The pandemic has been a rollercoaster for the travel and hospitality industry.
NB: This is an article from OTA Insights
The huge fluctuations in demand which disappeared and returned almost at the flick of a switch, depending on restrictions, created the conditions for an extreme black swan event. In response, hoteliers have had to look at every potential lever they can pull to try and keep their properties afloat during the troughs and capitalise as much as possible when demand returns.
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There is now a significant change going on in the market in terms of cancellation policies offered by accommodation providers. For the foreseeable future, flexible rates are on the rise, whereas non-refundable rates have been cut.
More flexibility
Long-term travel planning became almost impossible in 2020. Core to the emerging dynamics in the hospitality sector is how the pandemic has shifted the priority placed on flexibility – by both consumers and the overall industry. Stay-at-home orders and international travel restrictions came and went with different levels of severity, often lacking clarity and frequently with little time for travellers to adjust.
This created a need for more room flexibility for consumers. This has been met by the hoteliers and the online travel industry. The latter enhanced search terms for flexible rates, prioritising properties that offer these policies in results, while the latter have created semi-flexible rates for more of their inventory and reduced the prevalence of non-refundable rooms. Although the disruption has reduced in scale and severity in 2021, it remains very much present, this has led to these trends sticking and the rate of hotels offering flexible rates remains elevated, while fewer are offering non-refundable rates than pre-pandemic.
A reckoning for rates
The extreme situation of 2020 and 2021 is clearly reflected in the data for hotel rate strategies in North America. As the pandemic broke on the continent and rose to become a crisis that created economic and social consequences, there was a huge reaction when it came to rate strategy.
In March 2020, the WHO announced that there was officially a pandemic, with the Trump administration following on in mid-March by declaring a national emergency. Shortly after came travel bans, statewide stay-at-home orders and the closure of the US-Canadian border. The effect of this was devastating for the hospitality industry and is shown at the most extreme point in our data, as the percentage of hotels offering non-refundable rates plummeted by more than 50 points between the start of the year and May 2020. At the same time hoteliers also clamped down on semi-flexible rates. However, as hope of market openings returned, the prevalence of non-refundable and semi-flex rates surged, with the latter jumping by nearly a factor 7x.
This boost was likely driven by consumer demand for these policies, but also competitor behaviour and changes to OTA and metasearch results to highlight flexibility. Google, Booking.com and Expedia all moved to make flexibility more prominent in their search criteria in the first quarter of 2020.
As the year progressed, there were dips when infection rates spiked. However, it appears that these changes are here to stay as non-refundable rates were still 20 points less common when this data was pulled, but semi-flex prevalence has doubled across the Summer 2021 peak period.
United States vs Canada
Looking at the US and Canada side-by-side, we can see that, in general, hoteliers in both countries have reacted in broadly similar ways and at similar points, but there has been divergence as we move further into 2021.
US hoteliers have been more proactive during the pandemic, introducing semi-flexible rates in more cases after initial lockdowns and also distributing more non-refundable rates heading into the peak season of 2021. The US is seeing double the percentage of hotels offering semi-flex rate options at the end of our dataset compared to Canada (29.1% versus 14.8%) and has returned to more than half putting out non-refundable rates.
