The Ethics of Walking

Here’s another hypothetical for you: Suppose that you own a business, and six months ago you took a pre-order from a customer, to be delivered now. Just before you’re ready to deliver the product, a huge order comes in from a government client agency which will require all of the product you have available, including the pre-orders. If you make good on the special order you can make a huge bonus/mark-up on what your product would normally go for; more than the pre-order customer will ever spend with you; probably more than they will ever have to spend on anything. You can provide your pre-order customer with an equivalent product, and even offer them a deep discount on it; you can apologize for the inconvenience; you can even point out the “substitution” clause in the purchase agreement, which says you can substitute an equivalent product if you have to. But whatever you do, it won’t be the product you originally sold; nor will it be the product your customer actually wanted. What are you going to do?

Well, before you answer that question, you might want to consider the case of the Waldorf-Astoria Hotel in New York, and the situation they ran into last month when King Abdullah of Saudi Arabia came for a visit. You can read the New York Times article about it if you want to, but the basic story is that seven Saudi princes came with the King, and all of them brought their various entourages and security details, which wound up taking up more rooms than the Waldorf had available that week. So, as is commonly done in the hospitality industry, the hotel found rooms at a nearby property of equivalent price and quality for all of the guests displaced by this sudden demand, starting with people who had booked their rooms in advance using discount programs – the guests paying the least for their rooms to begin with. This practice is called “walking” within the industry, and most hotels do have substitution language in their contract with you that prevents you from suing them over such a substitution. Thus, the practice is legal enough; my question is, is this ethical?

In the story linked above, the Waldorf stood to make an extra $100,000 or more per night the Saudi contingent was with them; more than the discount customers they displaced were likely to spend in the next hundred years in total. They also provided the displaced customers with very nice rooms at the Hilton property around the corner, and provided one night free, which at New York prices is not a trivial gesture. It would be difficult to say that the displaced guests were actually damaged in any way; certainly no lawyer would touch the case even if the hotel didn’t have substitution language on their side. But the Hilton isn’t the historic Waldorf; the hotel the customers in the story had specifically wanted to stay in as the highlight of their trip, and the one they’d stayed in on the same dates for many years. Did the hotel have an obligation to give its customers what they wanted, or only the equivalent value?

In a world filled with Internet bargains and third-party travel cites (like Expedia, Hotels.com, and so on) the practice of “walking” discount-level guests in favor of higher-paying customers is becoming more and more common, and even confirmed reservations are no longer certain unless you’ve reached that stratospheric status where even a Saudi prince would think twice about messing with you. We’re going to end up seeing more and more stories like this one from the Consumerist website , and it’s going to get harder and harder to be sure of anything when you travel. Eventually the industry and its customers will both evolve new procedures to deal with all of this, but until then we’re left with the question of whether “walking” is ethically acceptable, or if hotels (and their management) have a responsibility to their customers (to provide the service as promised) that supersedes their responsibility to their stockholders (to maximize profits without breaking the law or materially damaging anyone)?

It’s worth thinking about…