Despite initial concerns from the corporate travel community regarding Marriott’s new 48-hour cancellation policy, one corporate travel services provider says these new booking policies won’t hurt corporate travelers and their companies much.
TripBAM, a platform that tracks hotel rates and rebooks them at a lower rate for its corporate clients, mostly mid- to large-size companies, said the financial impact of these new cancellation policies from Marriott and, soon, Hilton, to companies isn’t nearly as bad as you may think.
TripBAM examined its more than 10 million annual hotel reservations within the last year and found that of those bookings, only 4.9 percent of travelers, on average, canceled or changed their hotel reservations within 48 hours of check-in. If each of those changes were to result in a cancellation penalty, TripBAM estimated the cost would be $179 per occurrence.
“If you have 100 bookings, approximately five corporate travelers will cancel within that new booking window,” TripBAM CEO Steve Reynolds explained. “It’s not that big a deal. It’s not going to impact you that much. But it’ll really impact you [companies] if you have a preferred relationship with those hotels. Before, the hotel used to give you day of check-in to cancel, and now they give you 48 hours.”
Reynolds’ analysis is a direct contrast to a recent poll conducted by the Business Travel Coalition, which asked 216 travel manager and travel management company executives from 12 different countries to weigh in on Marriott’s new cancellation policy, which charges a one room-night penalty for cancellations made within 48 hours of check-in. That poll found 59 percent of respondents saying they would likely book away Marriott properties, and 30 percent saying they would consider a travel policy change that restricts travelers from booking a Marriott property.
Why Hotels Are Doing This
This shift in cancellation policy simply makes good business sense for hotels.
Said Reynolds, “It’s a revenue stream. What they are trying to do is reduce some of the volatility round their occupancy. If I have people cancel last minute, that’s a lot of rooms I have to sell last minute. It gets really painful, and they want less volatility three to five days out as much as they can.”
He added that these 48-hour rates have existed long before these new policies went into effect and that the party most likely to be impacted by them will be leisure travelers, not corporate travelers.
Marriott announced its new policy, which impacts hotels in the Americas across all brands with the exception of Design Hotels and Marriott Vacations Worldwide, on June 15. A Marriott spokesperson issued the following statement regarding the change in policy, saying this is not only better for the hotels but for other guests seeking accommodation, as well.
“The revised policy allows us to make rooms available to guests that would have otherwise gone unoccupied due to a last-minute cancellation. While cancellation policies vary by hotel, hotels whose policy is to allow guests to cancel their room reservations on the day before arrival without incurring a fee are faced with a significant number of unsold rooms due to last minute cancellations. Guests will now be required to cancel their room reservation by midnight 48 hours prior to arrival in order to avoid a fee. This will allow hotels a better chance to make the rooms available to guests seeking last-minute accommodations.”
Fifty-three percent of respondents from the Business Travel Coalition survey also said they anticipate other companies will follow suit, and they’re not wrong: Hilton will soon implement its own version of this cancellation policy by the end of this month for its hotels in the U.S. and Canada.
A Hilton spokesperson issued the following statement to Skift regarding the change in policy: “Right now, there are no changes for our guests, but we have proposed an update to our policy guidance for U.S. and Canada hotels that will begin on July 31st. We have proposed updating the default house cancellation policy to 48-hours (72-hours in select locations only) for our managed properties and have suggested the same for franchised hotels. The decision to participate will be made at the property level for all franchise hotels.”
“What are the reasons behind the update? Our goal is to provide exceptional experiences: every hotel, every guest, every time. We regularly review guest booking and cancellation patterns across our 5,000+ properties, and have seen cancellation rates rise the last few years. These insights have led to the proposed update, which will allow us to maximize the number of available rooms for guests seeking accommodation. Business travelers, leisure travelers, and hotel owners will all benefit from access to rooms that would previously have gone unused.”
Reynolds, for one, thinks the cancellation window will stretch to 72 hours within the next two-and-a-half-years. “It went to 24 hours five years ago,” he explained. “Five years later now it’s 48. In two and a half years, it’ll be 72 if they can. I don’t blame them. If I had to fill up a hotel, I’d need to fill it up as soon as possible, and I would do the same.”
What Companies Can Do
Reynolds had the following advice for companies concerned by this new cancellation policy at Marriott and Hilton.
“If you have a contract with a hotel where you promise so many room nights and they give you a discounted rate in return, you need to make sure you pay attention to the cancellation policy, especially if you think your travelers are likely to cancel within 48 hours of checking in,” he said.
Reynolds advised asking for more lenient cancellation policies in negotiated rates, encouraging corporate travelers to use preferred hotels, and contacting hotels to obtain waivers whenever possible.