How do pre-authorizations help boost hotel revenue?

Pre-authorizations using credit cards are a possibility to enhance the revenue for hoteliers. Even when most have a fair knowledge of the same, they are yet to implement it in their revenue management strategy. Last-minute cancellations can indeed mark up a hole in the hotel’s revenue and leaving the equations for online travel agencies (OTAs) to handle is not an ideal solution in the long run. So, it becomes essential to tap into prospects that pre-authorizations can offer.

What is pre-authorization?

Pre-authorization is the withholding of a certain amount of money made on the credit card of the guest while they book the room. The sum that has been used temporarily holds changes from hotel to hotel. It is not a charge on the booking but a freeze that will help ensure the authenticity of the card and prevent any fraud using the same.

Pre-authorization acts as leverage for hoteliers especially when the booking is made during the season. It acts as a safety net for both parties. Hotel owners get a guarantee during their busy times and it becomes more flexible for the guests than non-refundable rates as the hotel allows them a cancellation window which helps them get the entire money back.

Therefore, most hoteliers end up entrusting an OTA with their pre-authorization needs. This is not a good idea as the hotel’s revenue management is none of concern of an OTA and they play down rates to ensure booking.

How should pre-authorization be implemented?

Most hoteliers rely on OTAs for pre-authorization because:

Lack of means
Lack of time
Lack of will
No authorizations
No Permissions from the bank.
However, this move could hamper the revenue growth. The best way to ensure pre-authorization pays off well is to rely on proper planning and implementation through direct bookings.

Since pre-authorizations work only during the season time, it doesn’t make any sense to put up with it during the off-season, let us look into how to plan pre-authorization:

Timing for pre-authorizing is critical. Ideally, pre-authorization has to be done 10-15 days before the scheduled arrival of the guests. It is enough for freezing the amount and detecting any fraud.
The amount that is planned for the hold-up can be according to the cancellation policy of the hotel. It can be just a night’s stay or even the entire stay.
The banks and credit-card holders release the hold-up after 15-20 days. The hoteliers can manually withdraw the hold if the guest plans to pay through another mode.

How to make pre-authorizations on electronic payments?

There are two ways in which pre-authorization can be done, you either go old-school where you can manually enter the credit card details and the pre-authorization amount or go digital where you can get the help of a payment gateway to pre-authorize the amount.

The digital method is more convenient and all the payment information of the guests will be safe and secure. It has strong authentication measures where metrics like a password, PIN or even biometrics are required to authorize the process.

Conclusion

At MetaHotels, our aim is to help hoteliers make maximum revenue through direct bookings. MetaHotels helps in creating a strategic plan to implement pre-authorization in the most profitable manner for hoteliers who are unsure of how to implement pre-authorization in a way that boosts their revenues.