Posted November 21, 2014

New Hilton, Marriott Cancellation Policies Signal Embrace Of Last-Minute Bookings

New policies adopted by Hilton Worldwide and Marriott International that levy a charge of a one-night room rate plus taxes if bookings aren't canceled the day before arrival have been cast in frequent-traveler message boards and media outlets, including The New York Times, as little more than a fee grab.

Such a motive might have something to do with it, but both hotel companies also suggested the moves are about keeping inventory available for last-minute bookings.

Given healthy travel demand, high hotel occupancy levels and an apparent strength in demand for last-minute hotel bookings, clinging to that highly perishable inventory—whose value has seemingly grown—is wise.

How high is that demand?

A July 2014 PhoCusWright study, based on Adara data from May through December last year, found that 23 percent of hotel searches using online travel agencies were made within a one-day booking window. For searches using hotel websites, the figure was 19 percent.

More than any other single search window—two to three days, four to seven days, eight to 14 days, 15 to 30 days, and so on—the one-day window saw the most searches.

The report noted that those last-minute searches have a "significantly higher conversion rate" than those further out, suggesting "a significant market opportunity for last-minute hotel bookings."

The trend is even more pronounced when mobile devices are used. "Some 30 percent of searches on OTA mobile websites and nearly one in four on hotel mobile sites are for same-day or next-day check-in," wrote PhoCusWright vice president of research Douglas Quinby in a separate post.

Whether they helped create the demand or are just riding it, mobile-only HotelTonight represents this growing mobile market for last-minute hotel bookings. The app enables last-minute bookings at a discount to travelers, while providing "a way for hotels to yield pricing to reach incremental demand and fill rooms that would otherwise go empty," CEO Sam Shank said last week at the PhoCusWright Conference in Los Angeles.

And whether this demand is via mobile devices or OTAs or their own website, hotels need the inventory. With these new policies, hotels win either way: They get the fee revenue, or they have another room to sell that they otherwise wouldn't.

Asked by Travel Update, which first broke the news of Marriott's policy, if the move was guided by a desire for more fee revenue, a Marriott spokesperson claimed that it wasn't: "Our desire is to sell rooms that would have otherwise gone unoccupied due to a guest's last-minute cancellation."

Similarly, a Hilton spokesperson replied to The Beat that "these changes will make more rooms available for travelers needing last-minute accommodations."

Indeed, that is the one upside for business travelers. Looking for a hotel for that last-minute client engagement? You might have a better shot at finding it.

The downside, though, may be more apparent: Flight cancelled due to a snowstorm? Well, you—or more likely your company—are out a night's rate plus tax.

Posted by: Jay Boehmer | More by Jay Boehmer

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