Is your hotel being haunted by no-shows? In the hotel industry, guests who fail to show up without notice (no-shows) and last-minute cancellations pose significant challenges, affecting both planning and profitability.
NB: This is an article from D-Edge
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In the hospitality sector, the no-show rate for hotels is commonly between 1-5%, providing insight into the revenue lost by hoteliers each year.
As flexible policies and competitive offers increase, booking habits are evolving. A June 2023 report by Statista reveals that 66% of Gen Z adults and 64% of Millennials are willing to pay extra for flexible cancellation options when booking hotels. This growing preference for booking flexibility allows more guests to modify or cancel their reservations, which, in turn, raises the risk of cancellations and no-shows, posing challenges for hotels in managing occupancy and revenue.
Certain customer profiles are more likely to exhibit these behaviours, particularly those who frequently make multiple reservations or change their plans at the last minute. According to our 2024 Hotel Distribution Report, hotel booking cancellation rates range from 18% to 42%. In Europe, the cancellation rate for direct bookings was 18% in 2023, with Asia close behind at 23%. However, these rates increased for OTA bookings: in Europe, Expedia had a cancellation rate of 31%, while Booking Holdings reached 42%. A similar trend was observed in Asia, where Booking Holdings had a 40% rate, and Expedia performed better at 24%.
Here are our top strategies to cut no-shows and last-minute cancellations for hotel bookings.
Don’t let guests ghost you from the start
To reduce no-shows and last-minute cancellations, balance hotel cancellation policies with commitment-driven booking options. Travellers are now used to flexible bookings and will often seek a booking with a free cancellation period. Shortening this period (e.g., 24 or 48 hours before check-in) can enhance guest commitment, improving hotel occupancy management efforts. Prepayment strategies for hotels also reduce cancellation risks while attracting committed customers. While configuring rates, sales conditions, and pricing strategy in your CRS, you may also try to add a cheaper, non-refundable rate.
Separate pricing strategies from hotel cancellation policies
We feel compelled to challenge a common assumption. As Thomas Roche, Lead Product Manager of Payment, explains “It has been widely accepted by hoteliers that they can debit a validated card when there’s been a no-show. However, it is questionable: the transaction was made without the customer agreement or 3D secure. Online payment is highly regulated and always in the customer’s favour. If the guest contests the transaction it would mean wasteful procedures and bank charges for hoteliers.” Rather than making manual and disputable debits, Thomas advises “Separate pricing strategies from your hotel cancellation policies. You can request prepayment while still offering flexible cancellation terms. Remember, the cancellation rate for prepaid bookings is typically 50% lower than average! Prepayment increases guest commitment, as they won’t want to lose money.”
