An employee at a Hilton hotel describes a classic scam that they say is going on at their property in order to inflate the amount that the Honors loyalty program has to reimburse them when guests stay on points.
What’s being described is creating fake occupied rooms just before night audit, closing the day with those rooms occupied, and then zeroing out the fake rooms. This inflates how full the hotel appears to be, so that the hotel gets reimbursed at the higher rate for free night awards because they’re nearly sold out, rather than at the low rate for filling an incremental room with a redemption.
- When a hotel isn’t full, Hilton pays its hotels very little for free night awards
- When a hotel is full, they basically get compensated with the average room rate because the award guest may be trading off with a paying guest they could sell the room to.
- So hotels have been known to ‘juke the occupancy stats’ to make it look like they’re full, and take more money for free night award room.
Should I report my hotel to Hilton?
Employee QuestionMy hotel has been putting in fake reservations for the last few years during the summer months (June-August) if we are close to 95 percent occupancy but not quite there. They will ask night audit to check them in then 0 out the rate after the night audit is ran and checked them out. The purpose of these “threshold” reservations is to supposedly get Hilton to reimburse a higher amount for rooms staying on Hilton Honors points. They’ve been doing it for years is my understanding. Isn’t this fraud? Could it and should it be reported?
This is a play that I’ve written about before. Starwood alleged that the Parker Meridien New York and Palm Springs altered accounting records and manufactured guests to claim more than $1 million in elevated SPG free night reimbursements, by creating fake reservations, fake complimentary travel agent bookings, checking in no shows, and checking employees into free rooms.
Le Parker Méridien New York is now the Thompson Central Park, and Le Parker Méridien Palm Springs is the Parker Palm Springs and affiliated with Leading Hotels of the World.
A 200-room hotel with 188 occupied rooms is at 94% occupancy. Let’s say 20 of those are Honors free night awards. If the hotel needs to hit 96% occupancy to goose reimbursement to a higher rate, they create four fake reservations, check them in before night audit, and the audit closes at 192 rooms occupied or 96%. The fake rooms are zeroed and checked out. And the hotel generates more revenue from those 20 rooms.
But this pushes up redemption prices for members. The loyalty program is paying hotels cash for award stays. This drives up the program’s costs, and that causes the program to increase the number of points they need to redeem for a free night.
It’s also super detectable, and chains that miss this are asleep at the switch. When there are dates clustered right at 95% – 96% occupancy, and there are reservations created and modified late in the business day, and folios with no payment attached on those nights as well as no key usage for the romom and probably no housekeeping (and no guest communication or loyalty activity) that seems like a giveaway.
What savvier hotels will do is dump inventory on the cheap through online travel agencies and opaque channels – sell rooms cheap enough that someone bites – in order to cross the threshold for better reimbursement. That’s just aggressive revenue management, rather than actual fraud.
In 2015, Marriott came up with a strategy to exclude room nights sold at less than 35% of a hotel’s average daily rate from calculations. Then in 2023 they shifted further to move away from these occupancy cliffs determining reimbursement rates.
Not the first time, and won’t be the last!
https://nypost.com/2013/01/03/suit-le-meridien-la-scam/
@Alleguay – i mention that case in the post
It’s probably easy to get away with this at IHG, Choice or Wyndham given those chains have virtually no standards and are mostly franchised. In the case of Choice and Wyndham, they are like 100% franchised. Would the chain even have access to the folios or reservations for rooms not booked through the chain? Remember all those franchised Marriotts showing up on Airbnb. Presumably, Marriott was being cheated out revenue from Airbnb bookings. Does Marriott really have the resources to flag fraud at 9,000+ properties?
So now Hilton is getting bonvoyed by Hilton?
What goes around, cone around!
@ FNT Delta Diamond — From Gemini:
“The estimated breakdown of franchised versus non-franchised (corporate-owned and corporate-managed) properties for the major hospitality brands is:
Hilton Worldwide: Approximately 99% of Hilton properties are franchised and managed by third parties, with a very small fraction managed by the corporate entity.
Choice Hotels: 99% of properties across their brand portfolio are franchised, driving the overwhelming majority of the company’s total revenue.
Marriott International: Approximately 76% of Marriott properties are franchised. The remaining 24% are either managed by Marriott or directly owned by the corporation.
InterContinental Hotels Group (IHG): Approximately 73% of the rooms in the IHG system are franchised, with 27% managed and less than 1% owned or leased.
Hyatt Hotels: While historically more focused on property ownership, Hyatt has rapidly shifted toward an asset-light strategy, relying heavily on franchising and management fees to drive the majority of their ongoing financial growth.
Wyndham Hotels & Resorts: Wyndham operates almost exclusively as a franchisor, with the vast majority of its thousands of locations licensed to independent owners.”
Gene:
Wyndham
25 brands
9,286 hotels, as of the end of 2024
Zero reported corporate-owned or operated properties
6,200 franchisors
Choice
22 brands
7,586 hotels, as of the end of 2024
Owns 12 hotels and manages 13 hotels,
Marriott International
30-plus brands
9,361 properties, as of the end of 2024
2,032 corporate-operated properties
7,192 franchised or licensed properties
(Note those two numbers don’t add up to the claimed 9,361 properties)
IHG
More than 6,600 open hotels.
73% of properties across all brands are franchised, 27% managed by IHG and less than 1% are owned or leased by IHG
Hilton Worldwide
8,447 properties, as of the end of 2024.
831 corporate-managed properties and 50 owned or leased properties.
7,566 franchised or licensed properties.
In the United States, Hilton has 5,887 properties. 5,700 are franchised or licensed.
All 34 Waldorf Astoria properties are Hilton-managed. By contrast, all 34 Graduate properties are franchised or licensed.
Hyatt
1,442 properties, as of the end of 2024.
Hyatt managed 680 and franchised 731. A further 31 were owned or leased by Hyatt.
@Gary – whoops, I should read past the fold! lol
My (very unproven) hypothesis is that the franchise model for hotel chains has been toxic to guests and shareholders alike. Growth at the cost of lower net profits. This may be just one of many reasons if I’m correct.
Very common and I was a nigh auditor for years lol not at Hilton.
The dynamic between chain, owner and customer is quite interesting. Each trying to screw the other two over constantly.
I wonder if occupancy rate includes rooms out of service, or is it fixed. If not, that would be an easier way to game it, just block out some rooms for some maintenance or renovation work as needed.
@Mantis — But, but… the ‘free’ market…
“6,200 franchisors” lol, I love when people use words they don’t understand.
I’m pretty confident that the Hyatt House NYC Chelsea did that for New Years Eve as they charged my credit card & recorded me as staying there (even got the points) even though the room was checked out earlier. I disputed it & won – but the stay, I’m sure, was still tracked as occupied. Shady business practices generate revenue for some hotels.
This is disappointing to hear because our family loves the Brand.