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One year after introduction of stricter hotel cancellation rules: Business travelers are not adjusting booking behavior; Companies challenged to minimize incremental fees

November 14, 2018 Tech No Comments Email Email

A year after several global chains introduced new cancellation fees, the hotel booking behavior of travellers in global corporations is largely unaffected. Analysis of corporate bookings by HRS, the leading global hotel solutions provider, found that the relative number of cancellations increased by nearly one (0.9) percent. And, the associated additional costs for companies are considerable: the tightened conditions led to corporations absorbing higher hotel costs – on average 3.8 percent of their total hotel spend.

Consequently, corporations negotiating their 2019 hotel deals are prioritizing cancellation flexibility; business travellers cite flexibility as a critically important element of any business trip. Companies are looking to minimize their exposure to cancellation and other fees that drive higher incremental hotel costs.

For this research, HRS analyzed the booking behavior of its largest corporate customers worldwide. In September 2017, the solutions provider reviewed cancellations from that same grouping of corporations, predicting additional costs for corporations in the millions as large global chains extended the “cancellation penalty fee” period from 24 to 48 hours before arrival. In a survey of 100 travel managers, a third said they wanted to negotiate appropriate special conditions to avoid these fees.

“Urban Resort Fees” Present More Complexity for U.S. Corporate Hotel Programmes

A New York Times story on 22 October shed light on a new hotel fee trend, mostly impacting corporations in North America. The number of hotels in U.S. urban business city centers charging “resort fees” – typically $20 to $40 per night – has grown from two percent to eight percent in the past year, according to new research from the New York University School of Professional Studies Jonathan M. Tisch Center for Hospitality and Tourism. These “urban resort fees” are anticipated to generate $110 million in new revenue in 2018, with a significant amount of that borne by business travellers that typically stay at these properties. In the United States‘ top five business travel destinations, a total of 280 hotels already charge a resort fee*…and the NYU research projects that figure to grow in 2019.

The growth of all fees collected by U.S. hotels is rising dramatically this year, as noted in NYU’s research. From 2014-17, the amount rose from $2.35 billion to $2.7 billion, averaging less than four percent growth annually. In 2018, NYU projects U.S. hotels will take in $2.93 billion in fees, an increase of 8.5 percent over last year.

Companies outsourcing their hotel negotiations can stay ahead of this trend and minimize the financial impact of these fees. “In the current hotel sourcing season, we find that fee avoidance and flexible cancellation policies are a must for travel managers and purchasers. Stricter cancellation policies are costing hotel programmes up to four percent more, making flexible conditions even more relevant,” says Marco D’Ilario, vice president of sourcing solutions at HRS, the leading provider of hotel outsourcing services. “Last year, HRS maintained same-day cancellation in 95 percent of the agreements we finalized for corporations. By leveraging volume and engaging individual hotels and regional chains in the bidding process worldwide, we help companies reduce the occurrence of these fees.”

*Figures according to ResortFeeFinder.com as of July 2018.

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