In Booming Market, More Lodgings Require Deposits

Not only do America’s hoteliers want you to pay more for your rooms, some of them want the money sooner too.

As the resurgence of the American economy has grown into the current boom, a strong seller’s market in the hotel trade has been pushing occupancy figures and room rates steadily upward. And while consumers have been getting used to that, hoteliers have moved on to the next step: They’ve realized they can boost profits further by controlling their now-precious room inventories more closely. And one way to do that is to require advance deposits.

Putting a deposit on a room is a bigger commitment than making a reservation and guaranteeing it with a credit card, as the majority of hotel guests do now. To do the latter, you give the reservations agent your credit card number, but generally, no charge against your account is made until the day after your anticipated arrival. If you don’t show and didn’t call ahead to cancel, you’re generally charged for the first night.

But if a hotel requires a deposit, the hotel charges your credit-card account well before your arrival, the fee is often more than the cost of one night and you usually have to give more advance notice of cancellation in order to get a refund--sometimes 24 hours, sometimes 30 days or more.

Requiring deposits has been a standard practice for years at many ski lodges and some other resorts that gather a big chunk of their profits during limited seasons of intense demand--Hawaiian resorts during Christmas and New Year’s Eve, for instance. The same practice also has been used by hotels during big conventions, major sporting events and other special occasions, such as Mardi Gras in New Orleans.

In those cases, the hotel asks for an up-front deposit (usually by credit card) that may cover one or two nights’ lodging rate, or half the anticipated stay or even sometimes the entire stay. Sometimes the money is deducted from your credit-card account immediately; sometimes the hotel waits until 30 days before your scheduled arrival. In either event, the hotel has your money well before you ever arrive, and you have A) a reduced limit on your credit card, and B) a strong incentive to follow through on your reservation.

And now, especially in the periods of highest demand, deposits are being required by more and more hotels that don’t fit the old profile.

“The number is growing because of the tight market,” says John Luke, vice president of front office operations and systems at Hilton hotels. “It’s now being practiced in convention, city center, commercial and airport hotels.”

At the Seattle-based Westin chain, which includes about 70 city hotels and about 35 resort hotels, Marc Pujalet, senior vice president for sales and marketing, estimates that on any given day, about half of all Westins have deposit policies.

Bruce Baltin, a vice president and veteran industry analyst at PKF Consultants, agrees that the practice “is definitely happening more and more,” notably at resort-style hotels. If you’re a hotelier, he says, “it gives you your money sooner, and it makes the guest be a little more serious about canceling reservations.”

Industry veterans say that on bad nights at some business hotels, the front desk finds that as many as 15% to 20% of reservations are ultimately canceled or abandoned without notice. Hotel officials point out that a canceled reservation doesn’t make much difference to a hotel that’s 70% full because the hotel isn’t turning guests away. But once occupancy rates get near 90%--as they are in New York, San Francisco and other popular destinations--hotels run the risk of turning away prospective guests and then discovering that they have rooms open after all. They hate that.

Hence deposits, especially at far-flung resort hotels where there’s little prospect of walk-in business to make up for cancellations. Veteran hotel-watcher Bob Diener says that hotels have been expanding the practice property by property, not on a chainwide basis, and have done so simply by widening their definitions of what constitutes a special event or a resort property. “And we’re expecting to see it a lot more,” adds Diener, who is president of the Dallas-based Hotel Reservations Network, which handles bookings for 14 U.S. cities.

Still, many hoteliers wonder if this will alienate guests. At Sheraton, a spokeswoman says the company is focusing on making more sophisticated predictions of no-shows, in part because it believes “customers don’t find advance deposits as palatable as they used to.” Similarly, at the San Francisco-based Kimpton chain of smallish boutique hotels, Steve Pinetti, vice president of sales and marketing, says he thinks his customers would be made uncomfortable by deposits.

The Marriott chain, too, reports no major changes. Spokesman Gordon Lambourne says Marriotts may require advance deposits for stays during special events or at the chain’s 30 resort hotels. As with most deposit-requiring hotels, each Marriott has latitude to decide how much deposit to demand and when to set refund deadlines. (Marriott also offers discounts of up to 50% to guests who make nonrefundable payments 14 or 21 days in advance of arrival.)

The bottom line for consumers, regardless of their chosen hotel: When a hotel asks for your credit card number (or a travel agents asks on behalf of a hotel), be sure you understand whether a deposit will be taken, how much and when the cancellation deadline is. And never assume that any two hotels, even if they bear the same brand name, have the same deposit and cancellation policies.

Reynolds travels anonymously at the newspaper’s expense, accepting no special discounts or subsidized trips. He welcomes comments and suggestions, but cannot respond individually to letters and calls. Write Travel Insider, Los Angeles Times, Times Mirror Square, Los Angeles 90053 or e-mail chris.reynolds@latimes.com.