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The cost of flexibility

The consequences of cancellation fees

Some hotel chains have made their cancellation conditions more stringent. Will more follow suit? Companies are very sceptical of these developments. The scheme may result in additional costs into the millions.

There were strong reactions to the new cancellation policies announced by some hotel chains. The first large chain had barely announced the change in  charging fees for room cancellations 48 hours or less before arrival, before they were bombarded with expressions of indignation and warnings from the business travel sector. Many took this as an attack on flexibility in business travel planning.

For all business travellers, flexibility is one of the most important criteria when booking, as everyday business appointments change frequently. Around every sixth booking (17 percent) is therefore cancelled, according to analyses. But short-term cancellations are rather rare, with only five percent of bookings being cancelled up to 48 hours before departure. However, due to the more stringent regulations set out by chain hotels, the cost of these cancellations could be the subject of notable increases for companies. If, in the future, cancellations are made within the 48-hour time window, the fee of one overnight stay is charged in the corresponding hotel. As a result, the companies surveyed would experience additional costs totalling almost two percent of the entire booking volume.

In the event that other hotel chains follow suit, additional costs could rocket into the millions for firms. A clear example of this is provided by a key HRS client, with a total booking volume of over 70 million euros.

Additional costs of up to 2.3 million euros would be the result if other hotel chains introduced these charges – three percent of the entire booking volume. These developments will above all be tangible in countries such as the USA, where chain hotels dominate the market.

What can be done? Companies around the world now ought to review their hotel program and negotiated rates carefully, and ensure they have the right balance of chain hotels and individual hotels in their range. As part of its Sourcing solution, HRS includes free-of-charge cancellation up until 6 pm on the day of arrival – for almost all companies, this is a must. 

Graphic: Kirsten Semmler | Vector data: Adobe Stock