Business Travel News
Business Travel News
  • SECTIONSOpen Menu
    • Transportation
    • Lodging
    • Payment & Expense
    • Technology
    • Distribution
    • Meetings
    • Global
    • Management
    • Travel Procurement
    • Voices
    • Recent Issues
  • VOICESOpen Menu
    • Expert Q&A
    • Podcasts
    • OpEds
    • What to Watch 2022
  • RESEARCHOpen Menu
    • BTN's 2022 Essential OBT Guide
    • Corporate Travel 100
    • Corporate Travel Index
    • Expense Manager Report
    • Small & Midsize Enterprise
    • Salary Survey
    • Strategic Meetings Report
    • VIEW ALL
  • WEBINARSOpen Menu
    • View All Webinars
  • EVENTSOpen Menu
    • Webinars
    • Business Travel Hall of Fame
    • Business Travel Intelligence Summit
    • Business Travel Lodging Summit
    • Business Travel Show
    • Business Travel Tech Talk
    • Business Travel Trends Forecasts
    • DEI Symposium Series
    • Entertainment Travel Summit
    • Global Travel Risk Summit
    • Government Travel Summit
    • Innovate
    • Strategic Meetings Summit
    • Sustainable Business Travel Summit
    • VIEW ALL EVENTS
  • RESOURCESOpen Menu
    • Business Travel Buyer's Handbook
    • Business Travel Buyer's Techbook
    • Corporate Travel Index Calculator
    • Data Sources: The Reference Guide
    • White Papers & Case Studies
    • Influencers
    • Webinars
    • Hotel Search
  • SECTIONSOpen Menu
    • Transportation
    • Lodging
    • Payment & Expense
    • Technology
    • Distribution
    • Meetings
    • Global
    • Management
    • Travel Procurement
    • Voices
    • Recent Issues
  • VOICESOpen Menu
    • Expert Q&A
    • Podcasts
    • OpEds
    • What to Watch 2022
  • RESEARCHOpen Menu
    • BTN's 2022 Essential OBT Guide
    • Corporate Travel 100
    • Corporate Travel Index
    • Expense Manager Report
    • Small & Midsize Enterprise
    • Salary Survey
    • Strategic Meetings Report
    • VIEW ALL
  • WEBINARSOpen Menu
    • View All Webinars
  • EVENTSOpen Menu
    • Webinars
    • Business Travel Hall of Fame
    • Business Travel Intelligence Summit
    • Business Travel Lodging Summit
    • Business Travel Show
    • Business Travel Tech Talk
    • Business Travel Trends Forecasts
    • DEI Symposium Series
    • Entertainment Travel Summit
    • Global Travel Risk Summit
    • Government Travel Summit
    • Innovate
    • Strategic Meetings Summit
    • Sustainable Business Travel Summit
    • VIEW ALL EVENTS
  • RESOURCESOpen Menu
    • Business Travel Buyer's Handbook
    • Business Travel Buyer's Techbook
    • Corporate Travel Index Calculator
    • Data Sources: The Reference Guide
    • White Papers & Case Studies
    • Influencers
    • Webinars
    • Hotel Search
Business Travel News
  • Business Travel News on Twitter
  • Business Travel News on LinkedIn
  • Business Travel News on Facebook
  • SECTIONS
    • Transportation
    • Lodging
    • Payment & Expense
    • Technology
    • Distribution
    • Meetings
    • Global
    • Management
    • Travel Procurement
    • Voices
    • Recent Issues
    Subscribe to NewslettersBTN DailyBTN GlobalBTN Travel ManagementTravel Procurement
    Subscribe to Print IssuesBusiness Travel NewsTravel Procurement
  • VOICES
    • Expert Q&A
    • Podcasts
    • OpEds
    • What to Watch 2022
    Jean-Christophe Taunay-BucaloTravelPerk Nears Completion of Click Travel Integration
    Tripism CEO Kerr Assesses Travel Management EvolutionTripism CEO Kerr Assesses Travel Management Evolution
    Bryan LeibmanNewly Acquired by JPMC, Frosch Goes Into Growth Mode
  • RESEARCH
    • BTN's 2022 Essential OBT Guide
    • Corporate Travel 100
    • Corporate Travel Index
    • Expense Manager Report
    • Small & Midsize Enterprise
    • Salary Survey
    • Strategic Meetings Report
    • VIEW ALL
    Annual Supplier Ratings• Car Rental Survey & Report• Hotel Survey & Report• Airline Survey & Report
    Special Reports• The Mechanics of Sustainble Business Travel• Diversity Equity Inclusion
  • WEBINARS
    • View All Webinars
    Traveler-Driven Program and Policy Adjustments to Consider in the Next Era of Travel

    Tues., Aug. 2 at 12pm ET / 9am PT
    Sponsored By: TripActions

    The Mechanics of Sustainable Business Travel

    Monday, August 1 at 2:00 PM ET / 11:00 AM PT
    Sponsored by: Avis Budget Group, HRS, United for Business

    Trends in Managing Travel for Entertainment Companies

    Wed., July 27 at 1 PM ET / 10 AM PT
    Sponsored by: United for Business

  • EVENTS
    • Webinars
    • Business Travel Hall of Fame
    • Business Travel Intelligence Summit
    • Business Travel Lodging Summit
    • Business Travel Show
    • Business Travel Tech Talk
    • Business Travel Trends Forecasts
    • DEI Symposium Series
    • Entertainment Travel Summit
    • Global Travel Risk Summit
    • Government Travel Summit
    • Innovate
    • Strategic Meetings Summit
    • Sustainable Business Travel Summit
    • VIEW ALL EVENTS
    38th Annual Travel Manager of the Year Awards

    Marriott Marquis San Diego Marina, CA - August 16,

    4th Annual Business Travel Lodging Summit America

    InterContinental Times Square - New York City,

    5th Annual Strategic Meetings Summit London

    etc.venues Monument - London, 26 September 2022

    Entertainment Travel Summit London

    Kimpton Fitzroy London - 29 September 2022

  • RESOURCES
    • Business Travel Buyer's Handbook
    • Business Travel Buyer's Techbook
    • Corporate Travel Index Calculator
    • Data Sources: The Reference Guide
    • White Papers & Case Studies
    • Influencers
    • Webinars
    • Hotel Search
    BTN CTI Calculator

    Filter in or out as many as 200 cities, as well as hotel and car rental class and meals of the day and watch as the per-diem calculator automatically adjusts per diems to your program. Drill down into cost breakdowns and export the results.

  • Business Travel News Supplier DirectorySUPPLIER DIRECTORY

Lodging

Record High Hotel Occupancy, Rigorous Revenue Management Collide With 2016 RFP Season

By Julie Sickel / August 17, 2015 / Contact Reporter
Share

In February, a handful of DHL board members traveled to Miami, some from out of the country. Weeks in advance of the meeting, the CEO's executive assistant had reserved rooms at the Hilton Garden Inn Miami Airport West, a preferred property in DHL's travel program, and used the CEO's corporate card to guarantee the booking.

With the travelers set to arrive on a Friday, the shipping and logistics company's travel management company called the hotel on Thursday to confirm the reservations and to notify the hotel staff that the travelers were VIPs.

Everything appeared set.

Until the board members arrived to discover some of their reservations had been canceled earlier that day. No more rooms were available, and the hotel offered little help finding alternative accommodations.

The DHL travel program members learned firsthand what happens when record-high hotel occupancy meets increasingly aggressive revenue management techniques, and they're not alone. Buyers and revenue management experts said last-minute cancellations by hotels, while not widespread, have become more common as spare rooms have become scarce and no-shows threaten hotel revenue.

"We had one incident [in May] in D.C. where our traveler's reservation was canceled by the hotel the day before arrival," said Financial Industry Regulatory Authority corporate travel services manager Carol McDowell. "The traveler never received notice, but fortunately he checked their website beforehand and found it canceled."

McDowell said the reservation was made at a longtime preferred property months in advance. The hotel offered no reason for the cancellation, but FINRA's TMC was able to get the room, which had more than doubled in rate, reinstated for the traveler at the original price.

In DHL's case, it turned out the CEO's card used to guarantee the booking had been replaced. The hotel canceled the reservations after a test charge on the old card was declined. "He updated his travel profile [with the TMC], but it didn't occur to him that he needed to redo all the hotel reservations he'd already made, too," said DHL regional category manager of travel services Michelle Hunt. "It didn't occur to anybody because we've never come across this before."

The property made no attempt to reach out to DHL or its TMC before it canceled the reservations. The board members sought alternative accommodations, but the Miami occupancy rate that month was 87.6 percent, according to STR, and one traveler had to drive more than 50 miles for a vacancy.

"It blew my mind that they were VIPs, that we called and spoke to the front desk the day before and told them, 'VIP. Do not walk. Do not displace,' " Hunt said. "The hotel acknowledges that they were all marked VIP, but when they go to run the credit card, they don't look at those notations. They just ran the credit card, found out it was declined and then canceled the reservation."

Though hotels have long reserved the right to validate cards that are holding reservations, multiple travel managers told BTN they recently have noticed an increase in the number of hotels clearing cards before arrival.

"It does not surprise me at all that hotels are taking this stand," said The Linde Group corporate travel manager PJ Scala. "Let's face it: They are holding a lot of cards right now. … They want to cancel at the last minute when there is a problem, but [they] charge a penalty when a traveler cancels at the last minute. While capacity is on the supply side, we are all going to be dealing with new sets of rules."

Applied Systems Inc. senior travel coordinator Rachel Sylvester said reservation and cancellation policies have gotten so strict that hotels are charging cards at least one or two days before arrival.

Erik Browning, vice president of business consulting for hospitality/gaming at The Rainmaker Group, a revenue management solutions company, also has heard hotels are validating cards more frequently. Hoteliers also have told him that as occupancy has increased, no-show rates have grown.

"As hotels are getting busier, there are more and more sold-out days," Browning said. "People are likely making reservations at multiple hotels. If their preferred is not available, they book elsewhere, and then when their preferred hotel opens up, they forget to cancel the other booking. Little things like that just kind of add up."

As Hunt was still working through the incident in Miami with Hilton reps, a second DHL traveler, this one traveling from Australia, arrived at a Hampton Inn in Plantation, Fla., to find his six-day reservation canceled. The hotel said his card was invalid and workers had left a voicemail for him. The traveler was midflight, however, and the hotel did not contact DHL or its TMC. In this case, the traveler's card actually was valid, so the hotel rebooked him at the property, though in a smoking room.

In May, it happened again. A DHL recruit booked for a Tuesday night at Houston's Comfort Suites Bush InterContinental Airport arrived to find no reservation because an airline card had been used to hold the booking. The property did not contact DHL or its new TMC, Short's Travel Management, to get new card information.

A travel manager for another company, who preferred her name not be used, said an international traveler in her program arrived in New York City last April to discover his booking had been canceled by a Hilton Garden Inn because the card used to hold the reservation had expired. The hotel did not attempt to contact the traveler, his company or the TMC, and the property had no more rooms available.

The properties that canceled the DHL reservations cited no-show costs as justification. "I understand their perspective and what they're trying to do," Hunt said. "I just don't think there's any uniformity around what's being done. If the booking method is from an online site, maybe they do have a higher percentage of no-shows and that's what they're trying to combat, especially when they're in a sold-out situation. But if it's coming under a corporate rate from a TMC, it is unlikely that there's going to be a no-show on that reservation, even if it's not a preferred hotel."

Hunt is right about the lack of uniformity. More frequent card validations form just one piece of the changing revenue management landscape in the hotel industry. When it comes to revenue management, franchised properties run by an individual owner or management company have latitude in what strategies and policies they implement.

"The brands have practices, which are different than policies," explained Bjorn Hanson, clinical professor at New York University's Tisch Center for Hospitality, Tourism and Sports Management, "meaning that a local hotel can vary what it does."

A New Era Of Yield Management 

Airlines have used yield management strategies to maximize revenues for decades, while hotels have, for the most part, been playing catch up.

"For almost every other product out there, when you've purchased it, you've committed to buy it," said Duetto co-founder and CEO Patrick Bosworth. "With an airline ticket, if you decided you didn't want to travel, they may credit the [ticket amount] back to you, but there's usually some sort of a fee attached to it and you have to reuse that money with the airline, whereas hotels have historically had an incredibly flexible cancellation policy. Usually within 24 hours of arrival, you can cancel with no fee whatsoever, and in many cases even if you just no-show without telling the hotel, they wouldn't charge you."

In January, however, Marriott International and Hilton Worldwide both enacted stricter cancellation policies, stating reservations not canceled at least 24 hours before scheduled arrival would be subject to a penalty of one night's room rate. "Our cancellation window … was 6 p.m. the night of your stay, which just actually means you can cancel until the absolute last minute," Marriott CEO Arne Sorenson said during an April earnings call. "In a high-occupancy market, that created greater risk of overbooking. [It's] harder to predict, harder to revenue manage the hotels."

Other revenue management strategies include overbooking, segmenting inventory to limit discounted business, implementing minimum-stay restrictions and reducing the volume of discounted business in favor of higher-rated retail business.

"When you have fixed-price contracts, it incentivizes the hotel to do whatever they can to try to eliminate as much of the demand as they can that's at a very low fixed price in favor of much more lucrative demand that's coming last minute on their own website or through other channels," Bosworth said. "Anytime you can be selling a room, let's say, for $499, it's painful to be taking a room at $199 through a corporate contract. So obviously, it creates a big incentive for the hotel to look for different strategies to try to improve that mix of business."

Keith Kefgen, CEO and managing director of Aethos Consulting Group, which conducts executive searches within the hospitality industry, has seen a huge push for revenue managers. "[Revenue manager] is probably the No. 1 position that we're doing searches for in the next 12 to 18 months, more than any other position," Kefgen said.

One reason hotels have gotten more sophisticated about revenue management is that it took the industry much longer to increase rates during this cycle than in previous up cycles.

"Coming out of the recession, the expectation, like in most periods of recovery, was that the discounted business was going to recede much more quickly than it did," Bosworth said. "On the leisure side, it took longer for hoteliers to get pricing power than they expected. Occupancies came back much stronger for longer than [average daily rates] did, so when hoteliers realized that, now there's an increased focus on trying to figure out how to get the price up."

Add inflation, increased expenses, commissions for intermediaries and capital costs, Browning said, and "hotels are under pressure to recoup those losses and get at least back to historical levels."

Fighting Back 

STR, PKF Hospitality Research, and PricewaterhouseCoopers all predict occupancy and ADR's up cycles will persist for another few years, which means hotels will continue to hold the cards. But while hoteliers look to raise revenue, there are some things corporate travel buyers can do to meet the challenge, and even fight back, as they begin the hotel request-for-proposals and contracting season.

"A lot of these things can be addressed in the RFP," said Travel and Transport general manager of partner solutions Donna Brokowski. She recommends buyers push for last room availability, though properties that have been amenable to it in the past may not negotiate it with occupancies as high as they are.

She also insists buyers negotiate for 70 percent to 80 percent of total inventory at a property and, if possible, conduct monthly audits to make sure the negotiated rates are available.

"This year, we're making it a standard practice to conduct monthly audits," Brokowski said. "We're catching hotels on a monthly basis. What we thought we'd find is certain brands that do it more or regions. But it's across the board that we find hotels that are noncompliant."

Because individual properties can set their own policies about reservations and cancellations, former president of Scholar Consulting Debi Scholar recommends adding a terms and termination clause into an RFP. Scholar used to include language in a hotel group's contract that the hotel must make confirmed contact with the traveler's company before canceling any room or meeting space.

Individual travelers can use status and loyalty membership to avoid being walked or having their reservation canceled ahead of time because of overbooking. According to Bosworth, it makes a difference to hoteliers. "Some of the loyalty programs specifically guarantee that you would never be walked and that they'll always have a room available for you," he said.

Hunt plans to add cancellation terms to her hotel RFP for 2016. After her experiences this spring, she has opened the lines of communication with hotels by ensuring contact information is available, as well as with her travelers and TMC to prevent future headaches.

"We have put communication out internally that if your credit card has expired, you must update future reservations you've made with hotels because they may cancel them if they can't get an approval on an expired card," she said. "We've also recommunicated to our travel agency that if somebody does not have a credit card for car or hotel reservations for guarantees that they cannot use the airline billing card because it will cancel."

This report originally appeared in the August 2015 issue of Travel Procurement. 

More Lodging
Related
U.S. Hotel Pipeline Expands but Cost Concerns Mount

The number of U.S. hotel construction projects in the development pipeline at the end of the second...

Sonder Names Hebbar COO

Short-term accommodation provider Sonder Holdings has named SVP of operations Deeksha Hebbar its COO,...

J.D. Power Survey: Hotel Rate Hikes Dent Guest Satisfaction

Many hotels in the past year have been challenged to restore pre-pandemic service and staffing levels...

Sponsored Content

VIEW ALL
We’re making history by making our carbon history
We’re making history by making our carbon historyBy United Airlines

We’re going beyond traditional carbon offsets and taking a more direct approach to making sustainable aviation the norm. KEEP READING

Duty of Care Due Diligence Requires Wider Scope
Duty of Care Due Diligence Requires Wider ScopeBy Qatar Airways

Travel professionals must do everything they can to demonstrate due diligence and widen the scope of what they do in the name of duty of care. KEEP READING

Don't Let NDC Take a Backseat in 2022
Don't Let NDC Take a Backseat in 2022By FCM

Get ready to tailor travel programs by leveraging NDC with your partners in 2022. KEEP READING

More Lodging

U.S. Hotel Pipeline Expands but Cost Concerns Mount
Sonder Names Hebbar COO
J.D. Power Survey: Hotel Rate Hikes Dent Guest Satisfaction
Edition Names Fluhr SVP & Global Managing Director

VIEW ALL
Subscribe to Our

Free Newsletters

pixel2

Click Here for our Terms and Conditions and Privacy Policy.

  • Most Read
  • Most Shared
  1. Sabre Acquires Conferma Pay
  2. Premium Squeeze? Corp. Travelers Battle for High-End Air Seats
  3. CWT: Expect Travel Prices to Keep Rising in 2023
  4. United Plans New RFP Platform for Corp. Clients
  5. Snowfall to Acquire Psngr1
  1. Premium Squeeze? Corp. Travelers Battle for High-End Air Seats
  2. JetBlue to Acquire Spirit
  3. Gray Dawes Acquires Ventur Travel
  4. Hilton Optimistic Business Travel Upturn Will Endure
  5. Grasp Pilots Virtual Payment Integration with Marriott
Business Travel NewsBusiness Travel News
  • About Us
  • Contact Us
  • Advertise
  • Editorial Calendar
  • Business Travel News on Twitter
  • Business Travel News on LinkedIn
  • Business Travel News on Facebook
BUSINESS TRAVEL NEWS
NORTHSTAR TRAVEL GROUP
Business Travel News
  • About Us
  • Contact Us
  • Advertise
  • Upload Print Ad Material
  • Purchase Reprints
  • Editorial Guidelines
  • Subscribe to BTN
  • Subscribe to Travel Procurement
  • Subscribe to Newsletters
  • BTN Europe
  • Privacy Policy
  • Terms & Conditions
Business Travel News
Business Travel News Travel Procurement The Beat
Northstar Travel Group
  • Retail Travel
  • Travel Weekly
  • Travel Weekly Asia
  • Travel Weekly China
  • TravelAge West
  • TravelPulse
  • TravelPulse Canada
  • TravelPulse Quebec

  • Hotel Investment
  • Burba Hotel Network

  • Travel Technology
  • Inntopia
  • Phocuswire
  • Phocuswright
  • Web In Travel
  • Meetings & Incentives
  • Northstar Meetings Group
  • Meetings & Conventions
  • Meetings & Conventions China
  • Meetings & Conventions Asia
  • Meeting News
  • Successful Meetings
  • Incentive
  • SportsTravel

  • Data Products
  • Agent Studio
  • AXUS Travel App
  • Intelliguide
  • travel42
Northstar Travel Group
Copyright ©2022 Northstar Travel Media, LLC. All rights reserved.    100 Lighting Way Secaucus, NJ 07094-3626 USA | Telephone: (201) 902-2000
RRManagement rrtestprocurement