In this article, I talk about hotel bonds and why you might want to consider them. The hospitality industry is obviously struggling during COVID-19, and many frequent travelers (myself included) don’t have any immediate trips planned. Enter the concept of hotel bonds!
In This Article...
What is a hotel bond?
A hotel bond, also called a hotel credit, is something you buy now and use on a specific hotel in the future — often getting 50%-100% more value for it. Hotels are struggling for cash right now, and this is one way they can receive some income – even though you’re not staying there yet.
Image by Ahmad Ardity from Pixabay
Note, hotel bonds are kind of like investments – you might lose money on them. I am not a lawyer or a financial advisor and this isn’t investment advice! You should be aware that there are some risks to buying hotel bonds, though. Read on to learn about those risks.
Where/how can I buy hotel bonds?
As of this writing, there are two major sites that sell hotel bonds: Hotel Credits.PorterandSail and Buy Now Stay Later. Buy them from those sites, then use the “bonds” to redeem directly with the hotels listed.
Porter & Sail’s Hotel Credits has fewer properties, but appears to focus more heavily on luxury hotels. (They also say they’ll refund you if your hotel goes out of business.) Buy Now Stay Later has more properties in more locations, but doesn’t state they’ll provide a refund if a hotel goes out of business. There doesn’t seem to be much overlap between the properties listed on both sites, so it’s worth checking them both out.
Benefits of hotel bonds
- $100 in hotel bonds will be worth $150-$200 at most hotels, effectively saving you 50%-100% off the price. This is pretty huge! If you have your eye on a particular hotel that is selling a hotel bond, you can buy the hotel bond now and stay there later at a much-reduced cost.
- They’re often for independent or boutique hotel properties. Independent hotels are wonderful, but by definition, they’re unaffiliated with points and miles programs – and thus it’s hard to use points to pay for them. Elite status is also harder, if not impossible, to obtain. While hotel bonds won’t give you elite status, they are a way to reduce your cash cost for a luxury property.
- You’re helping a struggling industry. This is one way to “give back” to hotels that are struggling to keep their lights on and their staff employed. They need cash now.
Risks of hotel bonds
- Hotel bonds are nonrefundable. Once you’ve outlaid your cash, it’s gone. There are no guarantees, which brings us to….
- The hotel may go out of business. If you buy a nonrefundable hotel bond for a particular property, there’s a risk it could go out of business before you’re able to actually stay there. Porter & Sail states they will refund your purchase in this situation, but Buy Now Pay Later says it won’t. (Even Porter & Sail’s statement has some risk; this new website may not be around forever.) It’s no secret that the hotel industry is hurting right now, and you might be negatively affected by that. If this happens to me and I’m not refunded for my purchase, I’ll try asking my credit card company to issue a chargeback. But there is no guarantee.
- You have to work directly with the hotel to redeem the hotel bond. There’s some hassle here, because while the hotel certainly knows it participates in this program, each individual employee of the hotel might not be aware. You have to call each hotel directly for the booking redemption, and thus it’s not seamless if you want to change your dates.
- Terms and conditions, and expiration dates, differ by individual hotel. Although most hotel bonds appear not to expire until year-end 2021, this doesn’t appear to be the case always. And, Ts & Cs are set by each hotel individually, so you need to read the fine print of each hotel bond you buy.
- It’s unlikely you’ll earn elite nights/points. Most but not all of the hotels on these sites are independent, in which case this doesn’t matter. But there are exceptions, like the Aloft Silicon Valley, a Marriott property listed on Buy Now Pay Later. You can and should try to get your elite nights/points when you’re working with that hotel. But there are no guarantees.
How are hotel bonds different from a regular refundable hotel reservation?
Due to the COVID-19 crisis, many hotel brands have made sweeping policy changes that allows most stays to be fully refundable. Prior to COVID, hotels placed some pretty strict rules around which reservations were refundable and which weren’t. If you prepaid for the (usually) cheaper rooms, you were often out of luck if you needed to cancel or change your reservation.
Enter COVID-19, and the entire industry was struggling to fill rooms. Most brands now allow anyone to book rooms that allow free cancellation with somewhere between 24-72 hours’ advance notice – even the cheap rooms.
So why are hotel bonds different? For one thing, you get around 50% off. For another, these bonds are nonrefundable. Once you buy them for a particular property, you’ll have to work with that property directly to make reservations. Hopefully they’ll allow you to change your reservation at no additional charge, but this is up to the discretion of each hotel.
You’re getting a 50% discount for giving up the possibility of a refund, and for adding some extra hassle to the process.
What are some good hotel bond deals?
It really depends on where you’re planning to stay. For me, I checked out a few that are based on my favorite places to travel. These look like good deals to me, but I haven’t committed to anything yet:
- Roman Spa Hot Springs in Calistoga, CA: I love wine country California, and Calistoga is in the middle of it. The Roman Spa Hot Springs has natural hot springs, and they have a spa with mineral and mud baths. It’s unclear whether your hotel bonds could be used at the spa whether or not you’re a guest staying there. Buy Now Stay Later’s site just asks that you “request” the bonds from the hotel; they don’t actually process your payment. I think I can buy $300 (3 bonds) worth $450, if the hotel “accepts” my request.
- Tiara Miramar Beach in Cote d’Azur, France: I’ve been to Paris, but not to the resort-y, fancier parts of France. This is definitely on my list. Look how gorgeous!
- Hotel El Ganzo in Los Cabos, Mexico: This hotel is ridiculously beautiful, and is located in the middle of everything Los Cabos has to offer. It has a pool, sauna, steam room, and indoor gym on the property too. Rooms appear to start at around $140/night, so a hotel bond deal could really come in handy.
Should I buy a hotel bond?
Yes, you should consider a hotel bond, but only if you…
- Have plans to go to a certain place sometime between now and the expiration date of the hotel bond;
- See a beautiful hotel that’s selling bonds in the area you’re planning you travel to;
- Have the cash on hand to pay for the hotel bond now (and pay off your credit card in full);
- Are comfortable with, and very aware of, the risks that I laid out above.
If all of those apply to you, then go for it!
Bottom Line
I think hotel bonds are a very unique and creative option for the hotel industry, at a difficult time. I’m really glad I learned about them, and I am seriously considering buying a few, for the specific properties that look interesting to me. But, I do not feel that hotel bonds are a slam-dunk for me, because the average 50% savings that you achieve is subject to a number of risks and some additional hassle. That said, I’m definitely going to keep these on my radar for whenever I’m ready to book my next trip.
