Booking.com is launching its new programme: “Risk Free Reservations”, at least for some hotels here in Spain. They are doing so in the same way as with other programmes the past: including all hotels by default. Hotels who don’t wish to participate must actively notify their decision, something which, in practice and due to lack of time or certain passivity, achieves the programme’s objectives, which are for most not to reply and to include more hotels inside the programme.
What is Risk Free Reservations about?
This is the statement from Booking.com:
Risk Free Reservations is a new programme whose objective is to help you make more money.
How does it work?
Booking.com clients will see non-refundable bookings as bookings with free cancellation. If the client ends up cancelling, we will find you another client for the same dates. If we don’t find anyone, your room will not be occupied but we will pay for the booking.
How does it benefit you?
Our clients are not always certain about their plans and they love having the flexibility that free cancellations give them. If you participate in this programme, you will receive more bookings but you will not incur any risks with cancellations because, if the booking is cancelled, we will find another client for you and if we don’t, we will pay it for you. No matter what happens, you will receive payment from your booking.
Which is the downside?
Receiving payment is guaranteed, but it may arrive slightly later than usual because the client may cancel the booking up to 24 hours before check-in. If we can’t find another client, we will deduct the cost of the booking from your monthly invoice.
If you have any questions or wish to unsubscribe from the programme, please contact your account manager.
The Risk Free Reservations Team
Booking.com themselves are already anticipating the problem with the delay in liquidity, something which will barely have any impact on most hotels.
However, it omits other important problems:
Your average price will go down
If you offered both prices, non-refundable and flexible, one cheaper than the other, from now on the more expensive one loses all of its meaning for users and becomes unnecessary. You will stop receiving them. Booking.com may as well stop offering them as they will become redundant. You will only receive bookings of cheaper prices (the older non-refundable one that Booking.com has turned into flexible).
The decrease in average price can be easily measured:
For example, if 20% of your real bookings from Booking.com are flexible and are 15% cheaper, the price will decrease by 3% (20% x 15%).
Do some number crunching and calculate your decrease.
Booking.com will have best price-conditions than other channels, including your own website
If, up until now, you had parity, a user could see the same on all your channels. For example:
If you charge equally, by participating in “Risk Free Reservations”, the client will stop coming across the same and will see something like this:
In other words, it makes no sense to make a booking for your hotel on any site that isn’t Booking.com. You will move sales from other channels, including your website, to Booking.com and this will have happened because a decision you made: not unsubscribing from Risk Free Reservations.
Your cancellations will increase
Yes, from now on they will be guaranteed cancellations but if the Booking.com cancellation percentage was already high, now that non-refundable rates are disappearing the cancellation rate will increase even more, doubly annoying if you take into account all the operational and uncertainty problems each cancellation entails.
Booking.com will find another client for you… Of equal value?
The statement doesn’t mention it. In the event of a guaranteed cancellation, what does “finding another client” mean?
- Of the same room type or would a room of inferior value count?
- Of the same occupancy or would a lower one count?
- With the same board or would a lower one count?
- Could a booking with a Genius discount replace a guaranteed cancellation without discount?
- If you’ve lowered your prices, does a new client with a lower price count as a replacement?
Booking.com will have rooms available when nobody else, not even your website, has them.
With this programme, Booking.com takes on the commitment of finding a replacement client for all cancelled bookings. In order to achieve this, it will require available stock… And this results in an awkward situation:
What will happen with guaranteed cancellations on dates closed by the hotel due to being full?
Will it ignore the block because its commitment to find another client prevails over everything else? This would not only give them an advantage, it would give them exclusivity. The Booking.com conversion would shoot up, since they would be the only ones offering your hotel. Does finding a client this way have any merit?
Will Booking.com respect the closed dates, thus freeing itself from the commitment of finding another client? If so, it’s a terrible deal for the hotel. It will have given Booking.com an advantage, it would have generated a booking… that was cancelled, it wouldn’t have received a replacement booking and it would not have been paid by Booking.com.
Should you, therefore, unsubscribe from the programme?
No in the following cases:
You don’t mind giving an advantage to a specific channel. You don’t mind that, in this case, Booking.com, on equal charge on your behalf, offers better conditions than the other channels. In other words, you don’t defend price parity (understanding as parity not just the price numbers but also equality in associated conditions). Above all, you don’t care that an intermediary offers better conditions than your direct sale.
- You have no interest in boosting your direct sales. You don’t invest in it or don’t care about the profitability of those investments.
- You don’t care that Booking.com gains market share in relation to your other channels.
- You don’t care that your average price decreases.
- Even though you do care about the previous points, it’s more important to access the free “insurance” which is Risk Free Reservations.
Yes, in all other cases.
If you contact Booking.com to unsubscribe, your account manager is obliged to try and convince you to remain as part of the programme. The points set forth in this article may help you defend your position.
We suspect that Risk Free Reservations has no intention to prevent the damage caused by cancellations. If that was Booking.com’s genuine desire, it could employ some simple actions, such as:
- Notifying the hotel of the reasons behind the cancellation that the user states when making the cancellation.
- Notifying the hotel of reservations by guests with previous cancellations.
- Notifying the hotel when a user has other bookings made for other hotels on the same dates. Cross-checking information and notifying the hotel of a high risk of cancellation would be very easy for them.
We believe that, with this programme, Booking.com intends to pursue exclusive conditions which give it enough competitive advantage that it can dedicate part of its earnings to guarantee cancellations. Hoteliers must be aware that this seemingly innovative programme entails some serious drawbacks.