Digging into What the New Hotel Cancellation Rules Will Cost Us

By Robert McGarvey

More analysis about the bottomline costs to travelers of the new 48 hour cancellation policies at Marriott, Starwood and Hilton hotels continues to emerge – and the outlook is not good for us.

I’ve been consistently opposed to the new rules and still believe that, generally, we can duck them without inconvenience.  

I also snicker at the hotelier claim that somehow we are to blame for the new rules – when the reality, plainly, is that hoteliers are jealous of the mammoth fee income pulled in by airlines and they want their share.  

Their problem is that they don’t have the consolidation that marks the airline business.  From Phoenix where I live I have maybe three or four convenient ways to fly commercial to New York.  I have literally hundreds of hotels to choose among once there.  And many of those hotels are active on Hotel Tonight which means I have choice even for last minute bookings.

I also have new choices on Airbnb et. al.  

Airlines, pretty clearly, don’t give a hoot what I think about them. Hotels, on the other hand, want their guests to like them and hoteliers also actively seek to create loyalties.  

Punitive cancellation policies are a fast way to alienate guests.  Duh.

HRS, a hotel booking service, has looked closely at how the new policies will impact their corporate customers. HRS is saying “companies will have to budget for additional charges totalling millions.”

HRS further noted: “For business travelers, flexibility is one of the most important criteria when booking a hotel, as business appointments change frequently.”  

HRS said that 17% – one in six — of hotel reservations are cancelled.  It added: “But short-term cancellations are less frequent. Five percent of bookings are canceled up to 48 hours before arrival.”

Even so, per HRS, “In many cases, the late cancellation charge equals one overnight stay. Factoring in these potential costs across actual cancellation patterns over the past year, the companies surveyed would incur two percent additional lodging cost.”

HRS pointed to hard data: “One proof of this is provided by a key HRS client with total hotel spend of more than $82 million USD. If all cancellations made by this company within 48 hours of arrival were subject to this charge, the budget impact would be $600,000 USD a year.”

What to do about it? HRS is advising companies that as they negotiate corporate rates for 2018, they need to put cancellation policies on the table.

Understand: the big hotel operators will blink if a large enough corporate booker insists on greater cancellation flexibility.

What about smaller companies and individuals?

We need a more clever approach.

HRS offers pointers: “As part of its hotel procurement service for corporate programs, HRS casts its eye over the overall market. This includes independent hotels as well as hotel chain organizations that may offer more flexible cancellation policies for business travelers. Free-of-charge cancellation up to 6 pm on the day of arrival is a ‘must’ for almost all companies – correspondingly, hotels stand to gain more corporate room nights if they offer guests this flexibility.”

Read that again: it is saying book only at hotels that allow cancellation without charge up to 6 p.m. of the day of arrival. And always read the fine print in any reservation. Usually that’s where onerous cancellation clauses hide.

Incidentally, Bjorn Hanson, a hotel industry guru at NYU, told Skift why company wide cancellation policies make no sense: “A single, national cancellation policy is unwise,” he said. “In New York City, where occupancy is going to be, on average, 86 percent, cancellation policies are more important than they are in markets that run relatively low occupancy, for example. To implement a uniform cancellation policy with those two extremes is unwise and might cause guests to feel like they’re being treated unfairly.”

Absolutely right.  

My guess:  if enough of us hold tough, I would be surprised if we don’t see a broad retreat from the 48 hour rule, at least in many markets.  But it’s up to us to continue to make our dissatisfaction known.  Book at properties with kinder, gentler cancellation rules and don’t be shy about making your choices known on Twitter and Facebook.

That’s how to help hoteliers get this right.