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Virtual payments lower direct hotel costs

Graphic to demonstrate virtual payments

Data analysis from hotel solutions provider HRS reveals that virtual payments have an immediate impact on direct costs, with the average room price of booked overnight stays decreasing by an average of 12 per cent after a virtual payment solution is introduced.

The analysis took into account 30,000 hotel bookings by companies, which were equally divided into bookings made before and after the introduction of a virtual payment solution.

With virtual payments, companies receive and settle hotel invoices centrally and with no need for paper. A credit card number generated at the time of booking settles the invoice, meaning travellers don’t have to pay ahead themselves or figure out travel expense reports. HRS says this gives companies full transparency on lodging spend down to the item line level.

According to HRS, there are various direct advantages to virtual payments, including:

  • The average rate of rooms booked fell 12 per cent after virtual payments were introduced, from €112.30 to €98.60
  • The no-show rate – the proportion of bookings for which the traveller does not turn up at the hotel – also fell from 4.1 per cent to 3.5 per cent, which HRS says benefits businesses with lower additional costs and helps hotels better manage their inventory
  • And travellers booked their stay 2.5 days earlier than before – 11 days before travelling as opposed to 8.5.

HRS says the cost reduction can be explained by two factors. First, earlier bookings make room rates rise at the time of trade exhibitions, so those who book sooner have access to lower rates. Second, the data shows a shift from global chains toward regional and local hotels. Previous HRS data analysis shows options outside of global chains can often present less expensive rooms of a similar quality, as such properties do not have to factor in franchise fees and other overhead expenses.

Christian Gall, vice president of payment solutions at HRS, said: “The study shows that the transparency created by virtual payment solutions appears to steer travellers towards less expensive hotels. In effect, their behaviour is changing and money is being saved – without them even noticing. This adds a new dimension to the conversation around the benefits of virtual payment, as the focus has been mainly on indirect savings so far.”

Download the full analysis in the HRS white paper here.

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