Why do guests cancel and re-book hotel reservations? Well, that’s easy: Because they can, and because it makes economic sense—people don’t want to spend more money than they have to. In the eye of the traveler, freeing up money on a hotel stay frees up money to spend on other enjoyable aspects of a trip.
And because guests can do it, they do it. Thousands of people cancel and re-book online reservations every single day. In fact, there is automated technology specifically designed to alert travelers to new price reductions. For many of today’s travelers, this tempting practice has not only become a no-brainer, but advancements in technology makes it pretty damn easy for them to do it.
So how does this affect revenue and profit? Unfortunately for hotels, there are a couple of revenue implications. Let’s start with a common scenario:
Jamie booked a fully flexible reservation at your hotel for a future trip. Every once in a while, Jamie gets bored at work, thinks about his upcoming vacation and continues to surf hotel and travel rates online—checking both your website and comprehensive metasearch sites—just in case he spots a better deal.
The first implication in this scenario is what Jamie’s going to do if he sees a lower rate offered over the dates of his future stay. Aside from losing the monetary difference in rate, what happens to the hotel if Jamie cancels his original reservation and re-books at a lower rate?
And then there’s another consideration: For technology utilizing regrets and denials data in their forecasting algorithm, how does Jamie—as a shopper “shopping” for a room he’s already booked—potentially skew the hotel’s demand forecast? If every repeat shopper is counted as a new unit of hotel demand, how significantly does that inflate the demand forecast for that time period?