The Revenue Managers Guide to Handling High Cancellation Rates

Today’s hotel guests are empowered and informed, which in some ways is very positive. However, it has also led to a trend of guests making multiple bookings far in advance, before cancelling ones they decide against just a day or two before their stay dates.

High cancellation rates on OTAs or other channels can be a problem for your hotel if you don’t have a strategy ready to deal with them.

These high cancellation rates can lead to distorted demand levels for hotels, meaning non-optimal rates and lost revenue. Why does this happen, and what are a few quick tips for hotels looking to deal with the effects of these cancellation rates?

We’ve put together a quick guide to help you figure out the causes of higher cancellation rates, followed by some quick tips. Our goal is to help you figure out:

#1:  Which channels cancellations are coming from

#2:  What kind of cancellation rates you should expect

#3:  How to plan for them and turn cancellations to your advantage

The first thing to realise is that your cancellation rates will be very different for each channel, whether that channel is your brand website, an OTA, over the phone, etc.

Here’s the 6 tips we’ll be covering in more detail below:

01  Pay Attention to What Channels Are Booking and When

02  Focus on the Cancellation Rate On Each Channel

03  More Restrictive Policies on Channels with more Cancellations

04  Use Overbooking Practices

05  Review Allocation and Free-Sale Bookings

06  Analyse Forecasted Versus Actual Demand

01 Where are Cancellations Coming From?

Average lead times tend to be longer on OTAs. This is because their message to the consumer is to book now, even if they’re not sure. They encourage guests to reserve a room even when they’re still in the ‘looking’ or ‘dreaming’ stages of the buying process, with the message that they can take advantage of cancellation policies later

Click to get your free guide from NetAffinity