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The Challenges Long-Term Reservations Pose to Hotel Businesses

I have worked in the travel industry for several years, including in management. I have written travel guides, mainly about western Canada.

Long-term guests can help hospitality businesses secure income, but they can also present unique problems.

Long-term guests can help hospitality businesses secure income, but they can also present unique problems.

Long-Term Hotel Accomodations

When most people think of a hotel, they think of a place that they will only be using for short-term accommodation. However, some hotels specialize in long-term accommodations. Furthermore, a lot of hotels welcome long-term guests due to the volume of room nights that they promise to buy.

With that revenue in mind, hotel management can't afford to turn the business away. Yet, there are numerous challenges that long-term guests present to hotel staff and management, challenges that aren't necessarily present to the same degree with short-term guests.

Cancelled Long-Term Reservations Hurt Revenue Projections

Cancellations hurt hotels the most when the hotel staff members reject other business that would be sincere. I think most hotel staff with experience understand this. However, long-term cancellations also pose problems when it comes to revenue projections that are used for planning.

For instance, let's assume that a carpentry company books five rooms in your 25-room hotel. They want each room for 30 consecutive nights for a total of 150 room nights. With a discount for each room applied, the hotel's room revenue would be $7500 from the five reservations. When these reservations enter the software, it can make the month or months that the reservations affect look very profitable.

Ownership and/or management might look at the month and the revenue as a chance to upgrade the property or the amenities. They might understand that a certain percentage of the revenue will be lost due to cancellations, but when the long-term stays cancel, the lost revenue is much more significant.

What if the company that booked the rooms is only doing so just in case they land work in your city—work that is by no means guaranteed to them? When the cancellation comes in, it's not a normal cancellation that all hotels deal with. 150 room nights canceled at the last minute for a small hotel means staff scheduling will be affected for the worse, with ripples through staff morale. You might even have to tell someone you just hired that the job is no longer offered.

In regard to the upgrades you planned, hopefully, you didn't sign a contract because now you need to back out.

With short-term reservation cancellations, the changes in revenue projections are not as drastic. There is a certain flow to the ups and downs that experienced staff know to expect, but long-term group reservations are different. You need to put more pressure on the customer to increase the likelihood that the reservation is serious before you can begin to include it in projected revenue.

A contract is how you do that because people don't like signing them. What you will find is that they will leave sections of the contract unfilled (e.g., the signature line and the line where the credit card number goes). Incomplete contracts are how you get information as to whether the room sales are close to a done deal or just fluff.

That information can help you in many ways, especially when it comes to revenue projections. If someone else contacts the hotel with intentions of renting the rooms, you are then in a stronger position to demand that the contract be signed.

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When it comes to uncertain reservations, you still want to keep the door open to the business. Regular contact with the company is the key to determining the likelihood of cancelation. You certainly don't want them to keep that information secret until the last minute.

Increased Domestic Problems

Another problem that arises has to do with customer type. Short-term guests are more likely to be tourists or business people that are in town for a short time. I've found that long-term guests tend to be people in town for long work projects. Either they are relocating, or they are already locals. This last group is interesting because you kind of wonder what they are doing in a hotel if they live in town.

Some hotels don't rent to locals based on a prejudice that they will be problem guests. That kind of prejudice may or may not be legal, depending on the location. However, the prejudice could still be taken as somewhat insightful. Have experiences fueled it?

Locals that move into a hotel might have had their apartment buildings flooded. There are legitimate reasons to use a hotel if you are a local. Sometimes, people just want reliable air conditioning or the opportunity to hide from visiting relatives.

However, some locals that move into a hotel just got evicted from their apartments. Honestly, some locals in a hotel are committing infidelity or sleeping with prostitutes. These are all personal situations that could cause a lot of drama that might play out in your rooms, at your front desk, or in your halls. This drama could be present with tourists and business people too, it just doesn't happen quite as often.

I don't believe in turning away customers that have a method of payment and identification based solely on where they live. Instead, the customer has to have a history at the hotel that warrants it.

However, I think you will notice an increased likelihood of a domestic kind of drama with long-term guests relative to short-term ones. My recommendation is not to instantiate that assumption with anyone in a prejudicial way because it won't be 100% reliable by any stretch. Instead, be on increased alert with every one of your long-term guests. You will want to give the noise warnings out as soon as problems start instead of several days later.

Additional Challenges Associated With Long-Term Guests

Other challenges could arise with longer-term guests. For instance, there can be differing taxation if the government starts to define them as tenants as opposed to hotel guests based on the length of their stays. They may also acquire different rights, but these are matters that each reader will have to look up locally.

Another challenge with long-term guests is that long-term rates actually present an angle for the con artist. Someone might book 30 nights to get the monthly rate and then check out early. You need to write your registration card in a way that avoids giving a lower rate (based on a month-long stay) to someone who might end up staying for only three nights.

The benefits of long-term guests, however, outweigh the costs once you develop a smooth system. There is less housekeeping to be done and fewer interactions at the front desk due to a decrease in check-ins and check-outs. The revenue, if it fills up your hotel on dead nights, is great as well. Just be aware of the unique problems that extended stays can pose to your hotel so that you can ensure that things run efficiently.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2021 Shane Lambert

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