How Flexible Booking Attracts Extended Stay Travelers and Increases Revenue
Flexible booking options have become a cornerstone of modern hotel management and for good reason. They offer the freedom to modify reservation dates without hefty penalties, a compelling incentive for guests planning longer visits. This flexibility not only attracts a growing segment of extended stay travelers but also increases revenue by reducing cancellations and securing more guaranteed bookings.
In a competitive market, embracing flexible booking may be the key to maximizing occupancy and profitability. Below, we detail flexible booking options and how hotels can benefit without losing revenue.
Flexible Booking Options: Examples
Booking.com introduced its Smart Flex program to address the differing preferences of vacation home renters and property hosts. The program adds cancellation flexibility to some listings, targeting guests who are unlikely to cancel and offering them the option for a refundable booking. If a guest does cancel, Booking.com takes responsibility for finding a new guest, essentially guaranteeing the reservation for the property owner.
According to Eric Bergaglia, senior director and global head of accommodations segments at Booking.com, about 70% of customers prefer bookings that offer cancellation options. The Smart Flex program effectively turns non-refundable reservations into refundable ones.
Bregaglia reported that hosts participating in the program see a 3% increase in booking conversions. Booking.com is able to manage this risk due to its data analysis of guest behavior over millions of bookings, which helps detect patterns, and its strong revenue growth in the vacation rentals segment. Last year, the company reported a 56% growth year-on-year in this segment.
Here are some other ways you can implement flexible booking options:
Free Cancellation — Guests can cancel their booking without any penalty until a specified time period before their stay (e.g., 24 or 48 hours before check-in).
No Prepayment Required — Guests are not required to pay in advance. Payment is made at the hotel during check-in or check-out.
Date Change Flexibility — Guests can change the dates of their booking without any extra charge, often up until a specific time frame before the scheduled check-in.
Longer Cancellation Period — Extending the cancellation period to a week or more before the check-in date, instead of the standard 24 or 48 hours.
Low Deposit Options — Guests are required to pay a small deposit to secure the booking, rather than the full amount upfront.
Booking Transferability — Allows guests to transfer their booking to another person without penalty, should they be unable to travel themselves.
Voucher/Credit for Future Stay — If a guest needs to cancel, instead of a refund, the hotel offers a voucher or credit equal to the amount paid, which can be used for a future stay at the hotel.
Flexible Rate Plans — Offering multiple rate plans, including options with greater flexibility (e.g., higher rates that come with more lenient cancellation and change policies).
Waived Early Departure Fees — If guests need to cut their stay short, the hotel waives the fees associated with early departure.
Late Check-out Options — Allowing guests the option to check out later than the standard time without additional charges, if the room is available.
Guaranteed Rescheduling — Ensuring guests can reschedule their booking to another date, with the reassurance that they won’t be charged extra, even if the new dates are typically priced higher.
These options are designed to encourage bookings by reducing the financial risks for guests. They also help to foster goodwill and customer loyalty, as guests appreciate the flexibility and are more likely to rebook at the same property in the future.
How Hotels Benefit from Flexible Booking
Benefits to guests are obvious—more choice and convenience, less risk. However, hotels wouldn’t offer flexible booking options to extended stay travelers if it didn’t benefit them as well. Consider the startup HotelFlex. HotelFlex aims to make hotel check-in and check-out processes more flexible for guests. The company uses predictive analytics to forecast a hotel's hourly occupancy on each day of the week, based on the hotel’s current room rate, six months of check-in and check-out data, and other factors like the hotel's ability to provide clean rooms.
HotelFlex's booking widget, integrated into a hotel’s booking engine, allows guests to customize their check-in and check-out times based on this forecast and pay accordingly. For example, if a hotel usually has 30% of its rooms clean and empty by 9 am on Mondays, HotelFlex allows the property to offer the first 20% of these rooms for early check-in at an additional charge.
This model turns previously empty rooms into potential revenue. HotelFlex takes a 15% cut of any additional revenue generated from these charges. Shepherd-Cross, the start-up’s co-founder, views this service as a tool to encourage direct bookings since Online Travel Agencies (OTAs) can't offer this flexibility.
The core idea is to give modern travelers, whether on business or leisure, more control over their travel experience, which Shepherd-Cross believes is not currently optimized in the traditional hotel pricing and booking model.
This is just one case study regarding the benefits of flexible booking options for hotels, but there are many other ways you can benefit:
Competitive Advantage — In a market where many establishments offer similar amenities, flexible booking can be a unique selling proposition. This flexibility can sway potential customers to choose your hotel over another.
Increased Loyalty & Repeat Business — Guests appreciate the ease and flexibility provided and are more likely to return to hotels that offer hassle-free booking changes or cancellations.
Less No-Shows — When guests can easily modify their reservations, they're less likely to simply not show up. This allows the hotel to manage room availability better.
Better Reviews and Reputation Management — Positive experiences with booking flexibility can lead to better online reviews.
Attraction of Diverse Clientele — Offering such flexibility can help tap into the extended stay market, while attracting other demographics. For example, business travelers, who often have shifting schedules, are particularly drawn to flexible booking options.
Reduction in Administrative Overheads — Handling disputes, processing refunds, and managing bad reviews can all contribute to administrative overheads. Flexible booking options can minimize these issues, leading to smoother operations.
Effective Yield Management — By introducing dynamic pricing based on demand and allowing flexible bookings, hotels can ensure their rooms are occupied during off-peak times, thereby increasing their overall yield.
More Data — When guests book directly and leverage flexible booking options, hotels get the opportunity to gather more information about guest preferences, which can be used for personalized marketing campaigns in the future.
Mitigation of External Factors — Situations like flight cancellations, natural calamities, or global events (like pandemics) can significantly affect travel plans. Having a flexible booking policy in place ensures that hotels remain an attractive choice even in uncertain times.
Balancing Flexible Booking without Losing Revenue
The ability to change travel plans is a critical selling point for today's extended stay travelers. Despite the appeal of strict cancellation policies to secure revenue, properties with fully flexible rates are more likely to attract bookings.
If you’re still on the fence about the benefits of implementing flexible booking to attract extended stay travelers, consider these data:
“Fully refundable” listings were booked 5.2 times more than “partially refundable” offers.
“Fully refundable” listings had a 45% higher average day rate (ADR) than “partially refundable offers.
“Fully refundable” listings were only canceled 20% more often than “partially refundable” offers.
34% of “fully refundable” bookings are canceled within one week of being created, meaning that the calendar is quickly reopened for bookings again.
Fully refundable bookings had a significantly higher average booking value, bringing in around 18% more revenue per booking than partially refundable bookings.
Interestingly, the demand for flexible rates hasn't led to a significant increase in cancellations. In fact, travelers seem willing to pay more for the peace of mind flexibility offers, potentially making flexible rates more lucrative in the long term. Offering a mix of flexible and non-refundable rates can attract a variety of customers and secure more guaranteed bookings, which is important as 62% of travelers are expected to be more price-conscious following the coronavirus pandemic.
The data is clear. Flexible booking options are a win-win. They benefit guests while increasing revenue, furnishing higher occupancy rates, providing valuable customer data, and building customer loyalty.