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Payment & Expense

Could Implementing Virtual Cards Save on Hotel Costs?

By JoAnn DeLuna / February 13, 2018 / Contact Reporter
Share

Travel managers may be familiar with the benefits of virtual cards: They provide a payment solution for those who don't have corporate cards, and they reduce fraud, time filing expenses and time reconciling transactions, and that all adds up to cost savings. Hotel solutions company HRS has claimed clients that implemented virtual cards also reduced hotel costs by an average of 12 percent. Booking and traveler behavior also changed when companies implemented virtual cards.

In 2016 and 2017, HRS evaluated 30,000 bookings for 12 clients that implemented virtual card programs with AirPlus or American Express, both of which are HRS partners. Within the study's two-year time frame, HRS analyzed a 12-month period for each client—the start time for each based on when the client rolled out virtual cards—to capture before-and-after data for each. The bookings HRS analyzed were primarily for hotels in Europe, North America and high-volume Asia/Pacific countries like China, Japan and Singapore, an HRS spokesperson said. Clients in the study had worked with HRS for at least a year before deploying virtual cards.

Resulting Benefits

Before implementing virtual cards, clients paid an average room rate of 112.30 euros. The rate dropped 12 percent to an average of 98.60 euros after clients deployed virtual cards, according to HRS. Additionally, travelers under virtual card programs tended to book more price-sensitive regional and local hotels; bookings in this hotel segment increased from 30 percent to 40 percent following virtual card implementation. Travelers under virtual card programs also tended to book trips 11 days prior to travel, whereas they'd booked an average of 8.5 days in advance before virtual card implementation. The no-show rate also dropped an average of 15 percent following deployment. "With travelers knowing that payment for the stay is already in place, they appear to be less likely to cancel at the last minute," the spokesperson said.

Potential Causes

"People are more likely to act in normative ways when they feel that their behavior is being observed," HRS said. Implementation of virtual cards, which offer more transparency to the travel program, tells travelers that the company is observing travel costs and behavior. That prompts them to book in line with the company's interest, according to HRS.

Additionally, virtual cards eliminate the need to pay in advance and to file expenses later, and thus, HRS said, travelers are more inclined to use company-approved booking tools, which display preferred choices, and, if a company allows, alternative affordable options.

While the study's results are impressive, attributing the benefits solely to virtual cards may be far-fetched. It seems the real benefit comes from steering travelers to their company-approved booking tools, which can ensure preferred options are displayed.

GoldSpring Consulting partner Neil Hammond said it's "difficult to validate" HRS's premise without seeing the raw data and methodology. "I'm not sure how the form of payment impacts hotel selection. I think the availability of virtual payment and the avoidance of expense reimbursement will [motivate] travelers to use an online booking system."

However, HRS maintained that the companies surveyed did not alter their promotion of online booking tools following the implementation of a virtual card program. The company also said the only change was the addition of virtual cards to their travel programs. "While [companies] certainly advised their travelers [and] travel planners that virtual payment solutions were now in place for hotel, nothing else extraordinary was done. The [company's] promotion [and the travelers'] awareness of OBTs stayed constant," the HRS spokesperson said.

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