Hilton CEO outlines tiered pricing plan, defends commission cut

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Hilton CEO outlines tiered pricing plan, defends commission cut
Photo Credit: Toronto Images/Shutterstock.com

Hilton CEO Christopher Nassetta on Thursday outlined his company's plans to expand its tiered pricing structure designed to reduce cancellations and defended Hilton's cut in the group commission rate.

Nassetta, speaking on Hilton's first-quarter earnings call, said the company's so-called "customer-centric" pricing initiative involves charging a fully refundable room rate that's "a few percent more" than what had previously been a hotel's best-available rate, and discounting that rate slightly for rooms requiring a 48- to 72-hour advance cancellation for a full refund.

He added that the pricing structure, which has been tested at "hundreds" of Hilton hotels, will be globally rolled out by this summer.

Like other hotel companies, Hilton has been tweaking its cancellation policies amid the proliferation of apps that let travelers search for last-minute room discounts. Hilton last summer tightened its cancellation policy to charge guests penalties for cancellations within 48 hours of a stay, up from 24 hours.

"We've done it to give the customers more choice and to be able to manage inventory better and reduce cancellations," Nassetta said. "We do believe it'll give us a bit of an ADR [average daily rate] and RevPAR [revenue per available room] boost."

Nassetta also defended Hilton's decision last month to cut commissions paid on North American group bookings across its brands from 10% to 7% starting in October, following a similar move by Marriott International.

"It's a delicate balance of trying to drive business results and maintain great relationships with intermediaries but to serve our owners well," he said.

Nassetta forecasted that Hilton will boost its number of hotels by 6.5% this year, and that the company's development pipeline equals 41% of its current hotel count.

Hilton's first-quarter net income almost quadrupled from a year earlier to $163 million, while global RevPAR advanced 3.9%. The company boosted its 2018 RevPAR forecast to a midpoint of 3%, up from 2% in January.

"We're happy to report a great start to the year," Nassetta said.

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