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ABSTRACT
The implications of group/convention cancellation policies for the US hotel business practice are examined. The first objective of the study is to get general information about the group/convention cancellation policies that hotels are currently operating. The second objective is to investigate if there is any relationship between the property profile (size, age, location, ownership/management pattern, or percentage of group/convention business) and the current business practice of the group/convention cancellation policies in the US hotel industry. It is shown that most of hotel properties have already formalized their cancellation policies. This study proves that hotels are quite strict about group/convention cancellation cases. On the other hand, most properties exercise flexibility when applying cancellation penalties for many reasons.
INTRODUCTION
Considering the need to further explore the current practice of group/convention cancellation policies, the primary purpose of this study is to examine how US hotels implement their group/convention cancellation policies in actual business practice.
In order to investigate the relationship, hypotheses were set as following;
Hl: There is no significant relationship between formalization of cancellation policies and the property profile such as size, location, age, ownership/management pattern, or percentage of group/convention business.
H2: There is no significant relationship between people who design cancellation policies and the property profile such as size, location, age, ownership/management pattern, or percentage of group/convention business.
H3: There is no significant relationship between flexibility in dealing with cancellation policies and the property profile such as size, location, age, ownership/management pattern, or percentage of group / convention business.
H4: There is no significant relationship between the factors affecting flexibility in dealing with cancellation policies and the property profile such as size, location, age, ownership/management pattern, or percentage of group/convention business.
H5: There is no significant relationship between people who have authority to enforce cancellation policies, to alter, or to waive them and the property profile such as size, location, age, ownership/management pattern, or percentage of group/convention business.
H6: There is no significant relationship between accrual of cancellation fees and the property profile such as size, location, ownership/management pattern, or percentage of group/convention business.
H7: There is no significant relationship between the basis of cancellation fees and the property profile such as size, location, ownership/management pattern, or percentage of group/convention business.
LITERATURE REVIEW
The Hotel and Motel Index 1996 was used to compile a list of hotels, chosen randomly using the criteria of size (250 rooms or more) and location. Four hundred and seventy hotels were chosen are located in larger cities in the states of Indiana, Illinois, Iowa, Kansas, Kentucky, Michigan, Minnesota, Wisconsin, Missouri, Pennsylvania, Massachusetts, Tennessee, Texas, Louisiana, South Carolina, and North Carolina. Each hotel was telephoned in order to get the name of the Director of Sales & Marketing. Several hotels were unable to provide the name of the Director. In those cases, the names of General manager were obtained.
Mail survey techniques were applied in gathering the required data in the strictest confidence. The questionnaire had fourteen questions which were classified as property profile (from Question one to Question five) and general information about group/convention cancellation policies (from Question six to Question fourteen).
Explanatory variables are size of the property (measured by number of guest rooms), location of the property, age of the property, percentage of group/convention business in the property, and ownership/management pattern of the property.
Response variables are flexibility in dealing with cancellation policies, formalization of cancellation policies, people who write cancellation policies, people who have the authority whether to enforce cancellation policies, accrual of cancellation fees, and basis of cancellation fees.
A file on Microsoft Excel 5.0 was created in order to enter all of the raw data from the completed questionnaires. This file was saved as "Formatted text" option and was transferred into the Purdue Statistical Analysis System.
The statistical test used for this study includes Chi-Square Test. To test the null hypothesis, which states that "there is no relationship between the explanatory variables and the response variables," Chi-Square statistic was used. A probability of less than 0.05 was expected to establish the relationship between the variables. However, Chi-Square Test assessed only the significance of the association, so the descriptive percents are essential to an understanding of the data. The descriptive percents of data were shown through the output of the procedure FREQ in the SAS statistical software package.
RESULTS - PROPERTY PROFILE & BUSINESS PRACTICE
From the 454 hotels surveyed, 248 questionnaires were returned, most in two weeks, for a response rate of 54.63%. The data obtained from the survey was analyzed in two sections: Frequency distribution and Hypotheses testing.
The first section covers the survey results regarding property profile of the respondent hotels. It covers survey results regarding the current business practice of the group/convention cancellation policies in the respondents' properties as well. Eighty percent (80.6%) of the respondents have 250 to 499 rooms, and 48 properties (19.4%) have 500 or more rooms. Half of the properties (47.0%) are located in center city/downtown. Other properties are located in suburban area (27.9%), at airports (18.6%), or in resort areas (4.5%). About half of the properties (45.9%) have been operating less than 15 years and 15.9% of the properties have been operating more than 31 years.
Majority of the properties (75.1%) are independently owned. Twenty-two percent (22.4%) of the respondents are corporate-owned and managed. The data suggest that 73.9% hotels have more than 20% but less than 40% group/convention business or more than 40% but less that 60% group/convention business in their properties. Seventeen percent of the respondents (17.1%) have more than 60% but less that 80% group/convention business.
Most respondents (98.8%) report that their hotels have cancellation policies. Among them, 97.1% have their cancellation policies in written form.
Forty-two percent of the respondents answered that the Director of Sales & Marketing is most often involved in designing cancellation policies. Sixty respondents (24.7%) report that the corporate Sales & Marketing department is involved in designing cancellation policies.
The data suggest that most properties (99.2%) apply flexibility in dealing with their cancellation policies. Only two respondents (0.8%) never apply flexibility in dealing with their policies. More than half of the respondents (60.3%) answer that they apply "some" flexibility.
The factors effecting flexibility in dealing with cancellation policies on questionnaire are potential for future business (34.7%), time of the year (17.8%), history of group/convention usage (1 0.3%), and size of group/convention (9.1%). Twenty-eight percent (28.1%) of the respondents checked more than two responses.
Over 60% respondents' properties report that Directors of Sales & Marketing have the authority to enforce the cancellation policies, to alter, or to waive them.
The majority of the respondent properties (95.5%) report that they charge fees for group/convention cancellations. Fee charges are based on losses both from room sales and from food and beverage sales.
RESULTS - HYPOTHESES TESTING
The second section covers results of the hypotheses testing.
HI: A Chi-Square analysis of the data shows that among the five different property profiles, age of the property has a significant relationship with formalization of the cancellation policies (H 1). The younger properties are more likely to have their cancellation policies formalized.
H2: A Chi-Square analysis of the data shows that among the five different property profiles, size and ownership/management pattern of the properties has a significant relationship with people who designing the cancellation policies.
In the smaller size properties, Directors of the Sales & Marketing department are more frequently involved in designing the cancellation policies. Directors of Sales & Marketing are more likely to design the cancellation policies in the independently owned properties, whereas Corporate Sales & marketing Departments are more likely to design the cancellation policies in the corporate owned/managed properties.
H3: A Chi-Square analysis of the data shows that among the five different property profiles, location of the property has a significant relationship with flexibility in dealing with the cancellation policies.
H4: A Chi-Square analysis of the data shows that there is no significant relationship between the factors on flexibility and the property profile.
H5: A Chi-Square analysis of the data shows that there is no significant relationship between people who have the authority to enforce cancellation policies, to alter, or to waive them and the property profile.
H6: A Chi-Square analysis of the data shows that among the five different property profiles, percentage of group/convention business has a significant relationship with the accrual of fees. Most properties charge cancellation fees: 95.49%. The respondent properties that have more than 40% but less than 60% group/convention business are most likely to charge fees for cancellations.
H7: A Chi-Square analysis of the data shows that among the five different property profiles, ownership / management pattern has a significant relationship with the basis of fees.
CONCLUSION AND SUMMARY
This study employed a Chi-Square Frequency Distribution to investigate the property profile such as size, location, age, ownership/management pattern, and percentage of group/convention business. Frequency distribution was used to investigate current business practices of the cancellation policies as well. This study also employed Chi-Square testing with frequency analysis in order to investigate the relationships between the property profile and the current business practices of the cancellation policies.
The results of this study reveal that most US hotels have already formalized their group/convention cancellation policies. Despite the risk keeping customer goodwill for future business, this study prove that hotels are quite strict about group/convention cancellation cases.
On the other hand, most properties exercise flexibility when applying cancellation penalties for many reasons.
This research focused on hotels with 250 or more rooms in the Midwest and surrounding areas. As limitation of this study, the authors want to point there is no information regarding the cancellation policies in hotels with less than 250 or more room was investigated. This study focused on group and convention business in hotel properties. As suggesting for future research, studying individual cancellation policies might also be valuable. Factors affecting flexibility were a controversial issue on the survey questionnaire of this study. Future research is needed to develop more factors that could affect flexibility in dealing with cancellation policies as well.
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