Hilton and InterContinental Hotels Group have joined Marriott International in introducing a cancellation fee for hotel rooms.
The operators, which have trialled similar policies in the past, drew attention to the need to keep rooms open to last-minute bookings.
Hilton told us: “At this moment, there are no changes for our guests, but we have proposed an update to our policy guidance for hotels in the US and Canada to be effective at the end of the month. We have proposed updating the default house cancellation policy to 48-hours (72-hours in select locations) for our managed properties and have suggested the same for franchised hotels (this decision will be made at the property level for franchise properties). As always, the cancellation policy associated with any reservation is made clear to our guests throughout the booking process and in the confirmation emails they receive.
“At Hilton, our goal is to provide exceptional experiences – every hotel, every guest, every time. The proposed update to our cancellation policy guidance will allow us to maximise the number of available rooms for guests seeking accommodation. Corporate travel or group bookings will remain subject to cancellation policies stipulated in their contracts.”
CEO Chris Nassetta told analysts at the company’s second-quarter earnings call that the decision was “not just because of new technologies, but just because customers have been trained to do multiple bookings and do things that have created a scenario where cancellations have, in some markets, skyrocketed. They’ve got, they’ve gone way up.
“And it’s not good for anybody. It makes it very hard for us to manage inventory, particularly close-in inventory in a way that makes sense. We can’t have it be within 24 hours, because we can’t manage that last minute inventory.
“We are testing some other things – hopefully sometime in the second half of the year we will layer some incremental opportunities on top of that, that would really start to bifurcate. Then really thinking about from the 48 hour, 72-hour mark out to seven days, creating fully flexible pricing structures and semi-flexible pricing structures that would require potentially even cancel seven days, within seven days.
“A large majority of our customers know within those time frames whether they need to cancel or not. It’s just they haven’t had to do anything about it. So they haven’t. But if you can create the right incentive system where you give them an incentive to let you know earlier, it’s good for them because they ultimately probably can get a better deal.”
At IHG, the group’s new 24-hour cancellation policy was due to be introduced in Europe from July 28, with US hotels due to follow on 4 August and other parts of the world by the end of September.
IHG said that the new cancellation policy would create “greater consistency” across its properties, adding: “IHG’s previous cancellation policy varied by both region and brand, and this new change will mean that the majority of the IHG estate will now operate under similar terms.”
The pair follow Marriott International, which is implementing a 48-hour cancellation policy at hotels in the Americas including the US, Canada, Caribbean and Latin America, across all brands with the exception of MVW and Design Hotels.
The company said that: “In an effort to better serve guests seeking last-minute accommodations, guests will now be required to cancel their room reservation 48-hours prior to arrival in order to avoid a fee.” The revised cancellation policy will take effect on 15 June.
The decision to charge for cancelled rooms was not a new one for the operators. In 2014 Hilton and Marriott International announced that 2015 would be heralded with the introduction of charges for customers who failed to cancel their bookings by midnight the night before arrival.
Marriott International told us at the time that hotels whose policy was to allow guests to cancel their room reservations on the day of arrival without incurring a fee were “faced with a significant number of unsold rooms due to last-minute cancellations. The new policy will allow hotels sufficient time to offer these unsold rooms to guests seeking last-minute accommodations”.
Hilton also trialled a flat cancellation fee of USD50 for any booking at any time. Nassetta told analysts that the issue of what he described as “robo techno approaches to cancel and rebook” which have seen customers cancelling and rebooking at lower rates remained an issue. He said that the prior two to three years had seen a “significant increase” because of customer behaviour, but also technologies and apps, that had accelerated the behaviour.
Nassetta commented: “We’re one of the very few businesses I can think of that ties up basically all of its inventory with no downside risk, and particularly in today’s world with new technologies and these kinds of behaviours, that has a cost to it. Now that cost ultimately is going to be borne at some point by the consumer.”
Nassetta said that one route could be to look at pricing for those that need more or less flexibility and to create different sorts of pricing structures.
Charlie Osmond, chief tease, Triptease, told us: “It looks like the big chains are having a go at resetting consumer expectations when it comes to late cancellations. Guests have come to expect ever-easier cancellations, fuelled in part by insistent OTA marketing on the subject.
“I suspect that Hilton would like to allow the segmentation of travellers with legitimate last-minute schedule issues (e.g. a delayed flight) from travellers who deliberately book multiple hotels with a view to cancelling one at the last minute – but separating the two behaviours will be very hard.
“Resetting the expectations around late cancellation policies will be a challenge, but the chains may have enough combined clout to make a difference. After all, Airbnb has managed spectacular growth despite it being fairly difficult to make last-minute cancellations through the platform.”
HA Perspective [by Katherine Doggrell]: The figures on room cancellations vary, with clarity not offered up readily, but a study last year by distribution consultants Mirai reported that cancellations for rooms booked online were 19%, while through Booking this rose to 39% and 25% for Expedia (the lower rate was attributed to Expedia charging more customers at the time of booking) No time scale was given for the cancellations. Mirai assumed 85% recovery of the bookings, which it described itself as optimistic.
As we see elsewhere this week, Scandic, which has predominantly corporate clientele, told us that it felt no need to follow suit, being able to boast high occupancy.
An increase in leisure guests (who are more likely to be found on the OTAs) can change booking patterns.
Hilton told us that its 2015 trial made it “more sensitive to guest concerns”. Sensitive or not, the issue of cancellations has to be addressed now that apps such as HotelTonight have trained the consumer to book late, or book speculatively, safe in their free cancellation.
What has changed since the first iteration of cancellation charges in 2015 is the drive to direct booking. While Hilton’s USD50 trial saw loyalty members exempted, this time around the rules apply to all. We look to the imminent earnings season for evidence of how the drive to direct is progressing, but this push suggests that the operators are feeling confident enough to start asserting their personalities.