Compelled by corporate buyer resistance, Expedia Corporate Travel, Orbitz for Business and Travelocity Business have eased restrictions on discount merchant hotel rates, specifically their policies that make it difficult, if not impossible, to change or cancel bookings.
While these online agencies have liberalized these provisions, individual hotel policies regarding cancellation and exchanges remain in place, so travelers still may face penalties. By contrast, such Internet sites as Hotels.com, which offer prepaid discount merchant rates exclusively, tend to have rules that strictly prohibit any changes to the reservation.
Expedia Corporate Travel recently eliminated fees for changing a reservation booked for its merchant-style Expedia Special Rate hotels. At the same time, ECT instituted a two-tier cancellation policy: Rather than not being able to cancel at all, travelers canceling within 24 hours are subject to a $25 fee. Travelers giving more notice pay no fee.
Similar cancellation provisions now have been implemented by Orbitz for Business for its merchant Orbitz Saver rates and by Travelocity Business for its comparable program. Both Orbitz and Travelocity said they are reviewing their exchange policies.
Meanwhile, the availability of merchant rates continues to grow. Outtask, for example, last month introduced a prepaid merchant rate component to its Cliqbook online booking tool. More major hotel companies also are making their inventory available through merchant sites, as long as their rate parity requirements are met. Marriott International, for example, last month agreed to give Expedia.com and Hotels.com access to the inventory of all its brands except Ritz-Carlton and Ramada International.
"The downside of merchant rates buyers cite most often is that travelers want more freedom when planning. They want to be able both to change dates and cancel as needed," said Mitch Robinson, Expedia product manager. "While dropping fees for corporate customers changing a reservation may not seem like a big deal, business clients tell us it's significant. In fact, we used to impose fees for making changes, whatever the timeframe, and we still charge on the leisure side." Robinson said Expedia considered the $25 cancellation fee to be fair since "business travelers usually know if they're keeping the reservation 24 hours out."
The $25 fee needs to be viewed in relation to the potential cost savings, according to Harriet Washburn, Orbitz for Business director of national sales and account management. "It's far lower than the savings corporate customers receive for booking Orbitz Saver rates," she said. "Just as on the air side, corporate customers, in order to receive additional savings have to bear a small penalty, if plans change or need to be canceled."
Robinson cautioned that hotels still impose their own charges for canceling, irrespective of agency charges. "In the same way, travelers booking directly with the hotel may or may not be charged." Hotels make the determination based on location, market conditions and number of reservations on the books for the dates in question.
Cancellation fees always may be a buyer fact of life, whether imposed by the agency or hotel. "While they're clearly a deterrent for buyers, the lowest optimum rate is either going to be through the merchant model, where the reseller is taking some of the inventory risk, or come with a cancellation penalty," said Andrew Menkes, president and CEO of Partnership Travel Consulting in Princeton, N.J. "The situation is like the airline model of nonrefundable fares versus consolidator fares."
With airlines, the agencies charge transaction fees. "Travelers can book a ticket through an agency and ultimately not travel," Menkes said. "They may pay nothing to the airline because there wasn't a cancellation fee, but they still pay a transaction fee, or they may end up having to pay both. If it was a nonrefundable ticket, they pay for a ticket they don't use and pay a transaction fee for the same commodity. The difference, compared to hotel pricing, is that they can apply that nonrefundable fare, minus the penalty, toward a future trip. There's nothing comparable on the hotel side."
In arranging to incorporate prepaid merchant rates into Cliqbook, Alexandria, Va.-based Outtask understood buyers' sensitivity around penalties. "Rates are prepaid, but they allow 6 p.m. day-of-arrival cancellation as a rule," said Tom DePasquale, Outtask CEO. "There's a $10 fee. We wouldn't be tied to any merchant model that didn't allow cancellations."
As long as rates on the merchant sites do not undercut its rates on any other distribution channels, Marriott has no problem providing access to its inventory to merchant sites. "Basically, we want to ensure travelers have access to our properties no matter how they prefer to plan and book," said Bruce Wolff, executive vice president for sales and marketing programs. Marriott in January introduced the rate parity initiative, which affects both online and offline channels.
For its part, Hotels.com has no plans to relax or remove rate restrictions. "The fences around the rates always will be there. I can't say today whether they will become a bit less or more restrictive. It really depends on what's happening in the industry at the moment," president Cheryl Rosner told BTN
(BTN, Jan. 19).Given the potential savings, there are times when merchant rates still make sense for business travelers, restrictions notwithstanding, Rosner said: "At the last minute, for example, business people tend to know they're going."
As originally envisioned, merchant rates were intended for leisure rather than business travel. "Leisure travelers tend to be more relaxed as to dates and time. Business travelers, by comparison, are inelastic," Menkes said. "This will never go away completely. Travelers, however, recognize that some flexibility on their part can equate to price differentials for the trip. Business travelers, for example, could start adjusting their itineraries to address issues of schedule and location."
Buyers need to make travelers more penalty-savvy. "At the end of the day, travelers have to be aware of all kinds of restrictions because, by definition, there's a correlation between flexibility and price," Menkes said. "The less flexible you are, the more you're going to pay."