In today’s online travel world, OTAs play a major role in terms of generating a maximum number of bookings for hotels around the globe, as over 70% hotel bookings come from OTAs.
NB: This is an article from Hotelogix
While this is good for hotels, it also casts a few but unavoidable challenges for them. One of them is the higher percentage of OTA cancellation.
Data suggests that the percentage of cancelled reservation on OTAs is around 20% to 40%. This means, if you solely depend on OTAs to sell more, you also have to deal with a higher rate of booking cancellations which leads to loss of business opportunities. However, in this case, with a little bit of careful approach, you certainly can do many things to safeguard your interest.
Reasons for such high cancellation of OTA bookings
Many OTAs have this ‘Book now & pay later at the hotel’ and ‘free cancellation’ policy to attract more travelers to their portals. Due to such arrangements, a majority of travelers tend to book multiple hotels and wait for the destination to be finalized. Once that is done, they just go ahead with one of the bookings and cancel the rest of them. Even though some of the OTAs have started charging a nominal cancellation fee, it is still not a deterrent to counter cancellations. That’s how many hoteliers like you are left with unsold rooms.
Here are some ways to counter OTA cancellations that leave you with distressed inventory leading to revenue loss.
Nurture your OTA guest, get closer to them
All the OTAs are now sharing guest data with the hotels, including their email ids and telephone number. It helps to start building a relationship with the guest from the time they book. For example: You have the guest details of those who have booked through OTAs – the moment you get those bookings, write a mail to them telling them how happy you are to see them at your property. Ask them for suggestions on how you can make their stay better. Offer them services like a free airport pick-up and drop, or a free meal. With such pre-arrival personalized communications, you can attract them to stay committed to their booking.
If you still get a cancellation request, do get in touch with the guest again and ask for the reason behind the cancellation. Try to find out if they have cancelled due to pricing. Offer them a special rate or an attractive package, like a 10% off in overall food and beverage.
Once they come to your property, serve them well, exceed their expectations and let them know the kind of benefits they would get if they book directly with you.
Focus on OTA-wise cancellation rate
Analyze all your OTAs – bookings, reservations getting cancelled and their date-range. How many days before the check-in did you get the cancellation request? Is it a group or FIT booking? Plus, you also need to look at seasons in which OTA cancellations are high. Once, you have all the data on this, you can develop your plan of action. They include –
#1 Start overselling, but be very careful about it
Let’s say you are a 50-room independent property and are working with 5 OTAs. You have identified that booking cancellation is high on OTA 1, say around 30% to which you have allocated 10 rooms. Here, in this case, it is advisable to introduce the practice of overselling or overbooking. Start with increasing the room allocation by a 20% to the OTA 1, wait and see the result for a month or two. If it works in your favour and you can sell all your rooms, you can implement the same strategy with other OTAs, too.
However, be careful while overbooking your property. You need to be very sure about your hotel’s overall cancellation percentage. It’s because you can only accept bookings for 12-13 rooms if you know that you have 10 unsold rooms at the end of the day. Unplanned overselling will lead to guest dissatisfaction. Moreover, your cancellation policies also help you in determining how many rooms to oversell.
#2 Take advance booking, work on your cancellation policy
To safeguard your business interest, you must have an effective booking/cancellation policy. Talk to your OTA partner and make it very clear to not promote ‘book now and pay later at the hotel’ or ‘free cancellation’ for your property. To reduce the risk, you can even set stricter cancellation and refund policy for any bookings that are made 15 days in advance. For example, strike a deal with OTAs that you need 50% as advance booking amount. Make it a part of your contract that refund for cancellation will be 50% of the advance amount collected if the guest cancels the booking 72 hours of the check-in date. This way, even if a booking is getting cancelled, you are still making some money and you get to know the number of unsold rooms so that you can oversell them.
Moreover, to further diminish the risk, and to ensure that guests do honor their bookings, you can even offer a certain percentage of discount based on how far in advance they book your property via OTAs. For example, 10% discount for booking 10 days in advance or 15% discount for booking 15 days in advance. You can apply the same for confirmed bookings that are coming in advance. However, here too, don’t hesitate to ask for advance payment and to implement your cancellation policy. Most importantly, you should have a ‘no refund’ policy for no-shows.
It is understood that successfully handling OTA cancellations cannot be achieved in a day or two. But as a hotelier, you must understand your property’s USPs, guest satisfaction score, online reputation and ratings, etc to dictate terms while setting up advance payment policy and cancellation & refund rules to counter losses arising out of higher OTA booking cancellation.
With their deep pockets, chain or group hotels can handle the loss that they may get to see from OTA booking cancellations. But given their much lower scale of operations and financial constraints, independent hoteliers must look at several ways to tackle this operational peril.