In today’s world, hotel guests are much more empowered and well informed which is a very positive trend. But this trend has created lots of problem for hoteliers as guests are in a habit to make multiple bookings well in advance. This allows them to cancel their other bookings and confirm one just a day or two before their actual stay dates. High cancellation rates can be a problem for hotels if they don’t have a strategy to counter them.
High cancellation rates can distort the demand level for online hotel booking. It also allows the guests to book some of the best hotels at non-optimal rates and your hotel looses revenue. Now the question is how can hotels deal with these cascading effects of these cancellation rates?
We come up with a quick guide that will help you to understand what drives the higher cancellation rates, followed by relevant tips to deal with them.
Our goal is to help you identify the channels from which these cancellations are coming, what will be the expected cancellation rates, and the ways to plan for them and turn your cancellations to your advantage.
Starting from the basics, the very first thing to realize is that cancellation rates are different for different channels and you need to identify whether it is coming from brand website, OTAs, over the phone, etc. Long lead bookings coming through OTAs witness higher cancellation rates as compared to short lead bookings done through other channels.
Once you find out where your cancellations are coming from, you can use the following tips to overcome high cancellation rates. Remember, when it comes to dealing with cancellations, forewarned is forearmed.
High cancellation rates can distort the demand level for online hotel booking. It also allows the guests to book some of the best hotels at non-optimal rates and your hotel looses revenue. Now the question is how can hotels deal with these cascading effects of these cancellation rates?
We come up with a quick guide that will help you to understand what drives the higher cancellation rates, followed by relevant tips to deal with them.
Our goal is to help you identify the channels from which these cancellations are coming, what will be the expected cancellation rates, and the ways to plan for them and turn your cancellations to your advantage.
Starting from the basics, the very first thing to realize is that cancellation rates are different for different channels and you need to identify whether it is coming from brand website, OTAs, over the phone, etc. Long lead bookings coming through OTAs witness higher cancellation rates as compared to short lead bookings done through other channels.
Once you find out where your cancellations are coming from, you can use the following tips to overcome high cancellation rates. Remember, when it comes to dealing with cancellations, forewarned is forearmed.
1. Keep a track of channels that are getting bookings and when- Keep a track of both, online and offline leads and find the number of bookings you are getting from each channel.
2. Look at the cancellation rate on each channel- You must figure out the number of guests that actually stayed in your hotel compared to those that were expected to stay. Maintain a record! This will help you monitor the cancellation rates over time and devise a plan to deal with them.
3. Devise more strict cancellation policies for channels with highest cancellation rates- While this requires going through your OTAs contracts but if you can reduce the cancellation rates by introducing stricter policies, you’ll reduce uncertainty. It is obviously clear that you do not need your good bookings to be affected when you take these necessary steps to reduce higher cancellation rates. To make sure this does not happen, you can run a trial for few months and put a suitable cancellation policy in place.
4. Use overbooking practices- Don’t fill your house too fast with bookings that are likely to be cancelled as the arrival date approaches. Monitoring the rate at which cancellation occurs prior to arrival will help you determine the overbooking at a particular date in future.
5. Review allocation and free-sale bookings- In case an OTA is allocating your rooms too fast and well in advance then you need to review your allocation. Check if your OTA is selling the free-sale rooms keeping their allocation on hold.
6. Compare forecasted versus actual demand- Bookings from long leads can significantly distort your actual demand levels. Tracking cancellation rates over time will help you to predict the likelihood of booking being an actual one. This allows you to adjust your demand levels accordingly. A booking forecast can never be 100% accurate and will always show some deviation from actual demand. Your aim should be to make your Forecast Error (which is the difference between forecasted demand and actual demand) as low as possible. High level of error can be due to cancellations.
With these tips, you can know more about your OTA cancellation rates. Very high cancellation rates can significantly affect your hotel revenue. These techniques can help you control cancellation rates and recover your business from high cancellation rates.
2. Look at the cancellation rate on each channel- You must figure out the number of guests that actually stayed in your hotel compared to those that were expected to stay. Maintain a record! This will help you monitor the cancellation rates over time and devise a plan to deal with them.
3. Devise more strict cancellation policies for channels with highest cancellation rates- While this requires going through your OTAs contracts but if you can reduce the cancellation rates by introducing stricter policies, you’ll reduce uncertainty. It is obviously clear that you do not need your good bookings to be affected when you take these necessary steps to reduce higher cancellation rates. To make sure this does not happen, you can run a trial for few months and put a suitable cancellation policy in place.
4. Use overbooking practices- Don’t fill your house too fast with bookings that are likely to be cancelled as the arrival date approaches. Monitoring the rate at which cancellation occurs prior to arrival will help you determine the overbooking at a particular date in future.
5. Review allocation and free-sale bookings- In case an OTA is allocating your rooms too fast and well in advance then you need to review your allocation. Check if your OTA is selling the free-sale rooms keeping their allocation on hold.
6. Compare forecasted versus actual demand- Bookings from long leads can significantly distort your actual demand levels. Tracking cancellation rates over time will help you to predict the likelihood of booking being an actual one. This allows you to adjust your demand levels accordingly. A booking forecast can never be 100% accurate and will always show some deviation from actual demand. Your aim should be to make your Forecast Error (which is the difference between forecasted demand and actual demand) as low as possible. High level of error can be due to cancellations.
With these tips, you can know more about your OTA cancellation rates. Very high cancellation rates can significantly affect your hotel revenue. These techniques can help you control cancellation rates and recover your business from high cancellation rates.
