How to Guarantee Payment and Protect Hotel Revenue from No-shows or Refusals to Pay

For independent hoteliers and B&B owners, every booking counts. So when guests cancel late, refuse to pay or simply don’t show up, it really stings.

No-shows, payment refusals, fraud and chargebacks aren’t exactly rare in hospitality. Apart from being incredibly frustrating, they’re a real threat to your hotel’s profitability.

Fortunately, new technologies now offer hoteliers the tools needed to address these common issues. Avoiding revenue loss starts with a secure, automated and guest-focused payment approach.

The high cost of no-shows and late cancellations

For independent hotels, the effect of late cancellations, no-shows and payment refusals can be financially devastating. When a guest fails to show up or cancels at the last minute, the room tends to go unsold, most definitely for the first night. For smaller properties, this hits especially hard.

However, your revenue loss extends beyond the value of the booking itself. You possibly have already put money and effort into guests’ arrival: scheduling staff, prepping the hotel room, ordering breakfast, and so on. In addition, there is the administrative burden linked to manually processing no-shows and cancellations, chasing down unpaid reservations and handling disputes.

To compensate for some of this lost income, hotels commonly charge deposits or fees for late cancellations and no-shows. But, what in case of invalid payment methods or credit card fraud? Then the payment is not guaranteed and it is near impossible for hotels to ever receive settlement of the outstanding balance.

The solution: Secure, automated and flexible online paymentsWhy hotel revenue protection starts with payments

Your hotel’s revenue comes directly from guest payments. Guarantee payment and your revenue is guaranteed.

Every hotelier knows, however, that not every reservation involves a hassle-free payment. For starters, the industry is extremely susceptible to credit card fraud, resulting in chargebacks and declined payments. Furthermore, booking cancellation rates are notoriously high, and inaccurate or almost-expired card details are not uncommon either.

These cases shouldn’t hurt your business, as long as you have a robust payment system in place. Merely requesting clients’ credit card details or offering old-school bank transfer as a payment option on your website is not enough. A smooth, up-to-date hotel payment process leads to better website conversion rates, guest satisfaction, operational efficiency and revenue protection.

Here is how:

• The payment is the last step of the booking process on your website. When guests experience a frictionless and secure payment with various options to choose from, they are more likely to complete the booking.

• Guests who pay upfront – the full amount or a deposit – are less likely not to show up or cancel after the refundable period has ended.

• By pre-authorizing the desired amount (reserving it for a certain period), you avoid the common issue of ‘insufficient funds’ and the payment is guaranteed, even in case of no-shows or late cancellations.

• When payment information is automatically verified at booking and pre-authorization right before arrival is successful, you’re better protected against chargebacks or denials.

• With pre-authorization requests a few days before arrival, you can be more certain of a valid payment and predict potential no-shows.

• Pre-authorization requests and transactions are executed in a few simple clicks – no more entering endless digits on a terminal. If an error occurs, the system will notify you and help you resolve it quickly.

• A modern payment solution allows you to safely access guests’ details and easily resolve any issues or outstanding balances.

Manually processing payments is so time-consuming. You need to verify card numbers, contact guests, pre-authorize the right amount, potentially reach out again, execute the payment … Back in my days as a hotel employee, I’ve had to flag a lot of credit cards as invalid in the extranet of OTAs. It’s a real hassle and you’re still not sure of your money.Gilles Demeyer, Support Engineer at Lighthouse

As guest expectations and regulations around payments evolve, the way hotels process transactions needs to follow suit in order to stay successful. Updating and optimizing your approach to processing payments guarantees income from bookings and will improve your profitability significantly over time.

Guest expectations around payments have changed

Since the late 2000s, online hotel bookings outweigh offline ones. Today, Online Travel Agencies (OTAs) and hotel websites have since become the primary sources of hotel reservations. The majority of travelers are used to effortlessly booking hotels online, so they expect the same level of convenience when paying for those stays.

Modern guests want a fast, frictionless and secure payment process, and they want to use their preferred method for maximum ease. If your payment system feels clunky, outdated or unsafe, you risk losing bookings during the reservation stage. Website visitors will abandon their booking if they encounter too much friction or don’t see their preferred form of payment.

A large chunk of guests appreciate the ability to pay at the hotel, either on arrival or at check-out. Others prefer to pay in advance, so they can rest assured that the booking is confirmed, avoid unexpected charges and don’t have to worry about paying while on vacation. Offering flexibility is key.

A smooth payment process is now essential to creating a positive guest experience and optimizing guest satisfaction.

Secure online payments are the new norm

Until recently, cash, bank transfers and physical credit or debit cards used to be the main payment methods for hotel guests. That all changed when the habit of paying online spread from the fast-emerging world of e-commerce into the hotel industry. As web-based payments became more common, new regulations were introduced to protect the parties involved in these transactions.

With this shift to the online came security concerns. After all, e-commerce businesses handle a large volume of sensitive data that needs to be protected from breaches. The old way of collecting guests’ credit card details and printing them out at your front desk does not meet modern-day security standards. New legislation addresses these concerns by requiring companies to collect, handle and store consumer data with care and respect for privacy.

Since the introduction of PSD2 in the EU, all online businesses need to include a two-factor authentication step in the online payment process to guarantee the transaction. This added layer of security proves the customer’s consent to the payment and protects parties at both ends against fraudulent practices.

That means hotels can no longer rely on outdated or manual payment processes. If your payment process doesn’t meet current requirements, transactions can’t be guaranteed in case of no-shows, late cancellations and declined payments. Secure, automated payment solutions are now essential to remain competitive and financially resilient.

How to optimize your hotel payment process to protect revenue

Thanks to modern hotel payment technology, properties are now able to collect payments securely at every step of the guest journey – benefitting both revenue protection and the guest experience.

A hotel payment solution that integrates seamlessly with your current tech allows you to:

• Streamline and simplify the payment process

• Free up staff time

• Give guests more flexibility

• Avoid errors, fraud and failed transactions

• Reduce no-shows and cancellations

• Guarantee security and regulatory compliance

• Simplify financial tracking

• Speed up check-in/check-out

Below, we’ll cover how you can optimize the way you approach guest payments from start to finish.

Enable guarantees, deposits and prepayments at booking

Everything starts with the reservation process. By integrating a modern payment solution, you can offer guests a wide variety of secure online payment methods to pick from: credit card, debit card, Paypal, Google Pay, Apple Pay and regional (mobile banking) apps.

Capturing payments or guarantees the right way at the time of booking will secure your revenue and simplify your life later on in the guest journey. This approach not only benefits your conversion rate but also gives you peace of mind knowing the reservation is financially confirmed.

For each rate plan, you can go with either of these three options:

• Payment guarantee: The guest gives permission to charge their credit card at a later point in time – suitable for flexible rate plans.

• Deposit with guarantee: The guest pays a set percentage of the booking – useful in case of partially refundable bookings.

• Direct payment: The guest pays the full amount during the booking – ideal for non-refundable rates.

Offer flexible payment times

Today’s hotel guests appreciate flexibility, not only in terms of how they pay but also when. While requesting payment upfront is effective to reduce no-shows and protect your revenue, it’s not always the best approach. You need to consider varying guest preferences and potential refunds, for example.

When your booking process enables guarantees through a payment integration, the time guests pay becomes a lot more flexible – without compromising revenue certainty.

You can:

• Send payment request links via email, so guests can pay at their own convenience.

• Request pre-authorizations to block a specified amount on the credit card before arrival.

• Accept payments efficiently on site using a POS terminal – connected to your software for added speed and accuracy.

• Charge previously guaranteed (virtual) credit cards in one click.

Your payment solution should facilitate the follow-up of payment guarantees with a pre-authorization request closer to check-in. This ensures the credit card is still valid and has enough balance to charge the amount owed before your guest arrives.

Accept virtual cards from OTAs

Virtual Credit Cards (VCCs) are rapidly gaining traction as a popular payment method on OTAs. These single-use digital cards are a secure way to guarantee payment, without having to store the guest’s real card details. They add a layer of protection against data breaches, fraud and chargebacks.

Online travel agencies like Booking.com and Expedia now accept VCCs. Activating this feature for your property broadens clients’ range of payment options to choose from, enhancing your appeal.

With an up-to-date payment solution in place, you can easily access and charge virtual credit cards once they become active (depending on the applicable cancellation policy). The card is sent to your system and can be processed just like a normal credit card.

Charging VCCs through the software is infinitely easier and faster than manually retrieving the information in the OTA extranet and entering it on a terminal.Xavier Dewever, Product Manager at LighthouseIntegrate with online check-in and self-service tech

Self-service check-in and check-out is now an expectation for many travelers, prefererring to skip the front desk entirely and check in or out via mobile or a smart kiosk on-property.

When you integrate your payment solution with your online check-in solution, you create a more seamless and flexible guest experience. These integrated systems streamline all guest payments, including those for additional purchases. This way, they minimize wait times for guests and reduce workload for staff.

Implement a transparent and fair cancellation policy

Finally, hotel payments are inextricably linked to your cancellation policy. Transparency is key here. Your policy should be laid out in detail on your website, within your booking module and in booking-related emails you send to guests.

Guests should never be confused or surprised about what and why they’re being charged. Be fully transparent about the cancellation and no-show fees you charge, clearly stating:

• Which rate plans are non-refundable

• Refundable period or free cancellation deadline for flex rate plans

• Exact fees that will be charged (e.g., one night for no-shows or deposit for late cancellations)

• Refund conditions, procedures and time frame

Make sure your cancellation policy is easy to find and understand. Clear billing details and transparent, consistent communication are also crucial to prevent disputes or chargebacks.

Your next steps: Future-proof your hotel’s payment process

Now that you know what a future-proof payment process looks like, it’s time to implement it at your accommodation. Changing your way of working can seem daunting at first, but you’ll see it can go smoothly if you take it step by step.

1. Evaluate your current payment process

   Identify recurring problems, potential guest complaints and where revenue is leaking.

2. Choose the right payment solution

   Look for a secure tool that’s tailored to your specific needs and fully integratable with your technology (Channel Manager, Booking Engine and Property Management System).

3. Integrate it with your hotel software

   Ensure all your systems are integrated so you can streamline processes and minimize manual work.

4. Train staff and communicate new policies to guests

   Familiarize yourself (and your team) with the new tool, so you can take full advantage of its features. Update your website and other communication channels to reflect any new policies.

Whether you’re requiring a deposit at booking, charging the full amount in advance or sending a payment request after checkout, online payments guarantee your income in every scenario. No more manually checking credit cards or chasing unpaid bills. Instead, your staff can focus on providing exceptional service.

By modernizing your hotel’s payment process, you improve the efficiency of your operations, protect revenue from no-shows and cancellations, unlock a smoother guest journey.

Streamline every aspect of your hotel management with Lighthouse

Lighthouse’s award-winning AI platform for independents features an all-round Payment Manager, allowing you to streamline and automate your operations from A to Z.

• Automated room pricing: Maximize revenue with smart dynamic pricing across your channels.

• Effortless channel management: Manage all channels in one place and leverage AI automation to optimize your distribution strategy.

• More commission-free bookings: Enable a smooth booking process on your website, designed for maximum conversion.

• Streamlined payments: Simplify your payment and reconciliation process to save time and protect your revenue.

• Smooth-running operations: Automate daily reception tasks such as check-ins, room allocation and email communication.

Are you ready to enter a new era of automation and allocate your time on guest service instead of repetitive admin duties? We’re here to help you find the optimal solution for your hotel or B&B. 

Laure Cremers

Laure Cremers is a content specialist at Lighthouse with a focus on hospitality technology for independent hoteliers and B&B owners. Passionate about spotting new trends in the industry, Laure simply loves translating insights into actionable tips for hospitality professionals to boost their efficiency and profitability.

About Lighthouse

Lighthouse (formerly OTA Insight) is the leading commercial platform for the travel & hospitality industry. We transform complexity into confidence by providing actionable market insights, business intelligence, and pricing tools that maximize revenue growth. We continually innovate to deliver the best platform for hospitality professionals to price more effectively, measure performance more efficiently, and understand the market in new ways.

Trusted by over 65,000 hotels in 185 countries, Lighthouse is the only solution that provides real-time hotel and short-term rental data in a single platform. We strive to deliver the best possible experience with unmatched customer service. We consider our clients as true partners – their success is our success.

This article originally appeared on Lighthouse.