MINI-CASE ON HILTON WORLDWIDE HOLDINGS (HLT): IS THE NEW HILTON POLICY WARRANTED?

Headquartered in McLean, Virginia, Hilton Worldwide (and Marriott) on January 1, 2015, implemented a new policy that requires customers to notify the hotel the day before their scheduled arrival to avoid having to pay for the room. This policy reverses a long tradition of allowing customers to cancel their reservation “up to 6pm the day of arrival without penalty.” Bob Gilbert, CEO of the Hospitality Sales and Marketing Association International, a hotel industry group, said of the Hilton move, “It’s not surprising. The hotel business is one of the last places where you can hold inventory with no commitment.” Hotel demand in 2014-2015 has exceeded supply in many cities, giving hoteliers the upper hand. Another motivation for the new policy is that hoteliers desire to stifle the use of apps such as Yapta that track hotel prices and, whenever a rate dips, apparently a growing number of travelers rebook at a lower rate and cancel the costlier reservation, literally right up until check-in time. Penny-pinching travelers are increasingly using such tools, and Hilton is seeking to stifle this practice. Big rivals to Hilton (and Marriott) are staying the course, however, with traveler-friendly cancellation policies, including Starwood, Sheraton, Westin, Four Points, Intercontinental, Crowne Plaza, Hotel Indigo, Holiday Inn, and others. Some customers now say they will avoid making a reservation at all if they will be charged for a room they did not use when, for instance, their plane gets de­layed. Other customers say they will now simply use last-day booking services such as HotelTonight. Other customers say they will just book with Sheraton or Westin. Yet, Hilton says the industry needs to prevent the rapidly growing practice of travelers booking a hotel at the last minute after checking online for last-minute deals in the area. As discussed in this chapter, policies are often needed to effectively implement strategies.

Source: David Fred, David Forest (2016), Strategic Management: A Competitive Advantage Approach, Concepts and Cases, Pearson (16th Edition).

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