Business Travel News (USPS 0728-870, ISSN 8750-3670) October 2, 2017 Issue 826 Vol. 34, No. 15. Business Travel News is published monthly except semi-monthly in March, April, May, June, September and October by
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Suzanne Neufang is
HRS Americas VP
Major hotel chains’ recent expansions of their
advance-cancellation penalties reflect a lack of
understanding of the potential costs for corporate hotel programs. These changes bring
yet another new element to the hotel sourcing
process: Now buyers need to better track their
programs’ metrics on hotel cancellations, when
they take place and the costs/pain threshold
of their specific program objectives. Back-of-the-envelope assumptions rarely satisfy CFO
queries; travel managers need to have answers
ready for their bosses as the impact of these
changes on 2018 budgets comes into focus.
Hotels have the right to maximize 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 fees and keep most policies at the
historical level: free-of-charge cancellation up
to 6 p.m. on the day of arrival.
in Hotel Program Costs
A study of the booking data and cancellation
policies of HRS’s largest corporate customers
over the past 12 months leaves no doubt that
these new fees could drive millions in new,
travel-related expenditures. Some takeaways:
• 17 percent of business trips are canceled.
• 5 percent of those cancellations are within
48 hours of arrival.
HRS looked at a multinational client that spends
$82 million a year 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 US$600,000 a year.
• If all chain hotels implemented this policy, this
company could see another US$2.7 million in
costs, equal to 3 percent of total booking volume.
Real money is at stake. While most of the
changes so far impact properties in the Americas
under a few global chains, corporations need to
be vigilant on this issue as the traditional RFP
season unfolds: Once a new revenue stream
proves sustainable, it’s conceivable that others
will follow suit, including an extension of such
policies to properties on other continents.
Increased RFP Complexity
Hoteliers typically have a keen understanding
of a corporate hotel program’s threshold for
transient rate increases. The new cancellation
fee gives hoteliers one more element to negotiate; one can easily see a hotelier, in the course of
negotiations, offering more flexible cancellation
policies in exchange for a particular percentage
increase on room rates. Just as travel managers
have savings targets, hoteliers have revenue targets they are shooting for every year.
The buyer needs to be armed with his or her
hotel data and evidence of the program’s capability to shift share. What’s more, as buyers gain
from the transparency of ongoing rate auditing,
they should engage with their rate-auditing provider to ensure that their cancellation policies,
which may vary from property to property, are
monitored at all times. Sourcing experts also
should wrap in protection from future fees.
HRS’s survey of 100 travel managers showed
that most travel buyers value cancellation-policy
flexibility, as appointments often change on short
notice. We encourage travel managers to get
sound and transparent data, showcase the true
value their volume provides and restate the importance of business traveler flexibility. With these
elements in place and an expressed commitment
to extending successful relationships, we’re hopeful that preferred hotel supplier partners will be
open to prolonging historical policies that best
serve today’s business traveler.
Gather Superior Data to
Stop the Hotel Cancellation
Policy Countdown Clock
BY SUZANNE NEUFANG
can leverage their
proven performance to mitigate