How Can Hotels Reduce Their Cancellation Rates?

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We have frequently discussed on these pages the convenience of guests being able to book their hotel rooms online. They can do it any time, anywhere, it’s automatic and it’s easy to monitor.However, it can also be a double-edged sword when it comes to cancellations. Because making reservations online is so simple and convenient, guests are encouraged to secure a stay immediately – even if they are only at the research stage – and then cancel the next minute.

Travellers are actively encouraged by the online travel agents (OTAs) to make a booking or even several because there are free cancellation policies in place to protect them, allowing them to secure multiple rooms and then choose the one with the best rate just a few days before they travel.Unfortunately for the hotels, this leads to distorted demand, non-optimal rates and dramatic levels of revenue being lost. How can hotel owners reduce the laissez-faire attitude to cancellations while keeping their guests happy?There are a few techniques that hotel owners can build into their hotel online marketing strategy that may help to reduce this issue.

1.Make some structural rule changes It’s fair to say that OTAs are big contributors to the cancellation problem; it doesn’t matter to them, as they still get their money as long as one out of perhaps five rooms is paid for. A recent study by Mirai found there was an average cancellation rate of 39 per cent on Booking.com and 25 per cent on Expedia over a four-month period, compared to just 19 per cent on a hotel’s own branded website. To combat this, you might want to consider altering your cancellation policy so that a first-night deposit is included for third party booking sites or so you only offer non-refundable rates there.  Do your research though, as some channels might have lower rates of cancellation and so won’t need as much adjustment.You may discover that your hotel does go down the search rankings on the OTAs, but you’ll have to decide if this is worth the sacrifice if it means fewer cancellations and better revenues.

2. Engage with your guests On the OTAs, your potential guests will just see you as a name in a list and so they won’t have any qualms about making a cancellation. However, if you build a relationship with them, they may be more likely to respect their booking and not want to ditch it.Ensure you are running a good remarketing campaign so that if someone is researching holidays online, your sensitively placed ad will crop up elsewhere in their browsing and make them more familiar with your name.You can also pop up on social media sites like Facebook with money-off coupons not just for your own hotel, but for other businesses you’ve partnered up with. Hopefully, the increased engagement should lead to improved loyalty and might even mean people skip the OTAs entirely in favour of booking directly.

3. Maintain the customer experience The book now, cancel later mentality is so commonplace these days that guests will assume it’s perfectly OK – and they might be angry to discover that they’re going to be charged if they abandon their booking.To assuage this, you might want to consider putting special measures in place that will placate them. For example, insurance policies that protect both you and your former guest are available for a charge and may be worth looking in to.Alternatively, incentives like coupons for a free drink with an evening meal if people book with a deposit are another option that can help to boost loyalty. Tackling the abuse of cancellation policies is an essential strategy for hotel owners who want an accurate representation of their inventory and also want to slash lost revenues.