3 Tactics Hoteliers Use to Overcome High Cancelation Rates

Aug 23, 2019

Some amount of canceled bookings is inevitable. However, in recent years there has been a significant rise in cancelations, creating real issues like low occupancy for hotel managers.

A primary reason for increased cancelations? OTA (Online Travel Agency) customers who research in advance are booking online and later canceling before the OTA’s cutoff without penalties. Guests who aren't yet sure of their plans may feel compelled to prematurely book when presented with a message: "Only a few rooms remain for your dates."  For guests who are guaranteed refunds should they cancel before the OTA’s cutoff, there is little risk.

Without question, high cancel rates make it challenging for hoteliers to know the guest’s real intentions. Not to mention, cancelations lead to lost revenue for each night a room is vacant. Since cancelations very often occur within hours of the anticipated arrival, hoteliers have little other recourse than to drastically discount the canceled rooms in an attempt to recover losses.

The impact goes beyond revenue loss. Unfortunately, cancelations and subsequent discounts result in a lower brand image to customers who book the last-minute, at a heavily discounted rate. Equally important, cancelations further impact operational costs as the staff still must process canceled bookings. Additionally, the acquisition costs of each confirmed OTA reservation ultimately increase if later canceled.

Many hoteliers are responding to this business challenge with strategic changes to the way they manage bookings. Here are some of the tactics used to help them face the challenge head-on:

  1. Extend discounts to those who provide payment in advance, including non-refundable deposits.
  2. Collect information to figure reasons for canceling. The data may show the hotel's rates are not competitive enough, or that the hotel should invest in a shuttle service to make guest transportation more convenient.
  3. Commit to a cancelation policy with exclusive incentives for direct bookings on the hotel’s website and prioritize marketing initiatives on securing web bookings.

Statistics show that hotels without direct channels or those without a robust booking strategy face higher cancelation rates. These strategies can help reduce the volume of cancelations and give hotels a boost to their ADR and RevPAR.

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