If you are a hotelier, you must be well aware of the bane that last minute hotel booking cancellations are. Do you spend every waking hour worrying about how many guests are going to cancel? Then, you absolutely must read this article.
Hotel book cancellations might not seem like a big deal till you get to know the real statistics. According to this article by PhocusWire, 1 in 5 online hotel bookings are canceled.
That means 20% of your hotel bookings are canceled on a daily basis! The percentage is staggering. Imagine what this can do to your revenue.
Now you might think- ‘Well, I didn’t really invest any money, time, or effort on those guests. So, technically it’s not really a loss, is it?’
Well, sorry to break the ice, but It is- a huge loss. In this post-COVID-19 world when hotels are fighting tooth-and-nail to attract customers, money not earned is equivalent to money lost. You have to give almost a full refund to your guests without being sure if you can resell the room.
There are two kinds of cancellations. Either the guests cancel 1-2 days before the day of arrival and get their money back. Or, they just don’t show up when they are supposed to and don’t get their money back.
You don’t have to worry about the no-shows technically. Because you can keep the payment and then resell the room if someone requires it urgently. But the first category is the real problem. And for this, you first have to understand why people cancel.
Here’s the thing. People who cancel because of a sudden change of plans or emergencies, usually belong to the category of “no-shows.”
So, don’t just remain self-satisfied that guests are canceling because of their own problems.
It’s not them. It’s you.
If a booking is canceled at your hotel, it might be your fault. So, it’s important to understand what you did wrong.
One of the most common reasons why guests cancel is that they witness a radio silence from the hotel’s side. It’s not their fault because they themselves cannot contact the hotel very easily either. Especially if they are booking through Online Travel Agency (OTA) platforms.
Some guests just have a tendency to book multiple hotels before canceling all but one. You cannot change a guest’s habits. But there are ways to make sure that you are the one hotel they don’t cancel.
There is also a direct correlation between the number of lead days and the rate of cancellation. Lead days refer to the days between booking leading up to the day of check-in. The more time the guest has to ponder upon his actions, the more likely he is to cancel.
There is an added problem that is specifically faced by hotels in the United States. People from other countries often make fake hotel reservations so that their VISA gets approved. Now, the thing is- as a hotelier, there is no way you can truly tell these fake reservations apart. You can, however, keep an eye on foreigners coming from countries where getting a VISA is difficult.
There are various other reasons why guests cancel but you cannot always change their fickle-mindedness. You cannot suddenly change your 3-star rating to a 5-star rating either. But here’s a list of things that you can practically do to stop hotel booking cancellations.
The chief reason why guests cancel is that hotels stop communicating with them once the booking is done. You may think this is a completely fair policy. Maybe you think sending your guests regular emails disturbs them.
But here’s the deal- very often there are families where multiple people are looking for hotels at the same time. If a hotel goes into radio silence after the booking, the guests will start looking for other options.
This is why it is essential that you stay in touch during the lead days. Regular emails can actually work wonders. They let your guests know that you are invested in taking care of them. And it also allows you to understand their level of engagement.
Sending them questionnaires regarding their preferences after the booking is done, is a great idea. They will be more invested in answering because they know these answers will directly influence their quality of stay. And this will also let you know, based on their responsiveness, how likely they are to cancel. Automated emails are also a great idea. Let them know about the sites they should visit or the events around that area.
Whatever you do, do not let your guests forget you.
Very often tour agencies pair hotel stays with plane tickets. There’s a significant advantage of this package, especially to you- as a hotelier.
Paired packages like this are almost never canceled because guests cannot cancel plane tickets. Their unwillingness to cancel stems from the fact that they know they’re going to lose a huge chunk of money on the ticket prices anyway.
Also, people are much less likely to cancel a particular hotel in their entire package plan. This not only requires them to jump through a lot of loops but also requires a lot of planning. People mostly stick to their itinerary while traveling with these package deals.
However, you have to make sure that the commission that you’re paying to the travel agency is worth it.
OTAs love advertising “Complete Money Back” cancellation policies. However, they are the ones who keep track of how many hotel booking cancellations your property is facing. Accordingly, they push you to the back of the list if you have a lot of cancellations.
So, you need to start rethinking your cancellation policy. Yes, having a completely prepaid payment system paired with a cancellation fee might harm your hotel’s image. But having tons of cancellations will hurt your chances of appearing on the first page of an OTA even more.
Cancellation policies are made keeping the guests’ conveniences in mind. This is why most hotels give guests their entire money back. All the guests have to do is cancel before a critical period of 24 hours to check-in.
But being overly kind can damage your revenue. What if I told you a way that you can be strict without letting your guests know that?
You can take complete prepaid payment without offering a money-back option as long as you provide an attractive discount. Special discounts and offers reduce the net payment that your guest has to make. This impresses your guests at the very beginning and they don’t insist on opting for postpaid payments.
This way, even if your guests cancel- you aren’t really losing out on revenue.
Booking.com is an OTA that mostly hooks you up with postpaid bookings. This results in huge losses in the long run because people cancel rather abruptly. They can do so knowing that there are absolutely no consequences.
In such situations, you need to collect some money or the whole money upfront. A hotel booking software called StayFlexi allows you to do just that. It comes equipped with a Flex Collect system. This allows you to send the guest a payment link as soon as they book a room. The guests receive a notification that informs them that their bookings won’t be confirmed unless they make a payment.
I know this sounds like a weird suggestion but hear me out. Overbooking is not always bad.
There are events when you know that hotel booking cancellations will most certainly happen. This is true for events like company workshops or business conferences. You can be sure that 10% of the rooms booked by a company will go empty.
In such a situation, it is better to overbook. Overbooking is a practice that must only be practiced by a handful of hotels in very specific circumstances. You need hard data to back up your decisions. Thankfully a Property Management System like StayFlexi does exactly that. It collects data from all such similar events and lets you know how many people will probably cancel.
Remember, ONLY overbook if you have a large establishment. You should be able to situate the overflowing guests easily in similar establishments if such a crisis arises. Also, don’t practice this unless you are dead sure that you’ll have a considerable amount of empty rooms at hand.
But well thought out overbooking can solve the problems of predictable cancellations in an efficient way.
The reason to issue minimum stay limits is simple. Say you have a guest who is supposed to stay for a week. And on the other hand, you have 7 guests who are supposed to stay for 1 day each. If the first guest cancels, you still have one cancellation on hand. Within the next group, any number of guests can cancel. Even if you are facing a few days’ loss, the count will show that you faced 2-3 cancellations.
The thing is, OTAs care about numbers. If you face a lot of booking cancellations, all hopes of being listed on the first page are lost. To keep this number down and make sure you don’t develop a bad reputation, inform your guests that they need to stay for a while.
This suggestion is based on pure statistics. This Mirai article has a very telling title:
According to this article, the hotel booking cancellations rate on Booking.com is 39%. Guess what this rate is when it comes to hotel websites? 19%.
People are much less likely to cancel if they are making direct reservations from your hotel website. There’s an added advantage too. Guests are much more aware of your brand if they make direct bookings through your website.
If you want your hotel website to run smoothly, you should think of investing in a Property Management System like StayFlexi. PMSs aren’t just hotel booking software. They take care of every single aspect of the management, organization, and record-keeping of a hotel.
You can never weed out unexpected hotel booking cancellations completely. What you can do however is stop making some rookie mistakes. Don’t stop interacting with the guests and do watch out for your own interests. Yes, customer service is necessary but not at the cost of revenue, right? So, if you want to go for a “No Refund” cancellation policy, I say- go for it. Just make sure you sweeten the deal with instant offers and discounts. Also, if possible, get feedback from the guests who cancel so that you can know where you went wrong.
Hope these suggestions help you out in the long run. Do you think we missed out on any essential tips? Let us know in the comments below!
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