It is a fact that the pandemic brought a lot of changes in the hotel and tourism sector in general, among them digitalization, which seems to be one of the incorporations that came to stay and make vacation accommodation a better and developed category of the tourism sector.
Another of the modifications that became very important during the pandemic, was the application of refundable rates, flexible rates that were adjusted to the need of a traveler, who was tied to the constant changes of border closures or confinement.
This situation seems to be changing, and with it the extinction of these flexible rates, returning to non-refundable rates, but why this setback? Is it because travelers are increasingly confident that they can fulfill their trips? Or simply hoteliers are getting better at marketing non-refundable rooms for advance bookings? To resolve these doubts, we will show you an analysis by the company Tecnohotel, which explains why the incorporation of non-flexible rates and their viability.
There are three factors that influence the resurgence of non-flexible rates:
Advance bookings
In the January to May 2019 period, non-refundables accounted for about 59% of our sales. But that dropped to just 26% in 2021. So far this year, we’re seeing that figure at 32% and expect it to grow steadily.” Meanwhile, he explains that “advance bookings in the 8-30 and 30+ day range in the January to April 2019 period were around 32% and 23% respectively, dropping to just 10% and 2% in 2021.” As for this year, he clarifies that during those dates they are seeing those figures rise again to 14% and 7% respectively. In May they even reached 20% and 7%. In other words, they are still well below 2019, but hugely above last year. “All of this is a strong reflection of consumers’ desire to travel and their confidence that they can take a trip,” he reveals.
Reticence to return to non-refundable rates
For his part, Ernesto Sigg, founder and partner of consultancy Fitbooktravel, believes that “there has always been a demand from hoteliers to go back to non-refundable rates as soon as possible.” “But from the B2B distribution side there is a certain level of reluctance to do so,” he clarifies. That is, bed banks, wholesalers, business-to-agent platforms, resellers, channel managers and connectivity technology providers are opposed.
“Why? First, many still have unresolved disputes over who will foot the bill for non-refundable fees for 2020 filings. So far, OTAs and tour operators claim force majeure. Therefore, they do not want to risk further disputes and potential liabilities again. Taking that risk is definitely not in their model,” he says.
Cancellation levels drop
Nium’s head of travel, Spencer Hanlon, focuses on the current situation. The payment technology provider notes that we are looking at “the lowest levels of cancellations since the pandemic began. There were months in 2021 when that rate exceeded 40%. But this year it has been steadily declining and is now at just 1.74%, which is comparable to 2019″, he clarifies. “Let’s keep in mind that cancellations are not just a problem for a hotel because it doesn’t get paid or has to find another guest on short notice. In fact, the whole challenge of refunding and updating their inventory is an administrative hassle that, one way or another, costs them money and reduces certainty,” he qualifies. Hence, he explains, “it’s not surprising that stability in cancellations has now returned.”
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