This week we’ve been brushing up on the best ways to deal with high cancellation rates. Cancellations are one of the inevitable issues that arise, and they – especially last-minute cancellations – can wreak havoc with your revenue management strategy if you’re not prepared for them.
To successfully deal with cancellations, it’s important to know how many cancellations you’re likely to get and create a plan to deal with them. How often do your guests cancel their bookings, and how far in advance do they usually cancel? Do you have an overbooking strategy in place for times you know you’re likely to get a lot of cancellations?
You should definitely be tracking your own cancellation rates and building your strategy from there, but here’s a look at cancellation rates on different channels from the industry as a whole. We also found a few great resources on building a strategy to deal with them.
Let’s dive in.
Why Cancellation Rates are Higher on OTAs
Decisions about stock and price offerings to different channels rarely take into account cancellations and the costs that these generate per channel. It’s not easy to estimate or measure this cost, since it doesn’t leave a direct trail on the average price or production of each channel, but we should not ignore it nevertheless.
We will analyse these costs as well as determine who is responsible for the fact that cancellations are shooting up: the hotel or the channel?
Cancellation rates are highest on Booking.com, and they are higher on Expedia than they are on the hotel’s own brand website – why?
One in Five Hotel Bookings on the Web are Cancelled
Some 19% of hotels that are booked online are cancelled before the guest arrives at the hotel, according to data provided by Dohop.
The travel search business, which runs its hotel channel as an affiliate of Booking.com, has released a heap of data to illustrate some of the trends of 2015 in the hotel booking world.
The one in five cancellation metric is “rather high”, Dohop argues, but says the figure is actually lower than the average for bookings running through the wider Priceline Group-owned mothership.
2 Ways to Create a Successful Overbooking Strategy
As we know, overselling (or overbooking) is a technique used in Revenue Management to offset anticipated cancellations and no-shows. In other words, if you expect 2 cancellations and 1 no-show – you oversell by 3. That’s the optimal behavior that maximizes revenue. Pretty simple, right?
Nevertheless, not very many hoteliers embrace this practice. However, correctly implemented overbooking practices will minimize the chance of a walk while leading to a noticeable increase in revenues. You don’t need to have a lot of Revenue Management experience or knowledge to be able to achieve this goal.
In this article, I will try to describe some overbooking techniques and best practices. My goal is to show that overbooking is definitely underestimated. It is also not as scary as it may seem and leads to great revenue increases if done right.
How to Combat Last-Minute Cancellations
Last-minute cancellations can cost hoteliers time and money. Here are some ways to maintain each booking.
With last-minute cancellations having the potential to wreak havoc in the revenue management arena, hoteliers from Los Angeles to London are opting for a range of solutions that include tightening the rules on refundable bookings and turning to more sophisticated algorithms to forecast.
Last-minute cancellations have been on the rise in recent years amid an emergence of online tools and platforms that make it easier for consumers to shop and compare hotels, explained Bjorn Hanson, a hospital industry expert and professor with the New York University Preston Robert Tisch Center for Hospitality and Tourism.
“It’s an increasing problem that needs to be addressed,” he said.
