The Coronavirus outbreak has disrupted the entire travel industry and led to an unprecedented number of cancelled bookings all over the world. Initially, many of these bookings were refunded in full due to Extenuating Circumstances policies put in place by several OTAs and Sales Channels. However, this seems to have been somewhat short-sighted, with many rental hosts and property managers finding themselves out of pocket.
In order to address this, talk has now turned towards offering credit or vouchers to guests instead of cancellations in an attempt to save as many potential bookings as possible. Whilst not an ideal solution, it may go some way towards restoring the balance and maintaining some much-needed cash flow for rental hosts. This article explains some of the details that property managers and rental hosts need to know about rebooking credit.
A quick note. We’ll use the terms “Voucher” and “Credit” interchangeably throughout this article. Whilst individual circumstances and systems will vary, we basically mean a policy by which guests choose to forgo their right to a monetary refund for a cancelled booking and instead accept a balance of the same or greater value which can be used for a future booking.
What Is The Legal Situation With Offering Credit?
Currently, discussions are underway about the legal ramifications of all this. Given the uniqueness of the situation, we’re in something of uncharted territory at the moment. The interpretations of Extenuating Circumstances and Force Majeure policies are being scrutinised at length, and property managers need to be especially mindful of the decisions being made about guest credits by the different sales channels and OTAs.
There’s not a lot of consistency at the moment, though government interventions might lend some clarity in the near future. The European Commission has been discussing the concept of voucher systems and how this might apply in European member states. At the time of writing, there’s no official statement nor a timeline on when to expect one, but the general stance is largely positive towards a credit system.
In essence, whilst the commission does not mandate the offering of vouchers, they are generally in favour of advising guests to accept credit instead of cash, as long as certain conditions are met. For example, a voucher should not be compulsory – i.e. the guest should not lose their right to a refund. The European Commission has left it up to the individual member states to determine exactly how voucher systems should be enforced. Ultimately though, credit is considered a favourable alternative to refunds in most cases.
If you’re a property manager, you should be prepared to offer and accept rebooking credit for your cancelled bookings, though it’s important to get some guidance on what your financial obligations would be as these may differ depending on your region.
What are rental websites doing?
Most sales channels seem to be following this credit-first approach. Airbnb for example has begun offering guests credit worth 100% of their paid amount for bookings within a certain date range. This is opposed to (at best) partial refunds if the guest chooses to cancel the booking entirely. It’s clear to see that such an approach is likely to lead to a decrease in cancelled bookings and hopefully keeps guests happy at the same time.
However, that doesn’t necessarily mean that individual property hosts will feel the benefit. Airbnb’s policy allows the guest to use the travel credit towards any future stay, meaning that the host of the original booking may not be the one to receive the rebooked stay.
It’s worth checking with individual OTAs and Sales Channels what their policy is on rebookings, credits, and whether guests are able to transfer their booking to another property. For Direct Bookings, you may be able to negotiate with guests directly to ensure that the rebooking is made for your property.
What Happens If I Use A Channel Manager?
In cases where you have bookings from various different channels, it can get quite complicated to manage. That’s why it’s useful to have a Channel Manager and property management solution like Your.Rentals which can advocate on your behalf and liaise with guests and sales channels.
For bookings affected by Coronavirus Your.Rentals’ policy is to always first attempt to organise a rebooking for future dates at the same property, and we’ll discuss with both the guest and the property host to arrange that. Where this isn’t possible, we’ll offer the guest rebooking credit with the same host. In many cases, the guest is more than happy to accept this and defer their booking decision until a later date. The property manager will then be paid out in accordance with their usual terms on the new check-in date.
Of course, not all guests and hosts will be able to consider credit at this time, so some refunds are going to be inevitable. And managing rebooking credit does bring its own challenges and complications, such as ensuring dates are available and guaranteeing a refund to guests if they change their mind at a later date. But by taking a credit-first approach, we believe that we can go some way towards retaining a sense of normality and stability in the vacation rental industry.