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The Big Lie About Hotel Cancellation Fees
Sunday, July 23, 2017 -- On an average night at America's 55,000 hotels, about 30 percent of the rooms are empty. Thousands more properties are in the construction pipeline. Alternate lodging options such as Airbnb.com and HomeAway.com are dumping hundreds of thousands, perhaps millions, of apartments and homes onto the short-term rental market.
Yet two gigantic hotel chains, Marriott and Hilton, tell us that the only way they can ensure us a room when we need one is to impose 48-hour or even 72-hour cancellation rules on their nightly rates. This fewer than three years after they imposed 24-hour cancellation rules to replace the same-day policies that prevailed since, well, the dawn of the lodging industry.
"Last-minute cancellations in particular have prevented rooms from being made available to our guests," Hilton said in an unattributed statement given this week to The New York Times. But Marriott produced Brian King, who runs global sales for the 30-brand operation. "People were cancelling and customers couldn't find rooms when they needed them," King claimed.
Bullshit. King is lying. Hilton is lying. Marriott is lying.
Know how I know they're lying? They clam up when you ask them for facts--any facts at all--to back up their claims.
Marriott started this nasty rip-off last month when it imposed the 48-72-hour cancellation rule on virtually all Marriott- and Starwood-branded properties in the Americas. Cancel a reservation inside the 48- or 72-hour window and you'll be slapped with a penalty equal to one night's stay.
I asked to speak to King, a sharp, savvy hotelier I interviewed several years ago when he ran Marriott's Courtyard division. Marriott refused. So I asked for proof--any kind of proof--Marriott had that travelers were being shut out of a room because others were cancelling at the last minute. Marriott, legendary for its data-driven approach to even the smallest detail of its operations, couldn't or wouldn't produce any.
Ditto for Hilton, which imposes a slightly less-stringent policy beginning next Monday, July 31. The properties Hilton owns and manages directly will move to the draconian 48-hour policy, but franchised hotels--which make up the vast majority of the chain--will be free to stick with the 24-hour rule or adopt the tougher restriction.
So since we can now logically conclude that Marriott and Hilton are simply lying about last-minute cancellations causing a room crisis, what's behind their move to make our lives miserable?
Money, of course. A naked grab for revenue. A ham-fisted attempt to stop us from shopping around for the best rates for our lodgings. And, maybe, a play to create a new revenue stream of cancellation fees, something the airline industry has done in recent decades.
In fact, the lodging industry has followed the airline industry in the dark art of yield management. Like airline seats, hotel rooms no longer have an intrinsic value. As those nearly unavoidable Trivago TV ads remind us, hotels peddle a wide range of prices on a nearly endless number of Web sites. And the closer it gets to the day, the more desperate hotels are to book unsold rooms. Entire businesses--the Hotels Tonight app comes to mind--are predicated on the theory that travelers will book at the last minute when prices may plummet.
Even if you aren't a lodging arbitrager, you'd be foolish not to check prices after you've booked a room to see if rates have dropped. I've certainly cancelled a reservation and then rebooked because the hotel I'd chosen had lowered the price. In fact, the look-again strategy is one of my basic rules of travel.
The hotel chains--well, so far Marriott and Hilton--hate that you are smart enough to understand their pricing games. So they have invented these 48-hour cancellation rules to lock you into a price and free themselves to negotiate lower rates with last-minute buyers.
To be totally fair, this is not a two-sided battle between us and hotel chains. Online travel agents (OTAs) such as Expedia and Priceline are huge players and they exact several juicy pounds of flesh to help hotels sell their rooms regardless of when we book. There's another party to this dispute, too: the owner-operator-managers of the properties that fly the chains' many flags.
I've been talking all week to these in-the-trenches folks who run the hotels on whose beds we put our heads and who are actually responsible for the rates we pay. The chains take their cut and the OTAs take their cut before the hotel owner-operator-managers ever see a dime. They are as much affected by cancellation fees as we are because they're the ones who bear the brunt of last-minute cancellations and the ones who have to figure out how to market their empty rooms at the last minute.
They're split on the Hilton and Marriott move. Some think a stiffer cancellation policy will cut down on the deep-discount selling they must do at the last minute. Others, however, are alarmed. They think imposing more stringent rules will only lead to more instability, especially since they believe more business travelers will now wait until the last minute to book to avoid paying cancellation fees.
Cory Chambers, vice president and chief revenue officer for Hospitality Ventures Management Group, feels the new rules will help his business. HVMG owns and operates hotels that fly the flags of chains such as Hyatt, Marriott, Hilton, Choice and Inter-Continental. He thinks a 48-hour cancellation regimen helps him manage his revenues and room inventory more efficiently.
"I get business travelers don't like this," he says, "but it's not that simple when you go street corner to street corner, which is where I live." With a 48-hour cancellation policy, "I can get a more concrete picture of my day-to-day yield. When I know two days out what is locked in, I can concentrate on the unsold rooms and make intelligent decisions on whether to distress them [lower the price] or premium them [raise the price]."
But Mike Marshall, who runs the hotel management and development company that bears the family name, is convinced stricter cancellation rules will lead more business travelers to defer booking until the last moment. He believes his hotels, which include independent properties as well as hotels that fly Hilton, Best Western, Wyndham and Inter-Continental flags, will then have less predictable revenue streams
"Look," Marshall told me between flights on Friday, "unless they are going to a conference or something, these new rules will force business travelers to change their booking patterns. Everybody's got a smartphone. If you tell business travelers they've got to lock in 48 hours in advance, they are going to wait until they get to the airport and book on their phone before they fly. You're always going to find a room."
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