The ‘Double Whammy’ of Booking.com’s Early Payment Scheme
Most of us realise that Booking.com have automatically opted our hotels into their new ‘Early Payment Scheme’, but what exactly does this mean and how does it doubly affect our hotels?
NB: This is an article from Right Revenue
Well first of all, let’s look at what Booking.com has to say about this new ‘benefit?
”At Booking.com, we can facilitate guest payments for you – in a way that suits your property’s needs. We pay out to you either by virtual credit card or bank transfer, according to your property’s policies around bookings. Until now, a lot of international travellers might not have been able to book your property because their preferred payment options haven’t been available. Now we support alternative payment solutions like PayPal, Alipay and WeChat Pay, so more guests will be able to make a booking with you.”
Sounds like they are being really helpful, right? wrong! By not opting out of this virtual credit card option (and yes, to re-iterate, you have to opt-out, not in) you are hit in quite a few ways
So how does this actually work in practice? Well, Booking.com crawls other distribution sites to check the price you are offeringthem, compared to other sites and yes, this DOES include your own brand website. If a cheaper rate is found on ANY site, Booking.com will discount their price to beat it and take a hit on the rate (which of course is covered by your commission anyway). All of this is done to ensure that they are seen to be the cheapest site online.
But why else is Booking.com doing this? Why on earth would they take a hit on what they earn as commission? Well, in my opinion, this is for two reasons.
- They have lost the war on ‘rate parity’ and can no longer hold a gun to a hoteliers head by insisting that we can’t offer better rates on our own brand sites. They have, for some time, been taking a hit on their commission in an attempt to combat this, but this virtual credit card really has upped the game.
- My belief is that Booking.com are also aware that with more and more hotels getting rate parity on OTA’s right and offering better rates on brand site, this is leaving them very exposed on Meta (Meta being price comparison sites such as Trivago, HotelsCombined and TripAdvisor). Great rates on brand.com mean that they are no longer the cheapest on Meta and hey, that was never going to be a battle us hoteliers were going to win…
Imagine a customer browsing Trivago (as an example), the only way that Booking.com can now been seen as the dominate player, is to ensure that they are the cheapest and to be the cheapest, they have to now take a hit on rate. But as I say, please don’t feel too sorry for them as this hit is well and truly covered by their commission.
Personally, I had hoped that the days of the Meta Site would be numbered. Surely customers are getting more ‘savvy’ and understand that just like the annoying ‘Singing Insurance Man’, these comparison sites offer little in the way of value to the customer??? And for hotels, I was sure that they were getting better at rate distribution and using technology to help ensure that they always offered the best rates on brand.com. But perhaps this new strategy by Booking.com will ensure that these comparison sites are here a while longer…
And just some final thoughts… In the good old days, your clients turned up at your hotel, paid you and you were billed for commission. Now the onus is on you to remember to activate the payment on this virtual card and ensure that the guest’s bill is actually charged for. If this is a pre-paid rate, then you can activate and deduct the card immediately but if not, the card can only be activated when the guest checks in. Can we trust that this will always happen? Quote from Booking.com ‘For non-refundable reservations, you can charge the Virtual Credit Card as soon as you receive it. For bookings made with flexible policies, the activation date will be your guest’s check-in date, so you’ll be able to charge the VCC from that point onwards.’
There is also a wonderful transaction fee that you as a hotelier need to pay. Again a direct quote from Booking.com “The transaction costs associated with our virtual credit cards are between 2% and 3%, plus any other processing fees from your particular bank. Our virtual credit cards hold a minimum of 2% fees, but further variations depend on individual country laws, payment processors and your particular bank.”
My advice, is:
- Opt out. Go to your Booking.com Admin Centre; choose Guest Payment Options and un-click. Do it today – please…
- Add benefits. Review your own Book Direct campaign. Remember that a customer is often tempted by more than a few pounds or euro discount. What other benefits can you offer that cost little and but add huge value to your customers?
- Get ethical. As I have written several times in the past, your customer base wants to know that you are giving back, so let them see that you care about your local charities and good causes.
One thing that this does prove, is that we as hoteliers are fighting back and Booking.com are re-acting like a caged animal. They do not like this loss of power and in real terms, they are now having to pay to win the race… Oh how the tide is turning…
And to leave you with a quote from Game of Thrones “Never forget what you are, for surely the world will not. Make it your strength. Then it can never be your weakness.”