How much to charge for the reservation

In any case, it is good to secure your reservation. Even if it comes to old, returning guests do insist on the reservation confirmation. There are too many cases are when guests have to cancel at the last moment. Then it is almost impossible to find new guests and your loss of money is too big.

On the other hand, guests who pay for their reservation also are sure that their booking is confirmed and accommodation will wait for them.

First we will try to find the best price of the reservation, and then give a few examples of how the charge.

1. Partial payment - reservation fee

This is probably the most popular way of charging for reservation. Guests are paying from 10% to 50% for the reservation and the rest of the sum is paid at their arrival.

The most common amount is 20-30%. Under that, it is good to combine it with credit card authorization or similar. Another way, guests can find cheaper solution and are still in profit even if they cancel your reservation because their cancellation is affordable. Above that, it is usually rejecting guests from booking. Also, in case of too high reservation fees, guests will almost never contact you in case they have to cancel. Their opinion is that they have already paid too much for accommodation that they will not use. On the other hand, it is questionable whether you will find new guests and cover your loss. Therefore, if you charge a higher percentage, give your guests the possibility of partial refund, depending on the date of cancellation. This way you ensure yourself feedback in case of inability of guests' arrival.

2. Whole sum payment

In this case guests have to pay the whole amount before their arrival. It is a very good solution for home owners, but from the standpoint of the guest, rather unfavorable.

If you want to take the whole sum in front, at least give your guests possibility to pay part of the sum at the moment of the reservation and the rest of the amount some time before their arrival (a month or so). That way guests feel more comfortable when making a reservation. Also, you have plenty of time to find a new booking in case of cancellation.

3. Money reservation payment

If you are taking credit card details for the reservation, guests pay at their arrival and you charge their credit card only in case of no-show or late cancellation. Or you can charge them depending on the date of cancellation, proportional to the number of days left until the arrival. It is probably the simplest way to make a reservation, but there are a bit more technical and safety problems for that kind of business. Also, if you do not pre-reserve money on their credit card, guests can always void a credit card or remove funds from a debit card.

How to receive the payment

1. Bank payments

Bank payment is when your guests send money directly to your bank account, from their account or via payment in the bank.

Pros:

• It is an easy way to receive money.
• You receive money directly to your bank account.

Cons:

• There is a possibility of high and unexpected bank costs (you can never know the exact costs for transnational payments).
• You have to wait for payment (usually 1-5 days).

2. Money transfer solutions

There are several companies offering money transfer services (such as WU, MoneyGram, Xoom and other).

Pros:

• It is a quick service.

Cons:

• The costs are pretty high.
• Expect a loss in exchange rates.
• Service quality depends on the network of branches.

3. Online payment services

There are many companies offering you online payments which are very simple and popular, such as PayPal, Moneybookers, Authorize.net, 2Checkout and similar. Many of your guests already have open accounts there, if not, they can easily make payments with their credit cards or other.

Some are online wallets, others payment gateways, but they all give you the option to charge guests online.

Pros:

• It is an easy and quick service for guests.
• You can easily add the service to your online forms.
• Service is available to a large number of people.

Cons:

• Costs are high (commission).
• Expect a a loss in exchange rates.
• Expect a loss at money withdrawal.
• In many cases you have to wait too much to withdraw your money.
• It is not possible to store cardholder's data (security and legal reasons) for subsequent billing.

4. Credit card payments

The first and easiest way is to charge guest's credit card through above mentioned online services.

Another way is to request guest's credit card data and then charge it on your POS device. That way you can store data and then charge your guest only in case of no-show or late cancellation. Be very careful because there could be many security and legal problems with receiving credit card data and their storage.

Never ask for credit card details to be sent through e-mail or unsecured online forms. Some common solutions are sending data on fax (pretty old solution) or sending through online secure forms.

You can always receive sensitive information through online secured forms. There are a lot of free or low-cost online companies offering that (Formstack, Wufoo, JotForm, FormSite etc.). Of course, if you have the knowledge and funds you can always set your own secure server.

Pros:

• It is a quick service.
• Costs are low.
• Service is available to large number of guests.

Cons:

• There are security problems.
• Many people look with suspicion on giving their credit card data online and often avoid that.

No matter which way you charge the reservation, try to make sure at every moment that your guests will arrive or that you can cover the costs if they do not arrive. The worst feeling is when, till the last moment, you do not know whether the guests will show up or not. And you refused many others for the same period.