Hilton trying out restrictive rates at select hotels

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Hilton Worldwide once more is experimenting with rate types that make canceling hotel rooms more difficult.

Newer rate tiers like Semi-Flex and Prepay Restricted have started to appear online for select properties on Hilton’s brand.com websites, with special loyalty member rates also available for each tier. The Semi-Flex rates are refundable up to seven days before check-in but charge a cancellation fee thereafter. The Prepay Restricted rates are nonrefundable and unchangeable.

“We recently started a trial to learn how a variety of new products will be received by our customers, as well as uncover any unexpected technical challenges,” Hilton senior vice president of commercial services Chris Wilroy confirmed in a statement to Business Travel News. “The products, which are being tested at a handful of hotels, are intended to provide greater value and more options for our customers to save.”

The initiative is not dissimilar from a pilot conducted by Hilton last year in which it charged guests at select hotels a $50 penalty for canceling any time after booking.

Hilton CEO Christopher Nassetta said during the company's fourth-quarter 2015 earnings call that even though “customers hated it,” the pilot gave the company a better idea of what future changes it could explore, including introducing flexible and inflexible rates at different price points, similar to airlines.

That appears to be exactly what these new rates represent. At the Hampton Inn & Suites Boynton Beach, for instance, a nonsmoking, one-bedroom suite with a king bed booked for Oct. 14 to 18 would cost $144 per night. At a Semi-Flex rate, though, the cost per night is $138. The Prepay Restricted rate is even lower at $122. For Hilton loyalty club members, the Semi-Flex and Prepay Rates are even cheaper, $123 and $119, respectively.

While the reduced rates could be enough to tempt some travelers, TripBam founder and CEO Steve Reynolds said the discounts would need to be higher in order to compete with corporate rates. At that Hampton Inn in Boynton Beach, where the standard rate is $144 and the most restrictive nonmember rate is $122, a typical agency rate would be $129 and commissionable, so the net rate would be $116, Reynolds said. A standard chainwide corporate discount would be $122 and the standard flat rate would be around $115.

“In other words, the savings needs to be a lot higher for the seven-day rate to make sense to the corporate traveler,” Reynolds said.

Still, if Hilton’s initiative sticks and other hoteliers follow suit, it could revolutionize pricing for the hotel industry, aligning it more closely with the airline industry, where flexibility comes at a premium. The company already made waves earlier this year by tying loyalty member discounts to direct bookings — a strategy since implemented by Marriott International, Hyatt Hotels Corp., Choice Hotels International and Carlson Rezidor Hotel Group, to name a few.
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Source: Business Travel News

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