Hotels' Discount Rates Can Cost You Plenty

Jul 01, 11 | 12:08 am

By Scott McCartney

Following the lead of the airline industry, hotels are increasingly imposing no-refund rules on discounted rooms. For anyone not paying attention, it's easy to get burned.

Cy Yavuzturk, chairman of the mechanical engineering department at the University of Hartford in Connecticut, booked a low rate at the Dupont Circle Hotel on Expedia.com for a Department of Energy meeting in Washington, D.C., last month. The three-day reservation totaled $868 and was charged to his credit card. When the DOE canceled the meeting, Mr. Yavuzturk was left paying $868 for nothing-a heavy cancellation penalty.

"I'm 50 years old and I've been traveling a long time, and this has never happened to me," he said. He called Expedia and the hotel several times to complain, but "it was just, 'We're sorry. We're not going to give you a penny back.'" (The hotel didn't return calls for comment.)

Hotel chains and independent hotels have been adding nonrefundable restrictions to their normal discounted rates for several years, industry executives say. But the frequency of nonrefundable restrictions has picked up, according to hotel officials and New York University hospitality expert Bjorn Hanson, as hotels try to offer discounts to stimulate bookings while not cannibalizing business travel bookings at higher room rates.

Here's how the pricing generally works: A room may be discounted 20% to entice vacationers, who shop by price online and are less likely to make last-minute changes. Business travelers would book a room at a higher rate to get more flexibility in dates, knowing they could cancel one day or even a few hours before check-in. But without checking restrictions closely, some business travelers are opting for discounted rooms-which must be pre-paid-and getting stuck with the full tab when their schedules change. Leisure travelers, too, can get left with an expensive surprise if plans change.

Mr. Yavuzturk said he simply didn't pay attention and assumed the hotel policy was cancel at least 24 hours in advance to receive a refund. "It's obviously a mistake. I should have read this thing really carefully," he said.

Expedia, Travelocity and Orbitz have been heavily advertising "secret" or "unpublished" room rates offered by hotels. Those special deals generate customer interest and have proven to be popular marketing for the booking agencies. But the ads often don't mention a major restriction: All those special rates are nonrefundable.

What's more, both Expedia and Orbitz say on their websites that they don't charge reservation cancellation or change fees. They don't-it's the hotels that impose the nonrefundable rules and collect the cash when someone does cancel.

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