Corporate travel managers that neglect to gear up for the new era of hotel cancellation policies could find themselves short of a few thousand – or million – dollars.
HRS, the hotel solution giant, conducted an in-depth analysis of the booking data of its largest corporate customers over the past twelve months, focusing on cancellations as the 48-hour cutoff for canceling without penalty becomes the norm among major chains.
The survey of 100 corporate travel managers found the majority of respondents expecting higher costs due to the new cancellation policy, adopted so far in the Americas by Marriott International and Hilton Worldwide. (IHG said it would standardize it brands' policies with a 24-hour cutoff.)
Six out of 10 survey participants envision the new policy, which requires hotel guests to cancel within 48 hours of check-in to avoid a penalty of the equivalent of one night’s stay, will put them at risk of not achieving their travel management objectives.
Business travelers often experience last-minute changes in appointments and other travel plans. They also, as Hilton CEO Christopher J. Nassetta recently pointed out, don’t cancel reservations in a timely fashion because there are no consequences.
Getting business travelers to change their behavior is a tricky business, so it is left to travel managers to find ways to avoid the penalties.
HRS said almost one third of companies have already engaged with hotels to negotiate special conditions.
When choosing between two hotels with the same star rating, service and comparable location, 82% of travel managers would strongly favor the hotel that offers the more flexible cancellation policy.
Free-of-charge cancellation up to 6 p.m. on the day of arrival is a “must” for almost all companies, HRS said.
Nearly one of every six bookings (17%) is canceled, according to HRS’ research, but most are canceled before the 48-hour cut-off.
But the 5% that don’t cancel by the deadline can make a dent in hotel programs’ effectiveness.
HRS found that factoring in these potential costs across actual cancellation patterns over the past year would incur 2% in additional lodging costs for the companies surveyed.
For business travelers, flexibility is one of the most important criteria when booking a hotel.
HRS said that as rate shopping and revenue management technologies improve, optimized supplier relationships – and fairly-negotiated contracts -- between hotels and corporate hotel program managers are critical to mitigating the financial impact of these new policies.
As an example of the potential impact of the new policies, HRS cited a client with total annual hotel expenditures of more than $82 million.
If all cancellations made by this company within 48 hours of arrival were subject to this one-night charge, the budget impact would be $600,000 a year.
If all chain hotels globally implement this policy, this same company could see additional costs of up to $2.7 million, or 3% of its overall booking volume.
Companies in countries dominated by chains, such as the US, will feel the pain more acutely unless they prepare.
Suzanne Neufang, HRS vice president of the Americas, said:
“Against the backdrop of more stringent cancellation conditions in individual chains, companies should review their hotel program and negotiated rates. We’re making this a priority topic for all of our client negotiations this RFP season. Corporates who fail to address this issue in their 2018 negotiations risk absorbing unplanned fees that can negatively impact planning and actual expenditures.”
Neufang also urged companies to educate their travelers and travel planners on the costs of last-minute alterations to both air and hotel bookings.