Hilton at the end of the month will begin charging a penalty
for reservations canceled within 48 hours of hotel stays at properties in the
U.S. and Canada. Marriott International released the same policy last month.
For most franchise-based hotel companies, cancellation
policies have been at the discretion of the property. That Marriott has
introduced this policy companywide to its more than 5,700 hotels and that
Hilton has followed suit have created concern that the hotel industry will move
in lockstep with pricing policies the way the airlines do now.
"This was one of the fears everyone had with big
consolidation," Hess Corp. global travel category manager Nicki Leeds said
during an education session at the recent Global Business Travel Association
convention. "It is very difficult with a chain the size of Marriott to eliminate
them from your program."
This Has Been in the
Hilton and Marriott also moved in unison in 2014, when each
introduced a broad 24-hour cancellation policy. And, as a result of more
sophisticated revenue management practices across the industry, many hotel
properties already have been enforcing a 48-hour policy. During corporate rate
negotiations for 2016, analysts
noted, more hoteliers were pushing back on same-day cancellations, a
standard contract requirement for corporate travel programs.
Hotel rooms are perishable products; if a traveler no-shows
or cancels too close to a stay, it's difficult for a hotel to recoup that lost
revenue. For some time now, Hilton has been testing the waters on ways to get
money back for cancellations, most recently piloting an indiscriminate $50
cancellation fee, as well as more
Before Marriott deployed its 48-hour policy, global sales
officer Brian King said it tested it at about 410 hotels in various markets.
"Cancellations happened sooner and sales went up," he told BTN,
"which is what we wanted."
Wait & See
It remains to be seen how the new cancellation
policies will impact corporates. Even with the 24-hour policies that launched
in 2014, buyers have been able to secure same-day cancellation contract terms and
dissolve relationships with properties that wouldn't accept same-day cancels. An
analysis by Tripbam found that on average, corporate travelers cancel or change
4.9 percent of reservations within 48 hours of check-in and that if corporates
were charged a penalty, the average cost would be $179 per occurrence.
Goldspring Consulting partner Mark Williams said even with
the size of Marriott and Hilton, he expects that the high fragmentation in the hotel
space will keep the 48-hour cancellation policy from becoming a broad industry
practice. Leeds said it's more likely that these cancellation policies, as with
free Wi-Fi, will become a differentiator for companies that decline to follow suit.
King said one of Marriott's largest corporate accounts in
the professional services industry praised the hotel company because the move has “actually freed up more inventory for corporate customers” making last-minute bookings.
Marriott is not enforcing
the new policy on its existing contracts, but King did say the company has looked
into "extending cancellation requirements in that space, as well."
During the same GBTA session, EY Americas travel
lead Barbara Rose said things like this are going to happen again and again, so
it's important to prepare. "It's all about relationships," she said.
"When this happens, what is your relationship with your supplier? What can
you do to mitigate it? What can you do to help educate your travelers? What
does the data say? Work through that."