InterContinental Hotels & Resorts, citing a general malaise in the corporate meetings market due to economic conditions and fear of military action in the Middle East, late last month eliminated all cancellation and attrition fees for new meetings booked at its properties in the United States, Canada and Puerto Rico between now and April 30 and held before Dec. 31.
The move affects only 16 properties, a sliver of InterContinental's 135 hotels and resorts worldwide, and does not yet extend to other brands owned by InterContinental parent Six Continents, including Holiday Inn and Crowne Plaza. However, InterContinental brand vice president for North America Jeff Senior said expansion of the move to other properties is "absolutely under consideration."
Industry reaction was mixed, with buyers predictably supportive, but competing chains both privately derisive or acknowledging their hotels might do the same thing.
"Unique times call for unique solutions," Senior said. "We think that in these times of anxiety and lack of decisiveness that maybe a bold move was called for. We're tired of sitting on the sidelines with everyone else waiting for something to happen. Travel and business need to resume. Of course there's risk for us, but we can be rewarded for it."
Attrition and cancellation fees, particularly the latter, always have been a key target in negotiations for corporate meeting buyers. In the current buyer's market, there have been some reports of individual buyers succeeding in ridding such fees from certain contracts. InterContinental's Senior, though, said simply using the fees' elimination during individual negotiations would have little market-stimulating effect. "Sure, we kicked that around," he said, "but do we want to make a statement or not?"
The move has little precedent. In the immediate aftermath of the terrorist attacks of Sept. 11, 2001, several hotel chains waived attrition and cancellation fees for varying lengths of time. Yet, that was in response to an actual, specific event that grounded all airlines for days and decimated business and meetings travel. InterContinental's move is in response to unfavorable economic conditions and the threat of military action against Iraq.
As of press time, no chain had matched InterContinental's move, but Senior said he would not be surprised if they do. His competitors were less sure.
Hyatt Hotels Corp. vice president of sales Fred Shea acknowledged the concept of unilaterally eliminating attrition and cancellation fees was not foreign to Hyatt decision makers.
"This can influence us," Shea said. "During this month, hotels are going to decide what their policies are, even if it's to have no policy. We will see what happens with our competition. It's literally just getting on the radar screen. Sometimes you just need one company to do it to trigger the conversation."
At the moment, Hyatt has made no changes. "We deal on a case-by-case basis. As we inch closer to war, we may have to react or decide in advance what we'll do. There will be serious discussions in every hotel company boardroom," Shea said. "It's a great public relations move that might be worth the risk. InterContinental has very little domestic property."
Shea, though, questioned why other Six Continents brands were not eliminating cancellation and attrition fees, comparing the situation with the 2000 decision by Ritz-Carlton, since rescinded, to reduce commissions to third parties that handle only site selection and negotiation
(Meetings Today, Dec. 4, 2000). No other chain, including Marriott, Ritz-Carlton's parent, matched that move.
According to Wyndham International executive vice president of sales and marketing Dave Johnson, it is unlikely that the chain will eliminate attrition and cancellation fees as a brand, given the wide disparity in size of properties bearing the Wyndham name. But, he added, corporate buyers are targeting those fees in meeting negotiations.
"The leverage is in the buyer's hands," Johnson said. "Attrition and cancellation are on the table right away."
In addition, the majority of meeting contracts Wyndham signs include force majeure clauses that, Johnson said, may allow buyers to cancel events without penalty due to, among other events, an act of war. "That clause usually protects you," he said.
It remains to be seen if larger hotel companies, with far more properties in the United States than has InterContinental, feel the need to match. Do not expect it from Starwood Hotels & Resorts, said senior vice president of industry relations Dave Scypinski.
"In the short term, our hotels will continue to be flexible on contract issues," Scypinski said. "Beyond that, Starwood has no intention of eliminating cancellation or attrition clauses."
In addition, Scypinski was critical of InterContinental's decision. "It's very short-sighted for a number of reasons," he said. "First, it's going to be hard for them to put those clauses back in their contracts in 2004. It also leaves the potential for abuse wide open, as buyers can book multiple dates for a meeting without any downside. Plus, it's not fair. If a hotel holds space exclusively for a customer, as a true partner the customer should utilize that space as contracted. Customers tend to laugh when I ask if it's okay if we don't hold space that's already been contracted for them."
Corporate buyers, unsurprisingly, were pleased with InterContinental's move.
"InterContinental is a brand I use, and this definitely has an impact," said Jan Hennessey, manager of meeting and conference services for Oakland, Calif.-based Kaiser Permanente. "People are so skittish, and our internal customers are waiting and waiting. It's serious business. We're cautious bookers and we pick up our blocks."