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.