Non-Refundable Rate

3 Good Reasons Why Your Hostel Should Have a Non-Refundable Rate

Beatriz Abreu Peixoto Operations, Sales & Revenue Leave a Comment

Although Non-Refundable Rates have been around for a while many hostels are still not making use of them. Here are three good reasons why your hostel can also benefit from using a non-refundable rate.

But first, let’s start with the basics: what is a Non-Refundable Rate?
A Non-Refundable Rate is a rate that can be charged anytime after the reservation is created. This charge is non-refundable in the event of a cancellation or modification. It is also offered at a lower price than a standard rate where the establishment’s standard cancellation policy is applied.

The refund policy isn’t the only thing that distinguishes a (properly configured) Non-Refundable Rate from a Standard Rate. The Non-Refundable Rate should have a release (must be booked X amount of days in advance), may carry some restrictions (such as a minimum stay) and the price of this rate should be lower than that of the Standard Rate.
*The release time, special conditions and price difference between the Standard Rate will depend on the specific hostel and its market.

You may be thinking; “but my prices are already so low, I can’t possibly offer another discount!”. In this case, we ask you to think of it the other way around; the prices you want are the Non-Refundable Rates. The fact that a client may want to be able to book with less advance notice, pay at the reception and/or be able to cancel free of charge are all services that you’re providing and they come at a cost. In this case, the price difference between the Non-Refundable and the Standard Rate is the cost of flexibility. This is quite similar to an airline reservation where the “non-flexible” rate is the base rate and you pay a higher cost for a more flexible condition such as special cancellation conditions or even being able to pick your own seat.

Here is what a Non-Refundable Rate looks like on Booking.com:

As you can see, the non-refundable rate is cheaper but does not have the possibility of cancelling for free and you need to make a prepayment. If you want this flexibility, the price will be higher.

Now… We promised we would give you 3 good reasons to have this rate so here they are:

#1- Money in the bank

If your reservations are of the Standard Rate variety your only guarantee of having the money is after their check-in. So if you are looking at your accommodation revenue reports and see good figures in the next 3 months you shouldn’t start rubbing your hands just yet! Cancellations for these reservations can come in at any time. Whereas, if you have a good mix of Non-Refundable Rate reservations you will have some secured revenue (and have it available for your use immediately).

#2- Reduce No-Shows and Cancellations

It’s simple! Because guests prepay for their reservations they’re less likely to cancel or not show up. Moreover, after booking a Non-Refundable Rate, they stop looking for other options. Whereas with a Standard Rate they may book your hostel but also may keep searching for other options and end up canceling their reservation with you if they find them.

#3- Increased Occupancy and Revenue

We have seen many times that properly configured Non-Refundable rates allow hostels to fill up more in the long and midterm with secured reservations. This has allowed these hostels breathing room when they start their days/weeks with many more reservations on the books. They feel less pressure to try and get last minute reservations to fill up to capacity. The results in both occupancy and revenue have been outstanding.

Not convinced yet? Need more info to properly set up your Non-Refundable Rates? Talk to us at info@hostel.consulting.

About the Author

Beatriz Abreu Peixoto

Beatriz is a hostel coach at hostel.consulting. She's been working in hostels since 2014. She started out as a receptionist where she found her passion for tourism and, more specifically, for hostels. After deciding to develop herself in this area, she became the general manager in a hostel in Lisbon with 180 beds and later became the revenue manager and marketing coordinator of a hostel chain. Now as a hostel coach she is helping other hostels all over the world to grow and reach their full potential!

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