Why do hoteliers get stood up so much?
A peek into how we’re creatively tackling the ‘no-show’ issue in the hospitality industry.
Life is what happens while you’re busy making other plans
- John Lennon
Unfortunately for hoteliers, life is what happens when guests change their plans. When we compare bookings made vs bookings realised, there’s always a gap. Dreaded as much as it is, it’s something a lot of hoteliers learn to live with. But should they?
Friday: Monday’s occupancy is at 100%, this is great.
Monday: Only 80% of the guests show up!
Imagine this happening over and over. A straight 20% hit on revenue is what we’re looking at. Things are falling into perspective now, aren’t they?
We decided to take a crack at it.
Solving the “no show” problem at Treebo Hotels
Inventory in the hotel industry is a highly perishable commodity. Like apples that rot away, rooms that are booked but not consumed is lost revenue.
In case of significant no-shows, it is inevitable for the hotelier to worry as this results in net revenue loss for both Treebo and the franchisee owner.
Data tells us that ‘no-shows’ are significantly higher for pay at hotel (PAH) bookings as compared to prepaid bookings. This dichotomy exists because let’s face it, if you haven’t put down money, you may not worry about backing out last minute without letting the hotel know. There’s not much to lose.
But hoteliers lose. A lot.
We saw two ways to counter this:
- Increase pre-paid transactions
- Reinforce customer confirmations
Sounds simple on the outside but the complexity lies in the fact that over 60% transactions in any e-commerce industry is Pay at Hotel (PAH) or Cash-on-delivery (COD) mostly for three reasons:
- Low credit card debit card penetration in India
- Pay at Hotel is the most frictionless checkout flow
- Lack of trust
Over 60% transactions in any e-commerce industry is Pay at Hotel
You cannot simply remove the PAH option either. A steep drop in conversion is what will immediately follow.
As for customer confirmation — calling every customer is a manual and arduous task that is not scalable. Especially for a large organised brand like Treebo where we deal with thousands of bookings per day.
So here’ what we did:
- Communication and partial payments— We started with the hypothesis that customers who are sure of coming will be willing to make a partial payment and are less likely to be a no-show risk. To validate this hypothesis, we made a small MVP where we started sending payment links to select customers for PAH bookings. We also started communicating with customers to get a confirmation ahead of their stay dates.
- Increase prepaid transactions — To move customers from PAH to prepaid we experimented with preferred pricing for prepaid customers. This has helped increase the prepaid proportion in the mix.
- Frictionless cancellations — Next thing that we took a look at is to make the cancellation process absolutely frictionless. Our research indicated that lot of customers who wanted to reach out to us for cancellation decided not to largely because of the effort involved. With our new feature, customers can now cancel their bookings in a couple of clicks without having to necessary login.
We know it’s working. A steep decrease in no-shows is something we’re consistently seeing. To get it down to zero is still a while away but we know we’ll keep trying.
Stay tuned as we bring you many such industry firsts!
The rockstars behind this product are Krishna Nellutla, Snehil Rastogi, Pramod Yadav, Sunil Rana, Ansil Kareem, Rashmi Kumari, Jitesh Gandhi & Varun Aachar
A big thank you to Bonie & Mo for contributing to the post.