We at TravelPlex have been predicting stricter hotel cancelation penalties for almost a year. Hotels have been warning travelers if they continue to book last minute rooms on web sites, they will impose penalties that will end up costing the traveler more than any savings possibly earned.

Hilton Hotels will begin charging a penalty for reservations canceled within 48 hours of hotel stays at properties in the U.S. and Canada beginning August 1, 2017. Marriott International released the same policy and began enforcing it in June. The fact that Marriott introduced this policy to its more than 5,700 hotels companywide, and that Hilton has mimicked the policy, has created industrywide concern that the hotel industry will adopt these penalties the same way the airlines do now. Other hotel brands and chains could very well adopt the same strategy. The policy of cancelling a room prior to 6:00pm the day of arrival is, unfortunately, a thing of the distant past.

The root of this procedural change can be found in the practice of hotels lowering fares at the last minute in efforts to gain a few last-minute reservations. The problem is that there is new technology, such as TravelPlex’s CHART, that scans hotel (and car) pricing looking for these new discounted rates. CHART grabs the new lower fare, then changes the reservation to reflect the new-found price. CHART has tracked nightly savings as high as $89.

Due to this new policy, TravelPlex will adjust the hotel price scan from its current 26 hours, to 50 hours prior to check-in time.

The following article has more information about Marriott’s and Hilton’s attempt to reign in last minute savings...

Hilton's & Marriott's 48-Hour Cancellation Policies

By Julie Sickel for Business Travel News

Hilton at the end of the month will begin charging a penalty for reservations canceled within 48 hours of hotel stays at properties in the U.S. and Canada. Marriott International released the same policy last month.

For most franchise-based hotel companies, cancellation policies have been at the discretion of the property. That Marriott has introduced this policy companywide to its more than 5,700 hotels and that Hilton has followed suit have created concern that the hotel industry will move in lockstep with pricing policies the way the airlines do now.

"This was one of the fears everyone had with big consolidation," Hess Corp. global travel category manager Nicki Leeds said during an education session at the recent Global Business Travel Association convention. "It is very difficult with a chain the size of Marriott to eliminate them from your program."

This Has Been in the Cards

Hilton and Marriott also moved in unison in 2014, when each introduced a broad 24-hour cancellation policy. And, as a result of more sophisticated revenue management practices across the industry, many hotel properties already have been enforcing a 48-hour policy. During corporate rate negotiations for 2016, analysts noted, more hoteliers were pushing back on same-day cancellations, a standard contract requirement for corporate travel programs.

Hotel rooms are perishable products; if a traveler no-shows or cancels too close to a stay, it's difficult for a hotel to recoup that lost revenue. For some time now, Hilton has been testing the waters on ways to get money back for cancellations, most recently piloting an indiscriminate $50 cancellation fee, as well as more restrictive rates.

Before Marriott deployed its 48-hour policy, global sales officer Brian King said it tested it at about 410 hotels in various markets. "Cancellations happened sooner and sales went up," he told BTN, "which is what we wanted."

Wait & See

It remains to be seen how the new cancellation policies will impact corporates. Even with the 24-hour policies that launched in 2014, buyers have been able to secure same-day cancellation contract terms and dissolve relationships with properties that wouldn't accept same-day cancels. An analysis by Tripbam found that on average, corporate travelers cancel or change 4.9 percent of reservations within 48 hours of check-in and that if corporates were charged a penalty, the average cost would be $179 per occurrence.

Goldspring Consulting partner Mark Williams said even with the size of Marriott and Hilton, he expects that the high fragmentation in the hotel space will keep the 48-hour cancellation policy from becoming a broad industry practice. Leeds said it's more likely that these cancellation policies, as with free Wi-Fi, will become a differentiator for companies that decline to follow suit.

King said one of Marriott's largest corporate accounts in the professional services industry praised the hotel company because the move has “actually freed up more inventory for corporate customers” making last-minute bookings.

Marriott is not enforcing the new policy on its existing contracts, but King did say the company has looked into "extending cancellation requirements in that space, as well."

During the same GBTA session, EY Americas travel lead Barbara Rose said things like this are going to happen again and again, so it's important to prepare. "It's all about relationships," she said. "When this happens, what is your relationship with your supplier? What can you do to mitigate it? What can you do to help educate your travelers? What does the data say? Work through that."

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