Accommodation operators around the world are getting hit hard by cancellations from consumers who either can’t travel because of government restrictions or simply want to stay close to home because they’re anxious about catching COVID-19.
It’s scary. I’ve heard stories of operators numbly sitting in front of their computers watching the cancellation requests roll in while silently, pensively counting the cost to their business cash flow and liquidity.
The global scale of these cancellations is unprecedented and begs the question – what is industry best practice? There’s no clear answer, given the unique circumstances – effectively a global travel shutdown combined with domestic lockdowns in a growing number of countries.
In simple terms, there are three scenarios.
The first and most logical approach is, adhere to company policy guidelines and charge cancellation fees – that is if they exist. It’s become clear over the past couple of weeks that with the situation changing so rapidly many operators, particularly smaller ones, are forced to make it up as they go along.
And as recently as this week, that is what most of the world’s major hotel brands were doing – sticking to the standard ‘read the fine print’ approach while making fee-free exceptions for those coming from the worst affected countries such as China, South Korea and Italy.
But as time passed, and global travel restrictions tightened, industry leaders began to question the sustainability of this approach.
Which leads us to the second scenario – the no penalty approach, encapsulated by InterContinental Hotels Group (IHG), which last week broke from the pack, waiving cancellation fees for all bookings at its 5700+ properties around the world for stays between March 9, 2020 and April 30, 2020.
“The health and wellbeing of our guests and employees is our highest priority,” an IHG spokesperson told Skift. “We know that flexibility is what our guests need right now and want to make sure they aren’t being penalised for changing their plans — that’s the responsible thing to do.”
IHG made a splash by taking market leadership, leading to positive headlines and word of mouth.
Several news cycles later, the dominoes started to fall – Marriott, Hilton, Hyatt and Wyndham and others relaxed their restrictions and are – broadly speaking – offering refunds without charge for cancellations up to 24 hours before arrival.
Such an approach will cost them money but ease the pressure on reservations staff with a one size fits all approach and potentially engender guest loyalty. No doubt they also saw the positive publicity IHG received and feared a longer-term consumer backlash.
The third option is to offer consumers credit for future stays – an approach being pushed by retail industry groups such as the Council of Australian Tour Operators, largely because it preserves agent commissions.
Speaking of which, the role of retailers as an intermediary in the booking process is causing mass consumer confusion (the supplier always has final responsibility for the decision on cancellations) and exposed customer service flaws in the OTA business model, ie lots of tech, little service.
The OTAs have also gone rogue on occasion offering refunds to customers without consulting operators.
The bigger challenge has been determining the best approach to cancellations with the peak Easter holiday booking period looming and cash flow already hit by the Australian bushfires through December and January.
Rod Hearn, Head of Operations at Aspen Group, says the accommodation business has decided to offer all incoming guests a credit or full refund with “no questions asked” or date restrictions.
He says Aspen decided it was in the best interests of their client base, who are becoming increasingly anxious about their future, and believed the actions will be repaid through customer goodwill in the coming years.
So, returning to the original question, the what is the best approach for your accommodation business when it comes to cancellations during this extraordinary period of history?
There’s no right or wrong way. It’s an individual decision and depends on circumstance and inclination.
The one non-negotiable action is to decide on your approach (if you haven’t already) and communicate it clearly at all times to staff and guests.
Misinformation and lack of clarity are last thing we all need at a time like this.