Cost of cancellations: New hotel booking rules will affect your travel plans

Source: Shutterstock

IF you’re a cost-conscious traveler, you would have probably booked rooms in several hotels months ahead of your travel date, and then cancel them at the last minute after snagging an affordable online deal.

This flexibility may suit both business and leisure travelers, but weighs heavy on hotel revenue managers who are consistently left with last-minute inventory they then have to push to third-party websites.

This may soon come to an end, however, as hotels mull the option of imposing penalties on last-minute cancellations.

Marriott, Hilton and the InterContinental Hotels Group (IHG), three major hotel chains currently dominating the global hospitality marketplace, are leading the way in this, recently announcing changes to their cancellation policies.

Marriott was the first to update its policy with an announcement in June, followed by Hilton and IHG a month later. The former two now impose a minimum 48-hour notice on cancellations at their properties while the latter imposes a 24-hour notice.

Although likely unpopular, these are long overdue changes, given how technology has changed the hotel bookings process.

Hotels today rely less on walk-in business as most travelers prefer booking their rooms online, usually through third-party websites or online travel agencies (OTAs), or via one of the many mobile applications offering last-minute room deals.

Travelers also try to secure rooms far in advance to ensure they don’t risk ending up without a place to stay. Months later, they scour the Internet searching for last-minute deals, canceling one hotel at full price and gaining a refund, and then securing a cheaper option.

To hoteliers like Hilton CEO Chris Nassetta, this is how travelers are “gaming” the system, and hotels need to seek ways to protect themselves against empty rooms and grow their revenues.

Of course, a cancellation charge will deter a savvy traveler from a speculative non-committal booking. However, for those who have to cancel because of events completely out of their control, it will undoubtedly be frustrating.

SEE ALSO: Why loyalty programs are more relevant than ever for the travel sector

For the corporate traveler, a stringent hotel cancellation policy will be bad news. Business travel can be a minefield at the best of times: cancelled or delayed flights and rescheduled meetings. Late hotel cancellations, therefore, are inevitable.

To avoid the added cost of a cancellation fee, bigger companies with corporate travel policies will likely try to negotiate for some degree of flexibility to incorporate into their plans. For the smaller firms and the independent traveler, however, their best option for a workaround would simply be to change how they plan their travels.

First of all, always look at cancellation policies when booking.

Many hotels, including Marriott and Hilton, use tiered bookings. To secure the cheapest room, cancellation fees may be high or there may be a “no cancellation” policy. There are then the flexible rates, where you pay upfront but will gain more of your money back if you end up having to cancel.

“If there is uncertainty, we book flexible tickets,” Christopher Halsey, a frequent business traveler, told Travel Wire Asia.

“There are prepaid early birds which are non-refundable and then the flexible rates which are much more expensive, but can be cancelled within 24 hours.”

It can be a risk gambling whether his customers are likely to cancel on him so if there’s any doubt, Halsey books the flexible rates.

“This is how the hotels make sure that their customers are actually paying for their rooms, either way. The difference in price makes up the cost of losing the person staying in the room,” he says.

According to Hotel Mogel Consulting Ltd principal Larry Mogelonsky, the policy changes will likely result in travelers becoming “more conscious of the time restrictions now in place and adjust their ‘deal making’ to fall just outside of the penalty window.”

“Worse, they may be more hesitant to reserve a room in the first place – thereby giving hoteliers less information about future occupancy – or they may decide to only give their money to hotels that do not have this type of strict cancellation policy,” he said in an article on HospitalityNet.

Another option is to look at selling your room reservation online. Sites like Cancelon and Roomer provide the means to do this. The Cancelon website claims that “many travelers are not aware that their unused reservations are transferable”. However, users are urged to check the policy on the hotel’s website before using the site. Some hotels require a fee to change the name of the guest, but many do not.

Apart from the above, the options seem few and far between for travelers suddenly hit by a last-minute change in plans.

SEE ALSO: Marriott targets millennials with ‘lifestyle’ range Moxy Hotels

The luxury of free cancellation via the “flexible” room route, for example, costs more as an initial investment but is guaranteed to save you money when you actually need it. But how many of us treat our holiday booking process like we’re shopping for an insurance policy?

For now, it seems travelers are just going to have to grin and bear the new rules.

Mogelonsky says although the changes may be “unfortunate” for some, they are “a step in the right direction insofar as ensuring that travels don’t take our fragile product for granted”. He added that he’s “glad to see these chains leading the way”.