Lucky asks why the cancellation policy on his $90 hotel room would cost him $600.
- He booked an award night at the Aloft Abu Dhabi for 3000 Starwood points
- The paid rate for that night would have been ~ US$90++
- The charge for cancelling after the deadline to do so wasn’t ‘losing 3000 points’ or paying $90. It was AED 2200 or ~ $600.
And he writes,
Now, not that I’d ever cancel an award stay within a day of arrival (I’d be better off just no showing), but why would the forfeiture amount be more than six times the cost of a revenue stay?
More generally, does anyone understand how forfeiture amounts on award stays actually work in the hotel industry?
The forfeiture amount — what it costs you if you don’t cancel your stay by the cancellation deadline — for an award stay with Starwood is based on the hotel’s RACK rate.
That doesn’t really strike me as reasonable, and fortunately no one actually has to pay this. Although people used to and it generally came as a surprise.
While hotels would often be willing waive this charge with a reasonable excuse, if someone had cancelled flights and didn’t make their award stay they were theoretically on the hook for real money and not points.
Starwood Preferred Guest wouldn’t pay the hotel property for when a Starwood member didn’t show up. The member would keep their points but have to pay the hotel directly for taking up the room.
Starwood Preferred Guest didn’t want to let the hotel just keep the internal reimbursement rate from the program without a member actually showing up, because they were afraid that hotels would fraudulently overcharge the program… they could redeem no show nights especially when the hotel was booked nearly full and receive a higher than usual payout (the hotel’s average daily room rate for the year rather than the normal discounted rate charged to the program).
In the case of the Parker Meridien properties this turned out to be a reasonable fear!
But it’s not a great idea to build processes to prevent your business partners from taking advantage of you by inconveniencing your customers.
So a few years ago SPG changed their terms to allow the member to choose to just forfeit the points on an award stay instead of the cash.
3.2.g. If an SPG Member fails to cancel a guaranteed SPG Award reservation within the permitted cancellation time, the SPG Participating Hotel will charge the applicable cancellation fee to the credit card provided by the SPG Member at the time the reservation was made and the Starpoints that had been redeemed will be re-deposited into the SPG Member’s account. For Free Night Awards only, an SPG Member may request a refund of the applicable cancellation fees charged by forfeiting the portion of the Starpoints that he/she had redeemed for the SPG Award necessary to cover the applicable cancellation fees by emailing his/her request to email@example.com no later than 60 days after the reservation arrival date, provided that the SPG Member has adequate Starpoints in his/her account.
So Lucky wouldn’t have had to pay the $600 for no showing his Aloft Abu Dhabi stay. That’s what the hotel would have charged — but he could have then emailed Starwood within 60 days to have the charge reversed and his points from the stay taken instead.