Hilton has launched what it's calling customer-centric pricing at its hotels across the U.S. and intends to roll out the pricing structure at all properties globally this summer. The structure introduces tiered pricing with flexible, semiflexible and nonrefundable advance-purchase rates.
The pricing resembles that of the airline industry's refundable versus nonrefundable rates. During the company's recent earnings call, Hilton president and CEO Christopher Nassetta said airline rate structures served as a "decent model" for the company's strategy.
While the rates are subject to tweaking, the general idea is that Hilton has eliminated what was once the best available rate and introduced a "fully flexible" rate that's higher than the old BAR by a few percentage points, Nassetta said. The fully flexible rate, however, is still subject to Hilton's 48- to 72-hour cancellation policy. The "semiflexible" rate, at a discount of about 1 percentage point or more, gives customers a four- or five-day buffer to cancel a booking prior to the arrival date.
Despite eliminating the previous, lower-priced BAR, Nassetta described the pricing approach as "more of a carrot" than a stick. "If you want more flexibility, you're going to pay a little bit more for it," he said.
Hilton began piloting flexible and semiflexible rates as early as the third quarter of 2016. Nassetta said that, based on tests at "hundreds" of Hilton properties, the company expects the new pricing to reduce last-minute cancellations significantly, maximize guest rooms available and give hoteliers a slight boost in average daily rate and revenue per available room.
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