The Ins and Outs of Hotel Prepayment

What is a hotel prepayment?
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So, the coronavirus is finally calming down a bit, countries all over the globe have opened their borders, and you’re suffering from a different kind of sickness – wanderlust. Wanting to travel is as human as eating and drinking, so as soon as people can travel, they often do.

Well, while the pandemic has been in full swing, hotels have upped their game, and now we have something known as hotel prepayments. While not exactly a new thing, there is a heavy emphasis placed on it in the post-pandemic tourism world – let’s take a deeper dive into it. 

What Is a Hotel Prepayment?

Prepayment is a pretty simple concept that has been around for ages – it virtually means paying for something before you get it. This means that you pay for your booking plan before you ever depart – and that can be done in more than a couple of ways.

We’ve seen the rise of digital banking, but now that world is far bigger and more elaborate than it ever was. These days, every app seems to have its payment system, and PayPal is no longer the only payment service you can access from your phone.

Aside from Payoneer, Skrill, and other payment apps and accounts – hotels themselves and booking engines such as booking.com, have started accepting different payments – some have even started accepting cryptocurrencies!

In its most basic form, hotel prepayment means filling out a brief hotel reservation form and paying for your package, and staying before you depart for your destination. This ensures that you’ll have a room or apartment waiting for you at your destination, rids you of the hassle of paying at the front desk before your stay or the headache of paying on the last day of your stay.

There are quite a lot of benefits to prepaying for your hotel stay, the most notable of which are:

  • Lower staying fees
  • Cheaper transfer costs
  • Peace of mind
  • Easier planning
  • Booking discounts

Now, electronic booking agents such as booking.com have been placing a heavy emphasis on hotel prepayment. While it’s not mandatory, the option is still there and usually comes with an attractive discount.

This discount is possible because a prepayment gives the hotel themselves enough information about who is staying at their hotel and when on the spot, through the app – allowing them to account for their new guests and make adequate preparations beforehand.

Furthermore, it benefits guests as if they pay for everything in advance, it prevents them from overspending, allows for better budget control, and rids them of the worries of post-stay payments.

Implementing a system like this in your hotel, motel, or apartment is a revolution that every hotel or accommodation provider will have to switch to at one point in their career. Not only does this make things far easier for both parties, but it also streamlines the process by a considerable margin.

How Is Prepayment Calculated?

Calculating prepayment is pretty simple, as most of it is done in the booking engine itself. It allows people to select the hotel they’d like to stay in, the package they want to receive, and add any special requests or requirements.

Based on this, the booking engine will automatically calculate just how much they’ll have to pay and send you the payment as soon as they agree. It allows people to get a good idea of what they’re getting for their money and allows hotel owners to prepare for these requests accordingly.

What Is a Prepayment Fee for a Hotel?

Since hotels have to prepare everything beforehand, there is usually a prepayment fee imposed on this kind of booking. Now, it might sound a bit counterproductive, but these fees do not necessarily have to reflect on the consumer side price.

Hotels get to add an added fee if they choose to go with the prepayment method for their services, and booking engines flip the discount since they’d like to create a new industry standard.

What Are the Advantages of Prepayment?

There are a lot of advantages of prepayment for both clients and hotel owners. For clients, the most notable benefits of prepayment are:

  • Knowing what you’re getting beforehand
  • Knowing how much everything will cost
  • Paying for everything in advance
  • Making use of booking engine discounts

On the business side of things, the prepayment method is highly beneficial for hotels as well. Some of the most prominent benefits of prepayment for hotels are:

  • Knowing what your client wants
  • Receiving the payment before their arrival
  • Streamlining the booking process

What Are the Disadvantages of Prepayment?

Now, there are a couple of disadvantages of prepayment, but most of them are on the business side of things. On the client-side, sometimes a hotel won’t offer a full cancellation fee refund. Also, when booking, if you fail to mention that you might be interested in an extended stay, this can complicate things a bit.

On the business side of things, some booking engines and even the law will require you to give full or partial refunds based on your deal with them, and if the client has made extensive requests, this means that quite a lot of your inventory and accommodation can go to waste just because someone changed their mind.

In Conclusion

Let’s wrap things up! Payment systems are the future, and hotel prepayment will most likely become the most prominent form of payment for the tourism industry. Software is advancing rapidly, and clients can now have booking engines on their phones, allowing them to book a room without ever having to go to an agency or the actual hotel itself.

For businesses, having a central reservation system is crucial, as the digital booking option is overtaking traditional booking at a rapid pace, and it might give you an edge over the competition.

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Graduated from Standford University, Arielle has over 5 years of experience in the Hospitality industry. She holds an MBA in business administration from the IDC Herzliya, Israel. She currently works as Account Manager at Upstay, building and maintaining strong, long-lasting customer relationships. She is deeply passionate about helping hoteliers unlock significant new revenue streams from unsold premium inventory.

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