With 44% of the U.S. adult population saying they’ll be making use of airplanes, hotels and attractions in the coming year, and after the thrashing the tourism sector took from the pandemic, travel brands are betting on great experiences to trigger a total travel rebound.
Unfortunately, many travel experiences are anything but good. Just ask the millions of travelers who found themselves grounded in late summer and into the fall as major airlines canceled thousands of flights, giving little, if any, refund information. In short: bad customer experience.
These and related topics were part of PYMNTS’ latest On the Agenda series during a panel discussion featuring Best Western Head of Treasury Bryan Kleinlein, Fortis Chief Technology Officer Kevin Shamoun and Hotel Equities Senior Vice President of Finance and Compliance Carlos Melgar.
All three panelists agreed that companies need to strike the right balance between strategy and empathy when consumers cancel travel or demand refunds. They also need to get smarter about digital management of chargebacks and disputes arising from travel plans gone awry.
Acknowledging that a travel rebound is underway — despite ongoing interruptions from COVID-19 variants — Kleinlein said, “We’ve really worked with our hoteliers and as a company to make the cancellation policy a little more forgiving and work with everyone.”
Noting that a rebound in bookings also brings a renewed flow of cancellations and chargebacks, Melgar said, “It’s about having some empathy with your guests and relaxing your cancellation policies a little bit. But you’ve really got to be strategic in how you do that. Once the horse is out of the barn, then all of a sudden, you’re dealing with a lot more than you needed to.”
Shamoun added that “the better job you do as a property of documenting those situations, when a chargeback does come through, you have more likelihood to win. At the end of the day, the card brands are trying to be fair.”
Getting this wrong is costly, to say nothing of the reputational damage. According to the study Merchant Refund Policies: Keeping Travel And Entertainment On Track, a PYMNTS and Fortis collaboration, “Nearly one-third of the United States population booked hotel rooms or reserved tickets for attractions or events in 2021. More than half of this group, a representative 60 million people, canceled their reservations, and most of them wanted their money back.”
Get the study: Keeping Travel And Entertainment On Track
It’s All in How You Book
All panelists said they’re observing a strong recovery in leisure travel, with corporate still lagging considerably.
“How the booking happens matters because it will impact what the cancellation ability is,” Shamoun said. “Is it direct on the brand site or is it through some type of travel agency?”
Melgar added that hotels “determine what to release to the [online travel agencies] and to the booking agents out there. If you don’t want to make any of your inventory available, then you’re just going rely on your brand reservation system and transient traffic. Unfortunately, that’s not the world we live in. You live and die by how much you’re allocating to your third-party agents.”
Kleinlein noted that with 45% to 50% of chargebacks coming from fraud, whether true fraud or claimed fraud, travel and hospitality companies need to double down on these disputes.
“You can do things like 3D Secure, for example, where there’s an authentication that happens with the issuer, so now you can’t claim it’s fraud because you authenticated in another manner, and it was you making the transaction,” Shamoun said. “There are different things from a processing perspective that can be done to reduce the ability for somebody to claim fraud.”
See also: Hotel Cancellations Up 35% Due to Virus Variant
Loyalty Tips the Scales
With travel economics undergoing a kind of “new math” transition, players in the sector have varied approaches to fighting chargebacks, but all three panelists agreed about the fundamentals.
“It’s all based on your revenue management and how you manage that yield rate strategy in whatever your markets are,” Melgar said. “It doesn’t matter if it’s secondary, tertiary or a Metro market. It’s all about managing that.”
With the Merchant Refund Policies study finding that 70% of consumers who won a chargeback dispute are likely to rebook with the same provider, it goes back to customer experience, which raised questions about when not to fight chargebacks as a strategy.
“It’s definitely a real cost,” Kleinlein said. “It takes a lot of time, paperwork. But I’m a finance guy. Everything’s worth fighting for, but obviously there’s only so much you can do. You try to win the ones you can.”
Panelists aligned on the idea of differentiating chargebacks from refunds as one way of untangling cancellation messes without jeopardizing loyal guests.
“If we’re able to, and we can and there’s great reasons for it, I would think that [a hotel] would want [to] issue refunds,” Melgar said. “The guest is going to come back — they’re loyal Hilton Honors members or whatever the reward program is; they’re a loyal customer. But when the chargebacks come across, that’s a complete different refund.”
Loyalty is helping balance out the chargeback equation somewhat as program members stick with the travel and hospitality brands they’ve had good relationships with over time.
“I don’t think the guest expectations of a hotel stay have changed that much,” Melgar said. “I think they’re what they have been before 2020. I think it’s about quality for the dollar that you’re paying from a leisure standpoint and consistency. If you’re going from one Fairfield to another or one Curio or Autograph to another, they want consistency.”
See also: Senate Committee Hearing Puts Airline Chiefs in Hot Seat Over Cancellations, Staffing Shortages
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