Hotel Issue Brief


Introduction

In an effort to remain profitable and healthy, hotels are changing how they do business. In some instances they are following the lead of the airlines by adding new charges. At the same time, they are offering perks and bonuses to select customers as a way to increase brand loyalty. Corporate travel buyers should be aware of these changes to ensure they are negotiating the best contracts for their corporations and travelers.

WiFi
Hotels are increasingly offering free internet and Wi-Fi connections to guests. However, many are taking the step that requires the traveler to book directly through the hotel site. This can be an issue for those managed travel programs that require their travelers to book through Online Travel Agencies, or it can also be a positive for those policies that have been unable to negotiate free Wi-Fi into their contracts. Additionally, the blocking of personal WiFi hotspots has become an issue recently with the FCC weighing in saying that doing so is illegal.

Cancellation Policies
Another trend in hotels is that many are changing how they handle cancellations. Several are beginning the practice of offering prices based on flexibility or have changed the definition of “last minute”. For example, one policy says that as of Jan. 1, last-minute will mean by midnight the night before, or a penalty of one night’s stay. This replaces the longstanding practice of allowing guests to cancel a reservation as late as the evening of arrival.

 

Background

WiFi

Corporations have negotiated rates and plans for their travelers. These managed travel plans ensure the corporate traveler is protected should an issue or crisis arise and also ensure that travel expenses, which can be a major cost for corporations, are managed.

Several studies have shown that free Wi-Fi is one of the most coveted amenities among hotel guests. In a Hotels.com survey of 8,600 travelers worldwide, just 11% said they would be willing to pay for Wi-Fi when staying in a hotel.

GBTA has queried its members before about what ancillaries they are getting from hotels through their negotiations for room rates. The item most commonly added into the negotiated rate is WiFi. A 2014 survey by GBTA found that 85 percent of companies with at least $10 million in spend negotiated free WiFi into their preferred hotel agreements.

This compares to only 66 percent of companies with less than $10 million in spend, so there is a significant difference between what the high volume programs can negotiate versus the smaller ones. Based on this, you can see how important this is to smaller programs. In another study, from 2013, 100 percent of companies with less than $5 million in spend say free WiFi is important when making decisions regarding preferred hotels, compared to 77 percent of companies with spend of $30 million or more.

Some recent news on this:

  • Hyatt launches free WiFi to all guests worldwide.
  • Set hotel Wi-Fi free! This USA Today article says, “If it’s 2015, then why are hotel guests still doing something so ’90s, like paying extra for an Internet connection?”
  • Starwood will begin offering free in-room Internet service to members of its loyalty program who book their stay on the chain’s websites or mobile app.
  • Loews Hotels and Resorts is now offering free Wi-Fi to all guests in their rooms, bucking the industry norm of charging for it, especially at higher-end properties.
  • Hyatt Hotels announced that it would begin providing free Wi-Fi in guest rooms and public spaces at all Hyatt hotels worldwide as of February 2015. Use of Wi-Fi will not be limited to members of its loyalty programs, as was previously done at some brands. Hyatt Gold Passport members will have access to premium Wi-Fi service at some properties.

When it comes to WiFi blocking however, the FCC has weighed in loud and clear that this will not be tolerated. This CNET article covers the FCC’s official statement, which says blocking an individual’s personal hotspot, as hotels and convention centers have done, is against the law and subject to fines.

Although Marriott backed off its plan to block WiFi, the FCC made it clear that they – or any other hotel – better not try it again. More recently, Marriott decided to withdraw as a party to the petition seeking direction from the FCC on legal Wi-Fi security measures.

Cancellation Policies
Hotels across the price spectrum are changing how they handle cancelation policies. Some see the cancellation policy change as following airlines that charge varying fees for some services. Recently, Marriott and Hilton, two of the country’s largest hotel chains made broad changes to their cancellation policies. The new cancellation policies require that guests cancel their reservation by midnight the night before their stay, or else they incur a penalty equal to one night’s stay. This new policy replaces the longstanding practice of allowing guests to cancel a reservation as late as the evening of arrival.

Some are offering rates that are flexible. For example, a night in mid-December ranged from $263 with no-cancellation to a “flexible rate” of $329 for a room that could be cancelled without penalty at 6 p.m. the night before the reservation.

Others are increasing the cancellation rates based on when the room is cancelled. Cancellations 61 days or greater prior to arrival may be cancelled with no cancellation fee or usage restriction. Cancelations 60 days to 8 days out see a $50 cancellation fee versus those less than seven days out, which see an increase to a $75 cancellation fee.

For business travelers this policy change presents unique challenges because we require a certain level of flexibility when booking business travel. To add to the complication, these policy changes are not across the board for all hotel properties within a brand, and individual hotels could require even more advance notice for cancellations.

 

GBTA Position

In a free market economy, how hotels sell and market their product is a business decision and they should be allowed to pursue their chosen business model. However, this must be done with transparency and hotels should make sure all policies clear and known upfront.

WiFi
Hotels should also be discouraged from setting policies that drive consumers to specific sites for special offers.  These practices create bias against loyal business customers. GBTA will continue to follow developments in hotel WiFi and will keep you updated with the latest news and information so you can make educated decisions about your travelers and your travel policy.

GBTA agrees with the FCC’s position on WiFi blocking.

Cancellation

The new cancellation policy could make changes difficult for some business travelers as it doesn’t allow for the flexibility a business traveler needs. We would like for hotels to be clear about their cancellation policies so that business travelers can avoid incurring fees for reservations that are cancelled outside of the hotel’s appropriate time frame.

Before making a hotel reservation it is important to know the cancellation policy, since it may be different for individual hotels within the same brand. It is the responsibility of the hotel to ensure cancellation policies and any subsequent changes are well advertised and communicated to the traveler and travel managers alike in advance of purchase.

We anticipate that in the coming months more hotel chains will adopt more restrictive policies regarding cancellations and will be following this closely.

 

 *This brief was last updated on February 20, 2015.*

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