By Kevin Tatem, Director of Sales – Asia, SiteMinder
Regarding Payment Gateways: Everyday, for the past six years I have been with SiteMinder, it seems I have interacted with a hotelier in Asia who absolutely MUST have a payment gateway linked to the Internet booking engine on their hotel website.
The reasons they outline are always at least one of the following:
- To ensure cash flow – money in the bank
- To prevent fraudulent credit card use
- To prevent “no shows”
- They can’t charge a credit card without the actual physical card.
These reasons are all valid, but there are also a few serious problems associated with this strategy, such as:
- Guests don’t want to pay upfront
- Guests may not have the money right now
- The quality of the property may lead to guest remorse upon arrival
- Credit card fraud will happen anyway
- Guests know there are alternatives to booking without paying in advance
- There are charges associated with payment gateways, from initial inception to ongoing costs.
When a credit card gateway is used on a hotel’s Internet booking engine, reservation levels generally drop – in some cases, quite dramatically. Why? Because, often, the prospective customer decides not to pay upfront and then chooses instead to book the same hotel through a ‘book now, pay later’ online travel agency (OTA). At times, they may even end up booking a different hotel altogether as they browse on that OTA site.
Understandably, the ‘book now, pay later’ OTAs are increasingly becoming the preferred method for prospective bookers. However, some OTAs that offer the ‘book now, pay later’ option are becoming problematic for hotels as well, with some delivering astronomical “no show” rates and the hotel often has no recourse.
Some Asian cities, from what I can tell, average between 10-15 percent “no show” rates across the board, but I have also met with hotels where that rate has been as high as 25 percent.
For hoteliers, this is of course not ideal and potentially extremely damaging to their businesses.
So, what is the answer re Payment Gateways?
The general feel I get from hoteliers is that “no show” bookings made through a hotel’s own website are much lower – often as little as 2-4 percent. This means that, over time, using a payment gateway and paying the fees associated will generally outweigh the cost of lost business.
There are also no reimbursements to make if a customer has genuine needs to modify or cancel a booking. Once a customer has made the commitment to a hotel, and goes to the effort of booking with that hotel directly (with a ‘book now, pay later’ policy), the deal is generally done and dusted.
For any hotel that takes its direct online bookings seriously, easy-to-use, commission-free booking technology for “Brand.com” should be a must.
Hotels in Asia need the tools to take credit card payments easily and without the physical credit card, as can be done so easily in Europe, the U.S. and Australia, for example. Without greater access to these tools, which are made available to hotels by banks, the problem of “no shows” will remain and hotels across the region will continue to suffer.
Equally, as more and more hotels depend on bookings made online, the banking systems in the region need to move into the ‘Asian Century’ and react to assist their customers.