Watch Out for a New $50 Fee on Your Next Hotel Reservation

Travelskills writes about Hilton testing a $50 fee for cancelling cancellable reservations:

Hilton has started to market-test a new $50 fee for those who cancel at any time after they make a reservation…

Members of Hilton’s HHonors program are exempt from the new test fees. (For now at least.)

Hilton officials told Skift.com that the test is being conducted only at 20 U.S. properties in the Hilton, DoubleTree and Embassy Suites brands. The properties were not identified.


View from the Hilton Colombo, Sri Lanka

Skift attributes this to a stronger position on the part of hotels with high occupancy rates, suggesting that “a seller’s market provides hotel owners with a greater freedom to dictate contract terms, including cancellations.”

Hilton’s CEO suggests it’s about hotels lowering rates closer-in, and customers who booked higher rates cancelling and rebooking. He considers that type of perfectly reasonable behavior (wanting to pay less when a hotel will charge less) “gaming.”

“It’s not because we are seeing any short-term cancellation activities that’s outside of what we’ve been seeing. Obviously with all these new technologies and things over the last couple of years, there has been lots of different sort of ways people are trying to game all our systems with cancel and rebook. And when there is no cost to it, the system has risk of gaming.”


Hilton Toiletries

Hilton won’t say what hotels they’re doing this test with. And since the test “is to roll out in the coming weeks” it’s not clear how good the disclosure is, that booking a cancellable rate and then cancelling incurs a penalty. The rest of my analysis presupposes that consumers are aware of the restriction rather than taken by surprise by the fee when they go to cancel.

  • No doubt Hilton would love for other hotel chains to follow. They aren’t going to want to be ‘out there’ all alone, while competitors have more consumer-friendly policies. Hotel policies are usually pretty similar in terms of cancellation rules (although individual rates may vary and types of rates may vary, in material terms each different type of rate tends to be similar across chains).

    So there’s an equilibrium where everyone charges cancellation fees and one where no one does. But it’s hard to stand out as the most restrictive. Standing out as most generous may not accrue sufficient benefits (because consumers assume that standard policies in the industry apply everywhere and don’t realize the benefits of booking with the outlier).

  • Regardless, imposing a cancellation fee discourages making early bookings. The key with hotel reservations it to get the reservation made, most consumers lock in once they’ve made their choice. If they keep shopping instead, odds on they will book somewhere else — either via another booking site (and thus the hotel may have to pay a big commission to an online travel agent) or to another hotel (and thus lose the sale entirely).

    The tendency among consumers is to book later and later, rather than earlier. “Hotel Tonight” is one example of the model. As consumers go mobile they go last minute, often landing in a city and coming up with lodging plans.

  • The main reason to book early becomes, more or less, out of fear that a given hotel may sell out. But that’s not hard to monitor, and outside of peak demand dates hotels rarely sell out far in advance.

    A hotel chain might further discount advance bookings and pair that with a cancel fee in order to get consumers to lock in for the savings. But they do that now… it’s called a prepaid, non-refundable rate.


Hilton New York JFK

It’s interesting that this is a ‘test’, my suspicion is that if consumers are made reasonably aware of the fee then the test won’t work out well especially to the extent that the Hilton property remains an outlier.

This could be quite bad for Hilton hotels relative to their competitors, and could be quite bad for Hilton booking channels relative to online travel agencies… unless other chains quickly follow with similar policies of their own.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I think this mainly as a tactic that impacts OTAs. You would assume that Hilton would have fairly clear disclosures around this new fee, plus the majority of customers booking directly on the hotel website would be Hilton Honor members. But the OTAs, with their automated feeds and massive database, may find it harder to make it clear to consumers what is going on here.

    Any insight in the how the policy applies if you become a member of Hilton Honors after you make the booking but before you cancel? If they still waive the fee, then that would be an easy workaround

  2. …” He considers that type of perfectly reasonable behavior (wanting to pay less when a hotel will charge less) “gaming.””

    I’m glad the CEO feels that way, just makes my decision to abandon Hilton a couple of years ago even more satisfactory. I consider a company that charges me a $50 cancellation fee on a reservation that isn’t labeled as such, gaming the system – I’d expect some pretty major backlash on this if it’s rolled out across the board.

  3. Just when I was thinking of ditching starwood for hilton as my secondary chain, too. The hits keep on coming this year, don’t they?

  4. You saved me $ 63.97! Thank you for reminding me to check the rate for a reservation at the Logan Airport Hilton that I made in September for early January. The rate went down $64 and I just grabbed it at the lower rate!

  5. Good to go to IHG when they do this even when a honors member. HH has not been the best and their prices have not been good. $50 fee period is a slap in the face

  6. Hey Hilton, you don’t want people to “game” the system by cancelling their reservations and making a cheaper one? Don’t cut the price at the last moment.

  7. I see both sides of the argument. But this would be nothing but bad for consumers. I always watch rates leading up to my stay. And I love Hotel Tonight, since they are now letting you book a week in advance, there is an opportunity to get a great deal and cancel a reservation with plenty of time. I just used it for a great 3 night stay in NYC. (If you don’t have Hotel Tonight, download it and feel free to use my code: TBLUM1 for $25 free towards your first booking.)

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