At what cost do you lock in an advance purchase rate?

I have a simple policy I live by when it comes to booking hotels — always book the flexible rate.

Hotels typically have an advance purchase rate that offers a discount on the flexible rate, but the “catch” is that it’s non-refundable. There are a couple of reasons I avoid them. The main reason is because I hate finalizing travel plans too far in advance, since it limits the flexibility to change dates, stay in other cities, etc. The other reason is because often times hotel rates drop as the check-in date approaches, and if you book a flexible rate you can continuously “reprice,” often bringing the rate substantially lower than what the advance purchase rate originally was.

In a few weeks I’ll be returning to my favorite place on earth, Berchtesgaden. It’s a 90 minute drive from Munich, and the most relaxing, beautiful place I’ve ever been. And I’ll be staying at the InterContinental Berchtesgaden, which is among my favorite hotels in the world. I visited last summer and it was simply the most relaxed I’ve ever been. Not only is the hotel stunning (and located up Germany’s steepest street no less), but it was the first time in recent memory I remember breathing truly fresh air. I’m so used to cities that I forgot what real fresh air felt like.

Anyway, I’m thrilled to return and spend a bit more time there this year, and I’m presently trying to decide between booking an advance purchase rate and flexible rate.

Usually I wouldn’t even consider it, but take a look at the rate difference:

Advance purchase rate:

Flexible rate:

So that’s a difference of 60.56 Euro (~$75) per night, or $375USD over five nights.

I’m reasonably certain my plans won’t change and that advance purchase rate seems really low for peak summer time in Germany, so for the first time in memory I’m thinking of booking the advance purchase rate.

Am I losing it? Should I not be so opposed to advance purchase rates? What percent discount do you need to book an advance purchase rate, or what metrics do you use when deciding? What would you do?

Comments

  1. If it was me and I knew I was going to somewhere I truly appreciate (as you clearly do here) then I would book the advance purchase rate.

  2. If you do the advance purchase rate and the hotel offers a lower rate before arrival, don’t they grant you the lower rate based on policy or their best guaranteed rate?

  3. @ Michael — The best rate guarantee just applies within 24 hours of booking unfortunately.

  4. If you are planing to stay 5 days IHG is runing a european promotion stay 5 pay 4, beside IHG been runing for quite long time this promotion (green room) at 35% or stay 2 pay 1 and its bookable the same day so no need to rush.

  5. @ Jimmy — Unless I’m missing something, $210 is 171 Euro, no? Also, I wouldn’t technically be eligible for Royal Ambassador benefits (though I believe this hotel honors many of them on award stays), and I wouldn’t earn any points.

  6. @ Jimmy — Love that German hotels always include VAT.

    @ anon — Sure, I have no problem providing a rough outline now, and then I’ll have a more detailed post later. Doing Bali and Munich in Singapore first class in a couple of weeks, then Lima, Buenos Aires, and Santiago on LAN in business class on an award booked for 80K BA miles before they devalued their chart, and also have a quick weekend trip to Santiago planned on American with upgrades confirmed.

    Still working out the details on the rest of my travel plans.

  7. @ lucky stay 5 pay 4 apply to IC from 15 jully to 22 sept but your IC requires 7 nights just checked it.

  8. @ Jimmy — Good catch. In this case it seems the fifth night is actually free on the advance purchase rate, which isn’t the case on the flexible/AAA rate, unfortunately.

  9. I prefer the safety of things with changeable rates when possible. But this is enough money where if you were nervous still, take trip insurance that likely will cost half the savings or less and give you a way out if something comes up.

  10. my plans typically don’t change once I make them so I don’t have a problem doing advance rates.

  11. Considering that the hotel itself is your reason for going there, you’re probably safe with the advanced purchase. I have an upcoming trip to Asia though where I’m kicking myself for having bought advanced purchase hotels, especially with miles airline tickets being so flexible. Do “flat tire rules” work on pre-pay hotels?

  12. For me, it’s all about % chance of potential changes. If I’m in route to a destination, I will change to a prepaid rate for 1 less Thai Bhat.

  13. I doubt you would get a better rate in B. and the price difference is worth ‘risking’ it.
    Is this really peak season in B though? I mean, there won’t be any snow!

  14. I’ve been playing this game a fair amount myself lately with Hilton. My usual strategy is to:
    (1) Book refundable rates (AAA or something better) in advance so that I’m guaranteed *something*.
    (2) Babysit my bookings and rebook whenever the price drops.
    (3) Rebook at the advance purchase rate at the last minute … IF (a) my plans are pretty much set in stone, and (b) it’s a substantial savings.

    Right now I’m babysitting some European bookings where the Great Getaway rate is dramatically lower than the AAA rate. I’ll probably lock it in at the last minute (7 or 14 days in advance).

    However… I get burned this way too. I took advantage of Accor’s 50%-off sale to book pretty affordable but nonrefundable rooms in Paris and Amsterdam. About a week later, the Park Plaza promotion came out, and I discovered that I could have booked the Park Plaza Amsterdam for roughly the same amount (and scored the 50K bonus points).

  15. The other factor to consider is how tied up you really are with an advanced purchase. I use a few hotels fairly frequently and have occasionally had to change plans – in each case I called the property directly and apologized and the refund was processed. No guarantees, and it prob helps I am HH Diamond and SPG Plat but it’s always worth a go if you really need to make that change.

  16. Good post lucky.

    I am generally against advance purchase rates more than 14 days ahead with this level of discount. This rate is a 25% discount. Is the odds of something unexpected coming up (illness,volcano, bandits, better opportunity, etc.) much less than 25%.

    The correct comparison for valuation is the probability you will cancel x the refundable rate minus the non-refundable rate. If you only have a 10% chance of cancellation, then the comparison is .9 x 218 = 196.20 vs. 157.44 or about 40 euros.

    But if there is a 20% chance of cancellation, that wipes out most of the savings.

    Why not wait until a week ahead before deciding?

  17. I can’t speak for Intercon, but SPG has a bad habit of screwing up the earned points on prepaid stays. I recall this also happened to you in Khao Lak i think.

  18. Is this the room you booked on a prior posting and were upgraded to a two level suite as royal ambassador?

  19. @ Dan ray — I booked the same room last time, though got an especially good upgrade since they were sold out. I guess I was “operationally” upgraded since all the standard suites were occupied.

  20. 27.5% discount for locking it in – I would do that. Normally though, I like to be able to change it if I want to.

  21. Lucky,

    Nice post. I’ve actually been playing with this for a stay at the Le Meridien Khao Lak, which you reviewed not too long ago. Awhile back, the wife and I took the plunge and booked a refundable rate of $350/night for an ocean view villa in the off season. That far out (we secured bookings as far as one year out) I wasn’t going to prepay anything.

    Good thing, too. LMKL ran a nice promo fare where you could get a pool villa for $180 USD/night, including breakfast, 50% off at the spa, and 25% off F&B. Oddly, the first few days this promo was out, it was refundable. I snapped it up and kept the ocean front villa “just in case.” Good thing I jumped on it when I did, because it quickly switched to a nonrefundable rate.

    And then they yanked the rate altogether. And then they loaded back up, but it was $50 cheaper per night (25% discount.)

    Ok, decision time: Keep the refundable rate at $180/night, or prepay and save $50. I prepaid. Why? At this point, we’re three months out. A year out, I’m securing bookings that I’m reasonably happy with to ensure we have a place to stay. Three months out, I’ve probably finished all of the tweaking, settled on where I’m going to be and when, and probably booked our internal flights. Plus, the wife an I are coming specifically to stay at this property. We’d have to get something as nice but cheaper to stay elsewhere in the area.

    At six months out, I definitely would have prepaid this rate. I might have actually prepaid at the $180 rate, too. But, I got lucky.

  22. I have this debate with myself all the time! My rough rule of thumb is that if the trip is less than 4 weeks away and if the non-refundable rate savings are more than 25% to do it.

  23. Ben…I suggest you check Kayak, which seems to be offering the same advance purchase rate, but is refundable.

  24. @ Murphy — Wow, nice fun! Unless I’m mistaken, though, that stay wouldn’t qualify for RA benefits and points, right?

  25. @ Lucky – I’m unsure about about RA benefits on Kayak booked reservations as my IHG knowledge is confined to their BRG šŸ˜‰

    However, are you sure the rate offered on the IHG site isn’t refundable? The only thing it says is there is a nonrefundable one night deposit. Doesn’t really say much else (I assume you’re also looking at the Stay 5 Pay 4 rate…there is a separate “Advanced Purchase” rate which includes the normal non refundable verbiage).

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