Things come up. Circumstances change. Plans get disrupted. But is that the only reason why your guests might not show up at the last moment?
NB: This is an article from Hotelminder
More often than not, the problem lies on your side of the fence. A messed up cancellation policy, radio silence post booking, or even a better deal somewhere else often lead to unexpected cancellations and no-shows.
Did you know that almost 20% of hotels rooms booked online are cancelled before the guest arrives? That’s 1 of every 5 bookings you get! It not only directly impacts the revenue, but also leads to poor marketing, since OTAs keep track of cancellations drawn by a hotel. But before we move on to the rescue plan, here’s why cancellations are worth talking about.
Why do Cancellations Matter?
Here’s some Business 101 for you – Saving money is earning money. Now here’s some Business-in-a-modern-competitive-world 101 – Not earning money is losing money.
Somebody had plans to travel, looked up your website, booked a room and later cancelled or didn’t show up. There’s good reason to believe that the person is still travelling. Just not staying in that room you lovingly prepared.
Cancellations matter for several reasons, some of which are listed below:
Lower Occupancy Leads to Lower Revenue
Any room that’s vacant in a hotel is probably a loss-making entity for the day. You don’t need advanced math skills to understand the relation between last minute cancellations or no-shows and revenue. Even when you’re able to sell the room again, it would probably be at a lower rate.
Drop in Rankings on OTAs
Just like Google’s search results, OTA listings work best for properties listed on the first page. Although OTAs promote initiatives like ‘free cancellations’, they can significantly impact your rankings, and in turn, the overall sales and revenue.
Stress and Extra Work
If a ‘done deal’ isn’t done in time, you need to start from scratch again. Last minute cancellations and no-shows lead to extra work, more so, under stress and pressure.
Understanding Where Cancellations are Coming From
Use insights from guest data to understand key parameters that affect conversion. Analytics can let you know the exact reasons for cancellation. Types of rooms, days of the week, an event nearby etc. could be factors in increased cancellations.
Due to longer lead time, OTAs often have a higher cancellation rate. However, they also bring business. Though you should list the property on OTAs, it’s also important to keep track of other properties in the listing page to understand what they’re doing right.
Guests often make multiple bookings well in advance, only to cancel all but one a day or two before the arrival date. Try to make sure you’re the one that’s not cancelled. Stay in touch!
In certain countries, fraudulent bookings are a matter of concern. These are often made to get visa. Keep a check on such customers, primarily travelling from countries with stringent visa policies.
You must have understood how cancellations and no-shows impact your revenue and other things in business. So here comes the rescue plan. We’ve tried to provide you with certain tips that could help improve the overall customer experience and engagement to reduce cancellations and no-shows on the website.
1. Make Sure You have a Good Cancellation Policy
- Safeguarding your guests’ interests is a great approach. But not when it’s hurting your revenue. The cancellation policy is supposed to safeguard your interests.
- Before your guests hit the ‘Book Now’ button, you need to make it clear for them to understand everything. This may include information about refunds, cancellation fee, amount blocked on card etc.
- A stricter cancellation policy can have a great impact. Moreover, it also reduces fraudulent bookings.
- Ideally, your cancellation policy should be the same across channels. If you offer better terms on OTAs, it might lower your chances of getting direct bookings.
2. Require Card Deposits
- Near the high season or bank holidays, it’s better to ask for card deposits to secure payment.
- You could even mandate credit card details to block an amount for the booking.
- A partial or complete payment at the time of booking may come with offers and discounts. This not only reduces the chances of cancellation, but even has a positive impact on conversion.
- Depending on policy, you could even allow pre-authorization of cards.
3. Set Discounted or Advance Purchase Rates
- A partially prepaid rate with a slight discount works wonders. Many of our clients witness pretty good results with a 30% prepaid rate.
- A fully non-refundable booking doesn’t always sound bad, especially when it comes with a deal or a discount.
- For early bookings, offer upgrades or discounts. It makes you seem more credible and guarantees a cheaper rate for guests.
- OTAs offer special package deals, such as Hotel + Flight offers. Usually, these deals have a low cancellation rate, since it’s not possible to cancel flights with sufficient refunds. You can enroll for such a packaged deal with an OTA. However, take into consideration the commission charges and the impact on revenue.
4. Use Length of Stay Restrictions
- Checkout your competitors’ policies on length of stay restrictions. Some hotels do not allow one night bookings on busy days, or when an event is happening nearby. Longer bookings mean less booking count, which reduces the number of cancellations.
- These restrictions also align with your revenue management strategy, and provide you with additional revenue.
5. Sweeten the Deal for Direct Bookings (Offer discounts)
- As per a study, from Mirai, cancellations from a hotel’s website amount to only 19% as compared to 39% on Booking.com and 25% on Expedia over a 4-month period.
- For direct bookings, cancellation lead time is often longer, giving you more time to resell.
- Since it’s better and easier to control direct bookers vs OTA guests, it’s good to offer a special deal on the website. It also aligns with our recommended pricing strategy.
6. Send Your Guests Email Reminders About their Booking
- Post booking interactions show your guests the level of attention and care they’d receive at the property. Stay in touch with guests once they’ve booked.
- Warm your guests about imminent deadlines too.
- When you keep the communication going, it gives a personalized experience to guests. You can inform them about local events, nearby places, cancellation policy and no-show fee.
- If your PMS allows, create a template and automate emailers.
7. Adopt A Cautious Overbooking Strategy
- Don’t be afraid to oversell. Now of course we aren’t recommending this for a small-sized property. But if you’re part of a pretty big hotel network, take a chance. It will definitely mitigate the consequences of last minute cancellations and no-shows.
- Timing of such a decision is crucial. It’s better to adopt this strategy at the time of local events or during peak season.
- Also, you should have a backup plan, just in case. Shifting a guest to a similar property at the time of check-in could be one way to handle the situation.
8. Be Responsive and Proactive
- Keep a track of cancellations. Your frontdesk needs to be proactive and responsive.
- When guests don’t turn up, get in touch as soon as possible. Information is power and gives you the chance to resell the room.
- While empathizing with the guest is necessary, you need to be firm. For instance, the no-show fee could be allowed as a voucher for future use, if you’re able to resell the room.
Be in constant touch with your guests, not to bother them, but to be helpful with information about cancellation policy, local events, nearby places or anything that could be of use. You need to be responsive and proactive to ensure last minute cancellations and no-shows are dealt with quickly. It’s also important to keep track and check reports regularly.