Can a hotel speculatively book reward inventory themselves?
 

What stops a hotel from making speculative standard reward bookings themselves, to fill the standard reward inventory and canceling them shortly before the deadline? (Limiting the reward stays to premium rooms)

Probably just the sheer insanity of that idea.

What would you say the benefit to the hotel would be from doing that?

(AFAIK, there's no inventory restriction on reward inventory that's not a restriction on a money booking through Hilton or the GDS).

Hotels can't make rewards bookings themselves. All points redemptions must be made through the Hilton website or by calling Central Reservations. That means the hotel would need to find a real Honors account with enough points to make the fraudulent reservation.

Admittedly, it's been some time since I've read a franchise agreement. Still, I would bet a lot of money that fraudulent reservations would be violations that would get a franchise on the fast-track to expulsion from the chain. Due to the fact that this type of scheme creates a "paper" trail with the chain, muzthe42nd's categorization of this as sheer insanity is right on target.

As someone who used to work in hotels, I can say that point redemptions on non-sold-out nights aren't particularly bothersome. Certainly, hotels aren't making money off of most of them (unless the guest is spending money on extras like food and beverage). That said, hotels aren't typically losing money on them, either.

On sold out (or near sold out) nights, the hotel might actually encourage points redemptions because they get reimbursed by the chain at significantly higher rates.

Frankly, if a hotel is going to engage in fraudulent behavior in regard to points redemptions, it will be nights where they are just a few rooms shy of hitting the percentage that triggers the higher reimbursement. It would be easy for a hotel to juice their occupancy by checking in a few ghost rooms. Since hotel systems are walled-off from the chain (because they are technically separate businesses), it would be tough for the chain to catch they type of tomfoolery.

However, from the guest's perspective, that type of scam wouldn't really have a negative consequence.

-----

TL;DR: Speculative points bookings made by the hotel are a convoluted way to accomplish very little.

In the case of Honors standard redemptions, the important threshold is 90% occupancy, after which the point reimbursement rate goes from around $20/night at a Hampton (at WA Maldives, it might be as much as $100/night) to essentially a percentage of RevPAR (there are a couple more occupancy hurdles above that which shift the percentage of RevPAR, but those are less significant). It's not impossible that going from 61/68 sold to 62/68 sold increases the amount the hotel gets from a redemption by a factor close to 10.

(That structure is part (the other reason is to disincentivize earn and quickly burn) of the reason Hilton does 5th night free: there aren't many properties that regularly beat 90% occupancy 5 nights in a row: those that do are the ones that have really bad redemption value)

Hilton probably wouldn't mind the dummy reward bookings. The hotel would be buying (likely millions of) points at the cash rate (which is far above any other price for acquiring points) and loaning the cost of acquisition to Hilton for a year or more in order to prevent non-local booking of the rooms.

There are plenty of things a property's management could do with $100k or more of spare cash that would make more sense. For instance, buying scratch-off lottery tickets (where there's at least a chance of profiting).

I just want to do some additional math to show why they wouldn't do this.

The hotel I work at has 320 rooms. 297 of those are available as a standard room reward. It's 60,000 points per night to book those rooms. In order to block all standard room rewards, my hotel would need to float 17,820,000 points each night. People typically value Honors points at half a penny each, so each night we would have to have $89,100 of points being used to block inventory. As there's typically a year worth of inventory available the hotel would need $32,521,500 held up in points for this scheme.

You suggest the hotel would then cancel the points reservations at the cancellation deadline. Ok, so now 297 rooms are on the market for 48 hours. Typical pick up in those 48 hours is 40-50 rooms on a busy night, 20-30 on a slower night. This means of the 320 rooms at my hotel I have now sold at most 75 rooms, and some of those would still be on points because people would book with points last minute.

Also holding reservations you have no intention of using is against the spirit of the Hilton Honors program and I've seen accounts closed for similar behavior. If Hilton noticed a hotel doing this kind of activity the accounts would be closed and the points would be gone forever.

Yes hotels get less money for a points stay (most of the time) than a cash stay, but they would rather the room be sold than not sold. This scheme is just a bad idea from top to bottom.

No, if I were to do a scheme like this I would book the rooms at a competitor's hotel and cancel last minute so they're the ones struggling to sell out and we look better in comparison.

Thanks for the insight, I'm surprised its 297 of 320 rooms very high ratio (93%) , if all of these 297 rooms were to be booked using 5th night free as well, the hotel would still make money?

What bugs me is that a king (city view) room is only offered as premium reward and queen room is available as standard reward for this NYC property. Not sure how hotels would switch me if I book the queen room (standard reward) and ask for a king room during check-in.


​​​​