by Suzanne Neufang
August 21, 2017 – The recent announcements by major hotel chains on the expansion of advance cancellation penalties drove a degree of media coverage, but a lack of understanding of the potential cost implications for corporate hotel programs. Off-the-cuff assumptions rarely satisfy CFO queries; travel managers need to have answers ready for their bosses as questions on the impact of these changes are likely as 2018 budgets come into focus.
HRS certainly understands that hotels have every right to maximize their room inventory and generate revenue. That said, optimized supplier-buyer relationships are a priority for hotel chains big and small. Armed with metrics from verifiable travel data, HRS believes travel programs can leverage their relationships and proven performance to mitigate these new fees and help keep the historical free-of-charge cancellation up to 6 pm on the day of arrival in place.
A new study from HRS, together with fresh survey results, provides the first true glimpse at the potential fiscal ramifications of these new policies for multi-national corporate hotel programs. An in-depth analysis of the booking data of our largest corporate customers over the past twelve months – cancellations in particular – leaves no doubt that these new fees could drive millions in new travel-related expenditures. Some takeaways from the study:
- 17 percent of business trips are cancelled
- Five percent of those cancellations are within 48 hours of arrival
To provide a concrete example, HRS took a detailed look at metrics potentially impacting a multi-national client that spends $82 million globally on lodging:
- If all cancellations made by this company in North America within 48 hours of arrival were subject to this charge, the budget impact would be $600,000 USD a year.
- If all chain hotels globally implement this policy, this same company could see additional costs of up to $2.7 million USD, corresponding to three percent of total booking volume.
As these results show, there is real money at stake. While most of the changes so far impact only North American properties for a few global chains, corporations need to be vigilant on this issue as the traditional RFP season begins in earnest in September. Hoteliers often mimic other industries…once a new revenue stream proves to be sustainable, it’s a good bet that many others will follow suit. And once they see notable revenue from the new policy, it’s certainly conceivable that such policies could extend to properties on other continents.
Travel buyers that outsource to HRS can be assured that this issue will be properly addressed in hotel negotiations – not only to mitigate recent policy expansions, but to wrap in a degree of protection from future fees that some chains are modeling.
The survey of 100 travel managers reveals that most travel buyers value cancellation policy flexibility; we’re confident that hoteliers will respect that never-ending request when it is married with the bulletproof data of “past room nights” that showcase the steady volume of a preferred customer. We encourage travel managers to get their best data, re-state the importance of business traveler flexibility, and work with their preferred hotel supplier partners to prolong historical policies that best serve today’s business traveler.