Channeling the Airlines’ Model, Hilton to Launch Flexible Pricing

Hilton’s new “customer-centric” pricing model will reduce the number of last-minute cancellations and maximize the number of guest rooms available, Christopher Nassetta, chief executive officer of Hilton Worldwide Holdings Inc., said on a conference call last Thursday.

Hilton eliminated its Best Available Rate, and instead, created a fully refundable room rate that is higher by “a few percentage points,” and a “semi-flex product” that will be slightly discounted for rooms requiring a 48- to 72-hour advance cancellation (beyond Hilton’s existing cancellation policy of 48-hour advance notice without penalty). Last summer, Hilton joined other hoteliers in increasing the cancellation window from 24-hour notice.

“Instead of having it be a stick, have it be more of a carrot that if you want more flexibility, you’re going to pay a little bit more for it, but we’ll give you that option. And if you don’t need as much, which a lot of customers don’t, we’ll give you a little bit of an incentive to let us know, so that we can manage our inventory better,” Nassetta said, adding the idea is similar to methods used by the airline industry, which served as “a decent model in this regard.”

The new pricing structure was tested at hundreds of hotels, according to Nassetta, which yielded a slightly higher ADR (average daily rate) and a bit of RevPAR (revenue per available room) boost. It will be available at all Hilton properties globally later this summer.

Thanks to a strong start to the year, Nassetta said the outlook for the rest of the year is better than expected. The company is revising its full-year RevPAR guidance to increase between 2 and 4 percent systemwide. In the first quarter, Hilton saw systemwide RevPAR grew 3.9 percent, boosted by improving economic growth and increasing international inbound travel to the U.S., which was up 9 percent in the quarter.