In recent years, the airline industry has generated billions in revenue by charging a multitude of fees on top of base fares. Now the hotel industry seems to be focusing on the same idea.
Two worldwide hotel companies, Marriott and Hilton, recently announced that they would increase their fee revenue by tightening rules on last-minute reservation cancellations. Where a 24-hour cancellation was previously required, the new policy is a 48-hour cancellation requirement. This development puts an additional strain on business travelers who change travel plans often, and on their travel agents who are often asked to get fee waivers for late cancellations.
Policies allowing a reservation to be canceled as late as 6:00 pm on the arrival date were standard at most business hotels for decades. But beginning in 2015, Marriott and Hilton led the charge for establishing a 24-hour cancellation requirement. Gradually, other chains followed suit — and in some cases raised their cancellation penalty. While traveler advocates denounced the move at the time, it was eventually successful and has emboldened Marriott and Hilton to go back to the well.
Effective June 15 at Marriott/Starwood hotels and on July 31 at Hilton hotels, you will be charged a cancellation fee if you don’t cancel your reservation two days before your scheduled arrival.
Even hotels within large chains have varying cancellation policies, and the changes planned by Marriott and Hilton address only those last-minute cancellation rules. Policies won’t change for hotels that already have cancellation policies requiring a two-day, four-day or even longer advance notice. “Some hotels have more restrictive policies in place, so please refer to your individual conformations to verify their policy,” Hilton said. While the penalty for canceling past the deadline is a single night’s rate at most city and suburban hotels, at some resorts it might be three nights. And at some destinations it’s the entire stay. (Note: Corporate negotiated rates, which often include stipulated cancellation windows are exempt from the new policy at Hilton.)
Marriott explained the new policy “will allow hotels a better chance to make the rooms available to guests seeking last minute accommodations.”
Some observers suspect that hotel chains impose these rules to prevent travelers from booking a standard rate, then canceling the reservation at the last minute and re-booking at a cheaper rate using popular new last-minute booking sites and apps like TripBAM which monitor hotel rates and alert the traveler if a cheaper rate becomes available. But what about the traveler who has a cancellation because their flight was delayed or cancelled? Doesn’t this mean that the hotel can basically sell the room twice? How can a traveler know 48 to 72 hours in advance if their flight is not going to make it?
Globally hotels generated about $550 billion in revenue last year, with about $100 billion in revenue coming from ancillary fees and charges. Included in that revenue are fees for in-room Wi-Fi, parking fees, resort fees, mini-bar restocking fees and reservation cancellations fees. Much discussion has taken place in the hotel industry about how to raise those fees, with a special emphasis on selling ancillary services via branded mobile apps.
It remains to be seen if the move to a two-day cancellation window will be a negative factor for Marriott and Hilton. If the secondary hotel chains move in unison to back them up, like they did when eliminating same-day cancellations, they might get away with it. Another possibility is that they try to monetize less restrictive cancellation policies as an add-on fee, which would be charged on every reservation, whether the traveler needed it or not, like the difference between refundable and non-refundable airline fares. On the other hand, an enterprising hotel chain might make less restrictive cancellation policies the centerpiece of a new marketing campaign and push this industry trend back in the traveler’s favor.