Saturday, July 13, 2013

Are Prepaid Hotel Rooms Worth It?

View from my room at the Marriott in Colorado Springs, CO
Let's face it - unless you're Bill Gates or something, all of us are looking for ways to save a few bucks when we travel.  Usually, it's just a matter of waiting for a sale or lucking out with a coupon.  Almost everyone today knows that cheap airfares are nonrefundable.  In other words, you pay when you buy your ticket, and if your plans change, tough luck, unless you want to pay a change fee, unless you're flying Southwest.  Hotels have always been different.  When you book, there's almost always a cancellation policy attached, but it's usually pretty lenient.  The standard terms usually require that you cancel or change somewhere between 6 P.M. the day of arrival or 48 hours before arrival, or you forfeit one night's room charge (I should note that policies can be much more restrictive in resort areas, national parks, and during holidays, though).  But what you might not know is that...

Hotels Are Becoming More Like Airlines (Sort Of)

Yes, that's right.  If you're looking to save a few bucks on a hotel room, the travel industry has come up with a new option - the prepaid, nonrefundable hotel room, which appears to have been pioneered by online travel agencies (OTAs) like Travelocity.  I first noticed this about 15 years ago, when planning for a road trip to Vancouver.  I used to book most of my hotels through Travelocity at the time, since that (or Orbitz, or Expedia, or whatever) was the easiest way to see all of your options in a given place in one sitting.  While searching for a hotel in Oklahoma City, what popped up at the top of the search results was something called a "Good Buy" rate.  If you use Travelocity, these still exist, as shown in the screen shot below:

If you zoom in, you'll see the "Good Buy" designation at the bottom.  What's not entirely obvious at first blush is that this rate is NONREFUNDABLE - once you book it, your credit card is charged, and refunds are not allowed for any reason.  If your plans don't change, it's no big deal, really.  You've saved a few bucks.  But if you decide you don't need the room, you're in for a surprise when you call to cancel - you don't get your money back.  No option to even pay a change fee; your entire purchase has been flushed down the drain with no recourse.  Which usually generates a reaction similar to this:

I'll call it the "Flaming Angry Hissing Cat Award", since this pretty well sums up what you want to do to the poor customer service rep on the other end.  (For the record - Hercules wasn't really angry in this photo.  He was just yawning.  Though a mouthful of cat breath in the face isn't pleasant, either.)

Prepaid Rooms Carry Risks - Are They Worth It?

So now we've established the risk of booking a prepaid, nonrefundable hotel room.  You could end up with a big bag of nothing if you have to cancel.  But is the risk worth it?  If we use the Crowne Plaza (the first option) in the screen shot above, you'll see the following if you select it:

The prepaid, nonrefundable room is $18 a night cheaper than the standard rate, which allows you to cancel up to 48 hours prior (it's possible the savings is even less than that, if you are eligible for a discount through AAA, AARP, or the like).  That's why I said "sort of" in the subheading; while the difference between a nonrefundable and refundable plane ticket can be several hundred if not thousands of dollars, the difference in hotel rates is typically minimal, on the order of 10-20%.  If you're staying for a longer period of time, say, 5 nights, that means you'd save $90, but you also would have to plunk down $400+ today that you'd have to flush if you ended up not making the trip.  Is it worth it?  Guess it depends on your perspective, but you really should think before booking.

Another thing to be careful about - in the initial screen shot, unless you know what a "Good Buy" rate is, it's not obvious that the rate is nonrefundable. The same is true if you use a "metasearch" site like Kayak to do your initial search, or for that matter, even if you go directly to the hotel's website.  The rate that pops up in the display might be nonrefundable.  Make sure to click on the rate and read the terms and conditions before giving your credit card info.  Hotels tend to be highly unforgiving if you book a nonrefundable rate and then try to cancel, even a few minutes after booking.

So far, I've talked about nonrefundable rates offered through the hotels directly, through an OTA like Travelocity or Orbitz, or that you find on a metasearch site like Kayak. What I haven't covered, through, are the prepaid options offered through sites like Hotwire or the old "Name Your Own Price" feature on Priceline (despite Captain Kirk's recent attempts to downplay bidding on Priceline, Name Your Own Price does still exist).  These are a little different; you are offered a rate in a general area of a city, but you don't find out the name of the hotel until you pay.  You can often figure out what the hotel is by the features noted and the TripAdvisor rating, but I digress.  These deals are known as "distressed inventory" deals - in other words, the hotel can't get rid of the room - and as a result, they are often marked down substantially from the normal rate.  Here, the savings may well be worth the risk, especially at fancier hotels, since you could be talking half off or more from the rack rate.  But, there is a significant risk involved - the recent proliferation of "resort" fees, which aren't included in the rate displayed.

Personally, I think "resort" fees are pure evil.  It is usually something like a $10 a day additional fee, often buried in the mouse print, that provides "free" services like parking, pool towels, or WiFi.  The fees are mandatory, so there is no way of avoiding them.  I find these mandatory fees highly dishonest (they are a way to show a deceptively low rate, and dodge lodging tax and travel agent commissions on the fee in the process), and go out of my way to boycott any property that charges such a fee.  I am not a big government guy by any means, but this is one thing where I think the FTC needs to step in and order that mandatory fees be rolled in to the displayed rate.  If you get a room through Hotwire or Priceline, you are responsible for the fee in addition to the rate.  Trouble is, you don't find out about the fee until after you've already paid, at which point you can't ask for a refund.  So buyer beware.

In fact, I find resort fees so repugnant, they deserve THREE Flaming Angry Hissing Cats.










My Advice

Frankly, since I have AAA, I don't find the risk of a nonrefundable hotel rate worth the savings of maybe $10 a night.  If you really want to save some money, a better approach is to book a regular rate, then troll sites like Hotwire or Priceline as the date of your stay gets closer.  Often times, unsold rooms don't become truly "distressed" and marked down until a few days before you plan to go.  If a really swell deal comes along at the last minute - like say, $99 a night at the Four Seasons - you can always cancel the first room and then book the deal.  Chances are, by that time, you're going to be pretty certain of your trip, so the risk of canceling and losing your money is very low.


  1. Thanks for such a informative article. Truly said travelling is not an easy task these days if we consider the hotel rates. roomertravel is offering rooms at throw away prices