It was only 3 years ago that Hilton moved from generally allowing same day cancellation of hotel reservations to requiring cancellation the day before to avoid charges.
Last month Marriott rolled out a change to require cancellation 48 or 72 hours prior to check-in and Hilton matched with its own 48 hour check-in requirement.
If Hilton hadn’t matched, Marriott would have been left on its own at a disadvantage against a major competitor. Since Hilton did match, Marriott announced their intention to implement the change more broadly.
- The goal is similar to airline revenue management. They want to lock customers into higher prices they may book rooms at (offering them the security of having the room at the hotel they want) while being able to dump unsold rooms last minute at a discount without sacrificing revenue from those early booking customers willing to pay more.
- They’ll pick up some cancellation fees they wouldn’t have otherwise. And those they hope will mitigate revenue given up from lost business.
- But customers will likely shift towards booking more last minute. It’s hard to expense a business travel room you don’t use. And unless you need to be at a specific hotel for a conference, in most cases it doesn’t really match which hotel in a given city you stay at within a range of options. It’s rare for a city to sell out completely.
- My own plan is to still book in advance and then evaluate how likely a sellout is closer to arrival. When hotel rates haven’t jumped I’ll probably cancel three or four days out on the chance I need to cancel a trip at the last minute.
Conrad Koh Samui
Deanna Ting at Skift Hotel corporate booking codes may be the answer to retaining last minute cancellation flexibility.
Hilton, though, has a plan to become even stricter with cancellations — and to charge more for flexibility.
Expect Hilton to debut new rate structures that enable more flexible cancellation policies. “We have been testing some other things,” Nassetta noted. “Hopefully sometime in the second half of the year we will layer incremental opportunities on top of that that will start to bifurcate … creating fully flexible and semi-flexible pricing structures that would require a cancellation within seven days.”
Seven day cancellation!
Many resorts of course have farther-out cancellation policies. This is especially true in places where rooms are limited, customers tend to book farther in advance, and it’s difficult to replace last minute cancelling guests.
However it’s not clear how this will all shake out for individual properties across varying markets, and certainly there are many hotel owners nervous about the changes.
Finally, on Hilton’s new exclusive co-brand credit card deal with American Express, they may benefit incrementally “$50 to $60 million in 2018” and the deal also provides for “lower transaction and processing fees” for hotels.