Marriott’s 48-Hour Cancellation Policy To Affect 2018 Rate Negotiations

By | June 20, 2017

[UPDATE: July 26, 2017: InterContinental Hotels Group’s new cancellation policy will be more lenient than Marriott’s and Starwood’s, allowing guests to cancel reservations without penalty up to 24 hours in advance. A spokesperson confirmed the change will first affect Europe, beginning July 28, followed by the Americas on Aug. 4. Properties in Asia (excluding China where policies aren’t changing), the Middle East and Africa will follow at the end of September. The policy revision “will provide our guests with greater consistency when managing their reservations and offer certainty for our owners,” according to the spokesperson. “IHG’s previous cancellation policy varied by both region and brand, and this new change will mean that the majority of the IHG estate will now operate under similar terms.” Kimpton Hotels is the exception; its pre-existing 48-hour cancellation policy won’t change.]

[UPDATE: July 20, 2017: Hilton Hotels confirmed that it has “proposed” a 48-hour cancellation policy for the U.S. and Canadian properties that it manages, effective at the end of this month. It “suggested” the same for franchised hotels. A Hilton official indicated that the company has “seen cancellation rates rise the last few years.” The official added that the new cancellation policy would be 72 hours “in select locations.”]

In light of related tests by big chains in recent years, Marriott International’s June 15 introduction of 48-hour cancellation policies at nearly all Americas hotels wasn’t a surprise. That doesn’t make negotiations for next year’s rates any easier.

Like it or not, and most don’t, Marriott’s decision exemplifies the lodging industry’s efforts to better manage inventory and generate additional revenue. Many hotels a few years ago switched from same-day to 24-hour cancellations. The Starwood acquisition gave Marriott more clout to push further. Expect competing chains to follow, though maybe not right away as they try to leverage a competitive advantage.

This development is bad for business travel, restricting last-minute planning and late changes. According to one commenter on FlyerTalk, a 48-hour cancellation is as restrictive as prepaid reservations. “So is the strategy now never to reserve until the day of or day before when it’s concrete?” asked another. “There go any ‘advance’ upgrades.”

And there goes some latitude. Partnership Travel Consulting’s Andy Menkes gave this scenario: “I made a booking for June 3 at a Marriott for $250 a night. On June 1, I see a comparable hotel has dropped their rate to $199; it’s too late for me to make that change.”

As generally used today, popular third-party reshopping tools like TripBam and Yapta won’t help much. They often stop searching at 48 hours out. As such, “their effectiveness is unlikely to be impacted in the short term,” according to GoldSpring Consulting partner Neil Hammond. “If other chains follow suit and the periods are further extended then this may become an issue.”

Corporate negotiated rates often have looser cancel policies, but for 2018 rates that flexibility looks to be harder to come by. It will be especially challenging in markets where travel programs have modest hotel volumes.

“Corporate buyers will just need to do a better job to negotiate same-day or 24-hour cancellation,” according to Advito senior director Marwan Batrouni.

How should they do that? Consultant Mick Lee of Arrow212 said savvy buyers would be more attentive during RFPs — rather than simply “checking the box.” She said they should consider alternatives like Airbnb and review data “to ascertain the locations with the biggest impact to their expenses.”

Marriott CEO Arne Sorenson
Image: Reuters/Fabrizio Bensch

Marriott’s policy also will impact dynamic pricing programs and “hinder the ability of buyers to take advantage of inventory pricing shifts,” according to Lee.

Assessing all of this may take longer than usual. Donna Brokowski, GM of Travel and Transport’s Partner Solutions Group, said Marriott’s new policy could lead to a longer hotel RFP process and a “possible shift away for some key hotels.”

Travel Consulted’s Grant Caplan said companies would have better luck working with individual properties than through brand HQ. That means local relationships are “now even more valuable,” he said.

According to FINRA corporate travel services manager Carol McDowell, the new policy is “a game-changer” that may require strategy adjustments.

Carlson Wagonlit Travel Hotel Solutions director Eric Jongeling expects cancellation policies to be a “key element” in negotiating with and selecting preferred properties. “One of the most important considerations is ensuring business travelers are aware of cancellation policies and ensuring the terms are communicated,” he said. “We expect preferred hotels to provide better terms than travelers can find on their own and this change could present additional opportunity to drive more program compliance if negotiated deals provide greater cancellation flexibility.”

In 2015, Marriott International CEO Arne Sorenson told Wall Street analysts that allowing guests to cancel up until 6:00 p.m. on the day of originally intended arrival “created greater risk of overbooking” and made it “harder to revenue-manage the hotels.” During a conference call last month, Sorenson said the company had been testing a 48-hour window for “a number of reasons.”

He elaborated on the benefit of reduced overbooking after the earlier switch from same-day to 24-hour cancellation — a strategy Marriott copied rather than initiated. “There’s nothing worse for a traveler than to show up at a hotel with a confirmed reservation and not have the room there,” Sorenson said. “We’d like to be full every night without a single room empty and without a single customer walk. Now that’s not necessarily something that we will ever achieve, but I think we’re making good progress on that.”

Meanwhile, Marriott’s move helped raise the profile of last-minute B2C services like Hotel Tonight and Priceline “express deals” among several commenters on FlyerTalk.

Additional info: Marriott International’s policy impacts hotels in the United States, Canada, the Caribbean and Latin America, “across all brands except for Design Hotels,” according to a company statement. “Guests will now be required to cancel their room reservation by midnight 48 hours prior to arrival to avoid a fee. This will allow hotels a better chance to make the rooms available to guests seeking last-minute accommodations.” A Marriott spokesperson noted that the policy is 72 hours “in a few select locations.”


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