategy that includes maximising your visibility on the OTAs, while optimising your chances of increasing direct bookings.
Think of these updates as a long-term remodel that will be relevant long after the pandemic is just a distant memory. Yes, it is designed to help you take back control right now, but it will also sow the seeds for higher profit margins when international travel returns.
This is just the beginning. Let’s get resilient.
So, that said, let’s get some jargon out of the way.
What is a Rate Plan?
A Rate Plan describes the combination of different factors that make up a booking. These include cancellation policies, prices, number of days between booking and check-in, length of stay, room or unit type and meals if they are available.
Examples: Standard Rate, Half Board Rate, Non-Refundable Rate.
What is a Cancellation Policy?
A Cancellation Policy is created independently of your Rate Plans and is then applied to your Rate Plans.
Example: Flexible Cancellation Policy - the guest can cancel free of charge until 48 hours before arrival.
You add a Cancellation Policy to a Rate Plan for example:
To summarise, this means that the guest books at the published rate and can cancel free of charge until 48 hours before arrival.
What is a Prepayment Policy?
Your Prepayment Policy usually forms part of your Cancellation Policy and sits within its text. This can be as simple as “No prepayment is required for this reservation”.
In our example above it would look like this:
To summarise, this means that the guest books at the published rate and can cancel free of charge until 48 hours before arrival. There is no deposit to guarantee this reservation.
Prepayment policies can also be more complex. See example here:
Partially Refundable 7-day Policy - the guest will be charged a non-refundable pre-payment of 30% of the total price after reservation and the remaining amount in the 7 days before arrival. 100% will be charged if the guest cancels within 7 days before arrival.
This type of more complex prepayment policy can be applied to a standard rate in the high season for example, in order to minimise cancellations. It avoids creating and applying a 100% non-refundable rate plan, which can be off-putting to some customers.
Note: When creating Packages such as room night + private transfer in + evening meal + horse ride for example, you can apply any of your already created cancellation policies to those too.
What is a Reservation Policy?
Your Reservation Policy is essentially an umbrella term that details all of the above, and also explains how the property receives reservations.
"We offer different types of rates and policies. The information of each is detailed alongside the room type or package you choose. You can make an (immediately confirmed) direct reservation via our website. You can call us on [XXX] or email us at [XXX]. We are also happy to answer any of your questions via WhatsApp".
Top tip: Installing a Whats App button on your website is free and easy and allows for immediate communication with your prospective guests. This can be a deal maker in the effort to encourage more direct bookings therefore reducing commissions. How to do this, and more will be covered in the online course. Join the wait list here today.
So, let’s get to it!
My husband wouldn’t necessarily agree with this, but I am a big fan of order! I suggest you give your Rate Plans and Policies names. They don’t have to be fancy names. They can simply be Standard Rate Summer, Standard Rate Winter, Flexible Cancellation Policy etc. Keep one master list, share it with staff and print it out for reception. Consistency avoids confusion.
What are the minimum Rate Plans you need for our post-recovery travel world?
Every hotel, lodge, B&B and hostel should have a clear offer that includes these three rate plans right now:
As we already saw above, the market demands flexibility, so we have no choice but to add that into our mix.
Example of a Standard Fully Flexible Rate:
Guests can cancel up to 24 hours before date of arrival free of charge or modify the dates of their stay according to availability.
You can of course choose to extend the cancellation period to 48, 72 or even a week before date of arrival. That choice is yours. However, the more flexible you are the more likely you are to bag that booking.
Example of a Non-Refundable Rate:
There is definitely a place in the market for great deals right now, and so a Non-Refundable rate is appealing to those who book closer to the date of travel. Maybe they already have received a Covid vaccination, or they have a negative PCR test and are already within 72 hours of the date of their arrival. In today’s world, these rates are particularly attractive to the domestic market that is unaffected by international travel disruptions.
You can offer a significant discount for 100% pre-payment that is non-refundable in case of cancellation.
Example of a Early Booking or Book Now Pay Later Rate:
Given the huge amount of pent-up demand, Early Booking or Book Now Pay Later Rates are extremely attractive for convincing people to take the decision on where to stay and locking them in.
You can set your Early Booking Rate for any stays reserved after 3 or 6 months from now for example. Offer an attractive rate with no deposit requirement and the ability to modify the dates without charge. This will of course require follow up closer to the time to check if the guest wants to maintain the reservation. See this as a great opportunity to get to know more about what the customer wants and offer them upsells such as add-ons and upgrades during that contact process.
So, there you have it. These are your three Base Rate Plans:
Standard Fully Flexible Rate
Early Booking or Book Now Pay Later Rate
Create some Reactive and Proactive Rates.
Both Reactive and Proactive Rates are essentially certain fixed percentage discounts that are applied to the three Base Rate Plans that are detailed above. They are primarily used as marketing tools to appeal to the needs of the customer as they move through their research and booking journey.
What is the difference between Reactive and Proactive Rates?
Reactive Rates are rates that you can pull out of your hat according to the current state of your reservation calendar.
An example is a Last-Minute Rate that you can have ready to publish, activate, share and offer when demand drops, and you need to fill your rooms.
This rate has a different marketing power to your Non-Refundable Rate as it can still include a flexible cancellation policy:
Guests can book at a discounted rate for stays that begin within 48 hours for example. The guest can cancel free of charge until the time of arrival and there is no deposit to guarantee this reservation.
Proactive Rates are rates that you create according to more general current travel trends, so that you stay in the game and cover all bases when it comes to what the travelling public is searching for.
You can create them right now, and then publish them when and as you please according to trends that you see emerging. Or you can just get them published and see what works.
Examples of Proactive Rates are:
Once again, these Proactive Rates are essentially certain fixed percentage discounts that are applied to the three Base Rate Plans that are described above.
Here we go into a little more detail about each of these Proactive Rates:
Repeat Customer Rate
Admittedly, this is nothing new. Loyalty schemes and rewarding those who return to stay with you more than once a year is an important part of building brand ambassadors and generating positive recommendations. However, in today’s world, personalisation and connection are buzzwords so why not think of ways to reward your repeat customers. This does not have to be in the form of a discount, in fact, adding value based on personal preferences can often have a bigger impact on the guest than a standard monetary discount.
“Understanding [your customer’s] wants and needs every step of the way will not only accelerate recovery, it will win future customer loyalty.” ²
Long Stay Rates
The OTAs are encouraging properties to offer longer stay discounts on sites like Booking.com as they themselves have detected the need to compete with Airbnb. If you do the same, you give yourself a chance to win the direct booking and eliminate the commission you would pay to the OTA. If you do nothing, you are not in the game!
The idea of travelling less but better has come up again and again in recent traveller sentiment surveys. Increased awareness about the fragile state of the environment is encouraging people to shift towards longer, more immersive trips. If you publish a longer stay rate, (that can be anything from 5 days upwards), then you show you are in touch with this travel trend and it will help you to capture demand.
See also the idea for a Stay Another Day Campaign later on in this article.
Family Groups and Multi-Generational Travel Rates
There is a consensus too that Family Group and Multi-Generational Travel will see an increase over the next year or so as the trend for reunion get togethers allowing for whole families to reunite become more popular.
Think about your property set up. Do you have an entire wing you can price out for a private group? A whole floor, or an independent cabin or chalet? Set a price for a long weekend stay for example and encourage groups to get in touch for a personalised quote.
Just another tactic to get in the game!
I have also noted quite some nods towards an increase in Parent-Only travel. After months of home schooling, this can be as simple as a 2-night weekend stay somewhere for parents who can finally leave the kids with recently vaccinated grandparents.
Phil Salcedo from HolidayPirates has confirmed that they have “already seen an increased interest in the adults-only offers on [their] website”. ³
Create a standard package and get it out there. Include language that clearly states the intention behind it. Let’s be honest. Every parent is thinking the same thing right now, so use it to your advantage. “Kids can finally stay over at Grandma’s again? Enjoy a 2-night relaxing stay with us. Includes XYZ”.
You have to be in it to win it!
WhatsApp Reservation Rate
As for a discount for reserving via WhatsApp! Why not? Think of it as taking back control from the OTAs by competing against the Mobile Phone Rate that they encourage us to apply to our profiles. You are not breaking any price parity clauses. It is a purely healthy, competitive and strategic move.
Look at why and how you can compete with the OTAs
As I mentioned at the beginning, I am all for including OTAs in your marketing strategy.
Why? They are great for visibility and there will always be someone who chooses to book through them. However, it is easy to begin to feel that you are losing out if you don’t participate in the newest flash sale, or the latest cleverly designed promotion. That is a warning sign for you that the OTAs marketing is working its magic on you.
The discounts that the OTAs encourage us to validate online are almost always stackable, so if you have the Genius plan activated on Booking.com with a 10% discount, then you activate a mobile rate at 10%, plus a country rate at 5%, the total discount on your published rate is already 25%. And that is before taking off the 14 to 17% commission and then any national business tax! Ouch!
Don't panic and close your profiles though!
Ultimately, there is nothing wrong with their business model, after all, we are operating in a free market, but your job is to get smart and maintain your visibility on certain OTAs while building confidence in your bigger marketing strategy that encourages a healthy distribution mix. Shining bright as an independent property by personalising your offer and rewarding the choice of those who book direct is a wonderful business goal to have!
So, take back that control, work on creating clearly defined Base Rate Plans and add in a couple of Reactive and Proactive options to get back in the game.
How to include Responsible Tourism practices at your property
If you have read my other blogs, or are in my Building Tourism Resilience Facebook community you will know that I am passionate about Responsible Tourism. Enough to have done a whole Masters on it!
I have a firm belief that we can all do better with small actions that stack up and are capable of turning tides. My goal is to share with you what Responsible Tourism means, and to encourage you to work out what you can do to make a difference, however small.
Responsible Tourism is no longer just a desired model for the industry. "Build Back Better", "conscious comeback" and "regenerative tourism" are becoming mainstream concepts, not just catchy taglines. Millennials are now 25 to 40 years old and the older end of Generation Z are almost 25 years old. David Attenborough and Greta Thunberg have influenced them, as well as everyone else. There is an argument that we should never return to 2019 levels of tourism, meaning that there is a increasing number of customers asking ever more questions about our responsible business practices.
This is, and actually was, a discussion for a separate blog that you can find here. If you are interested in knowing more, a free download on Responsible Tourism Practices is available at the end of that article.
But for now, Responsible Tourism is all about creating “better places for people to live in and better places for people to visit”. IN THAT ORDER. A better place to live in first, before considering how to cater for tourism.
So, how can you show your awareness of Responsible Tourism?
Easy! Tied in with the Proactive Rates idea, one simple way to show your involvement in the local community is to create a “Stay Another Day” campaign. The city of Durango, Colorado pioneered this idea a few months back with great success.
What is a Stay Another Day campaign?
It is a very simple concept that encourages guests to extend their stay by one night so that they can further enjoy the area and spend a little extra in the community, therefore supporting the local economy.
Partner up with a local restaurant, café, bar or activity provider for example, and ask them to offer a discount to all your Stay Another Day guests in return for you sending business their way.
You can even go as far as committing to donate a % of the income from the additional night to a local project. Even better if it is a local project that your guests can visit or get involved in.
The success of a campaign such as this is all about the way it is presented and the wording that is used. I go into these kind of marketing strategies in the fifth section of my Purpose-Driven Marketing Compass, the framework I teach in most popular coaching programme, Amplify Hotel Marketing. Find out more here.
Give your guests a reason to participate by appealing to their conscience and you can even use this kind of campaign to generate press coverage in local papers and online to encourage even more people to choose your destination and your property over other options.
Once we wrap our heads around the concept that Responsible Tourism is about creating “better places for people to live in and better places for people to visit”, in that order, it becomes clear how this way of looking at tourism benefits everyone.
Think outside the box about local projects that you and your guests can get involved in. It doesn’t have to change the world overnight; it just has to contribute towards making a difference to someone’s life in your community.
So, moving onto our last point.
The lovely (but admittedly rather dull) topic of tax!
With more supply than demand, anything that makes you stand out can help you to make that sale. Transparency is another tool in your box that can help you here.
I have recently detected an increase in complaints about the fact that the pricing on Booking.com does not always detail the obligatory tax. Take a look at your listing now and see.
Where the price shows to the bottom right of your property in the listing, does it say “Additional charges may apply”, or something similar, or does it say “Includes taxes and charges”?
It seems that customer preferences are changing, maybe because they are comparing more than before for best price, or maybe people who are not used to how OTAs work are searching, or maybe more nationals are looking at the OTA sites for accommodation in their own countries. This is particularly important for countries like Chile where I used to live for example, where foreigners do not pay tax on stays, but nationals and foreigners who are resident there do.
Move with this changing sentiment, align your messaging and make sure that all your prices include tax, or at the very least, that the amount that will be added is clearly detailed on the first screen.
If a customer begins the process of booking a stay with you online thinking they have seen their final price to pay per night, and then they find details of the added tax on the last screen in the reservation process, you run the risk of them aborting the booking and looking