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I want to know how many hotel rooms are booked in the US each year and what % of them are refundable/changeable reservations.
Refundable hotel reservations has become a hot topic in 2017 due to high levels of cancellations, which leads to a difficulty in managing inventory across the industry. Hotels have responded with discounted rates when customers book direct as well as incentives for potential customers to book their reservations with a non-refundable clause.
Industry trends
The hotel industry in the United States is currently expanding, with both business travelers and leisure travelers booking more hotel rooms at higher rates. Hotels, motels, B&Bs and casino hotels generated a combined total revenue of $133.9 billion in the United States in 2015. Business travelers are spending 3% more per night and leisure travelers are spending 6% more when compared to 2014. Additionally, the revenue from international travel has increased over the past 2 years and is expected to continue to grow in 2018.
In 2015, the average business traveler spent $147 a night and the average leisure traveler spent $131 a night. The business traveler accounts for 40% of hotel guests and the leisure traveler accounts for 60% of hotel guests.
As more customers book online (and more specifically, on mobile devices), they are more likely to forget or misremember travel dates. In today's fast paced mobile world, 95% of business travelers make reservations and 93% of leisure travelers make reservations on a mobile device. This, combined with the rise of travel sites (such as Kayak, Expedia or Trivago) results in a higher rates of cancellations.
Geographical breakdown
Suburban: 1,779,116 rooms
Small Metro/Town: 985,889 rooms
Urban: 781,957 rooms
Resort: 602,015 rooms
Interstate: 513,075 rooms
Airport: 316,653 rooms
refundable/changeable reservations
1,200,000 hotel rooms were booked in the United States in 2015 and 67% of those were refundable/changeable. On average, hotel rooms cost $143/night for the top 15 cities. For the United States nationwide, the average cost of a hotel room is $121/night. On average, they drop 12% between time of booking to check in.
Within the industry, there is an ongoing battle to balance customer care and revenue loss due to last-minute cancellations. Last-minute cancellations can prove to be extremely costly to hotels, as it leads to a mismanagement of inventory. In fact, in New York City, some name-brand hotels have seen cancellations or no-show rates of up to 30%. Across the United States, the cancellation or no-show rate is predicted to be 15-16% in 2015. Furthermore, the emergence of technologies that allow people to cancel and rebook at a lower rate at the last minute has made it even tougher for hotels to manage their inventory. Due to these high cancellation rates, hotels are implementing new approaches to reduce revenue loss.
Hotels are switching from 24-hour to 48-hour cancellation policies as last-minute cancellations lead to millions in lost revenue. Recently, both the Marriott and the Hilton announced policy changes to their cancellation policies, shortening the amount of time to cancel a reservation to 48 hours prior to check in, instead of the industry standard of just 24 hours. The initial reaction to this was major concern, especially among corporate travelers, but industry research is predicting that the new policies won't hurt corporate travelers or their companies as much as they originally thought.
Additionally, hotels are offering incentives to guests who book directly and purchase rooms well in advance with non-refundable rates by offering discounts and other special perks and amenities. In the future, it's likely we'll see more flexible rates from the big brands. It is also common practice for hotels to offer non-refundable rooms at a discounted rate; refundable/changeable reservations are offered at a premium to help protect hotels against lost revenue.
Conclusion
The majority of hotels are still offering refundable reservations, which has led to an ongoing battle of managing cancellations and revenue loss. However, hotels are implementing measures to combat substantial revenue loss due to inventory mismanagement. These measures include policy changes and financial incentives to book non-refundable rooms. Key players are currently implementing these changes, with the Marriott and the Hilton introducing policy changes as recently as August 2017.