Late-cancel changes not a game changer—yet
02 APRIL 2015 6:33 AM
In the three months since Marriott International and Hilton Worldwide Holdings adopted stricter late-cancellation policies, hoteliers say the impact hasn’t been huge, but it’s a step in the right direction.
REPORT FROM THE U.S.—It’s been a few months since Hilton Worldwide Holdings and Marriott International changed their hotel late-cancellation policies, and hoteliers say the process is all about educating customers and helping the hotel industry optimize revenue generation.
Last fall the two hotel giants upped the penalties for last-minute hotel cancellations (namely, the generally accepted policy requiring guests to cancel by 4 p.m. or 6 p.m. on day of arrival to avoid paying a fee). In effect since 1 January, to avoid penalty fees, Marriott and Hilton guests must cancel their reservation by 11:59 p.m. local time on the day before check-in.
Bjorn Hanson, clinical professor with the New York University Preston Robert Tisch Center for Hospitality and Tourism, said the lack of industrywide standards when it comes to late cancellation policies has traditionally been a pain point for guests.
“Policies regarding cancellation times and charges have changed dramatically over the last 10 years and have become harder for travelers to anticipate,” he said. “Marriott and Hilton have tried to come up with something fairly easy for travelers to remember.”
One exception Hanson noted, however, was that both Marriott and Hilton clarified at the time of the policy change that these updates essentially were for those hotels that previously offered same-day cancellation policies, but that individual hotels that had different cancellation policies already in place—like two-day or 72-hour cancellation—could opt to keep those.
“It’s a good start, and over time it can become more uniformly applied and enforced,” Hanson said.
The education process
Now several months into the new policies, hoteliers say guests are becoming more aware of the changes.
“The frequent week-day business travelers are starting to become more familiar with the updated policy; however, there has been some confusion over the past few months,” said JJ Tabone, an area general manager with Peachtree Hotel Group, who manages the Courtyard by Marriott Columbus in Columbus, Mississippi.
To address that, he said the hotel staff have honored the previous 6 p.m. day-of cancellation policy for guests who made reservations prior to the change, and they’re willing to make some exceptions as consumers become more aware of the policy.
Bharat Patel, chairman and CEO of Sun Companies, which counts 20 Marriott- and Hilton-branded hotels in its U.S. portfolio, said the late cancellation policy change hasn’t had a big impact on consumers, who already are used to similar charges from other travel providers.
“Guests already are dealing with airlines and rental cars, and they know they should cancel within a reasonable time frame,” he said. Like Tabone, Patel said his company’s policy is to tell guests who book over the phone about the new policies, which supplements language about the changes on Hilton and Marriott’s individual brand websites.
Revenue management positives
Why enforce change now, when the industry is doing so well? Hanson said now is exactly the right time to implement changes like this.
“If occupancy was back down below 60% and demand wasn’t growing, it wouldn’t be the time. But now when we have such high occupancy, management becomes more important and demand is strong enough so that the offset is positive,” he said.
At the Courtyard by Marriott Columbus, Tabone said historically the most last-minute cancellations have come from mid-week business travelers. The hotel’s current business mix is 65% business and 35% leisure, so those business travelers drive a good chunk of property revenue.
“This one-day cancellation time period still allows for a significant amount of flexibility for our guests, but it also gives the hotel the ability to property prepare for our guests,” he said. “The fees don’t contribute a significant amount of revenue for our hotel, but the idea of the fee helps us prevent last-minute cancellations that may leave us with several rooms unsold during a high-occupancy night.”
Patel said the change will give hoteliers and revenue managers more time to fill rooms last minute—an important tool to use as booking windows grow shorter and shorter.
“It’s really a welcome change, especially for busy hotels. Now we have an extra 18 hours to make the best out of our last available rooms,” he said. “We have several hotels in gateway cities, and I think it was needed.”
Hanson said that as other franchise companies adopt similar policies, consumer education will grow and the industry will see what can be tolerated in terms of late-cancellation fees—just as it does for other ancillary charges.
“Something needed to happen because people were just confused about cancellation policies,” he said.
Patel and Tabone said they have heard minimal negative feedback from guests, thanks in part to the verbal reminders they give guests every time a room is booked.
“I hope other franchisors follow (this policy) and collectively change the mindset of the consumer that we cannot be lagging in maximizing the revenue potential out there,” Patel said. “It’s a business decision. It’s a positive change, so let’s take advantage of educating the consumer.”