Hotel cancellation terms are one of the major deciding factors for a guest making a booking. With OTAs promoting free cancellation as one of their major selling points consumers have grown to enjoy booking flexibility.
Typically direct hotel bookings have enjoyed a lower cancellation rate than OTA bookings however this is changing. Here at Net Affinity we’ve seen an increase in the percentage of cancelled bookings for the past 2 years – from 8.9% of total bookings to 11.7%.
We don’t expect this to reach the same 30-50% seen through OTAs but we do expect to see this continue to rise.
We’ve also looked at the lead time for bookings that end in a hotel cancellation. Generally cancelled bookings are reserved further out when perhaps plans aren’t set in stone. For short lead bookings the guest tends to be more certain.
The annual trends are clear to see in this chart, the high seasons are seeing a longer lead time in general, but the bookings that cancel are booking much further out. In fact, the stayed bookings don’t see as large a variance seasonally as stayed bookings do.
Finally, we’ve analysed how far out guests are cancelling ahead of their stay. On average for 2016 this was 26.5 days, increasing to 27.4 days for 2017. The averages don’t say everything when looking at these statistics, there is a large seasonal variation here also. Bookings in Jan are cancelling only 16/17 days out, but during the height of the season this is well over 30 days. On the ground this means you have less time to resell that room when demand is lower, but during the summer when demand is not a problem, it’s much easier to resell the room.
How to combat this?
Hotel cancellations will no doubt be difficult to curtail. The OTAs have created an environment where guests make multiple hotel bookings before final selection. And if a guest needs to cancel, they will.
The following recommendations won’t massively reduce your cancellation rate but we hope they should ease the pressure a bit.
- Promote a Prepaid / Advance Purchase rate. If the guest pays at the time of booking, they will receive a small discount. Ensure that you have a facility in place to take payment electronically at the time of booking to avoid issues with manual payments.
- Set up a pre-stay email to send a week before arrival. This will allow you to upsell hotel facilities and remind guests of cancellation policies. Hopefully at that stage if they need to cancel they will advise you immediately giving you more time to resell the room.
- Collect data on why guests are cancelling when they email or call the hotel. This will help you understand if a specific issue is arising and you can tackle it specifically.