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5 tips to reduce the cancellation rate in hotels and B&Bs


Dear WuBookers, cancellations are an inevitable phenomenon that one must learn to deal with: absolute absence of cancellations is indeed impossible, but when they occur they have major economic and practical consequences for the property. In this article we will look at how you can minimize them and what you can do to limit the damage. 

Cancellations: a widespread practice 

Why does a person decide to give up their reservation? The reasons can be various: unforeseen events, health problems, extraordinary events, or simple second thoughts. In fact, this is a more frequent occurrence when the booking window is large: those who book well in advance tend to be less motivated than those who manage to secure a room on a shorter notice.

But it is also true that, with the increasing use of OTAs, cancellation has become a widespread practice. The ease with which online agencies have made this option available ( it was once even mandatory on some portals), has meant that for many travelers it is now an essential and expected requirement of choice. Not only that, there are many users who, in planning their trip, book multiple properties with free cancellation for the same dates, and then take their time deciding which one to actually stay in, cancelling the others within the stipulated time frame at no additional cost to themselves.

And yet cancellations have costs, if not for the guest at least for the hotelier. 

Cancellation costs for the property

The fact that they are part of the equation does not mean that cancellations are without consequences for the hotelier. The first, and most obvious, is the loss of the revenue associated with the missed reservation: total, in the case of flexible cancellation conditions, partial for semi-flexible ones ( null for nonrefundable rates).

But it doesn’t end there, because at this point the costs of putting the room back on sale are triggered. Costs of an economic nature: depending on notice, you may have to put the accommodation up for bid; organizational (you need to have a dedicated asset take care of it) and time. 

In this sense, the worst case scenario is the so-called “no show booking,” which is the failure of a guest to arrive at the property without cancellation or change, simply not showing up, thus leaving the hotelier with the burden of handling the situation in no time. For the same reasons, last-minute cancellations are also quite obnoxious, so it is useful to know how to curb the phenomenon and its inconveniences. 

How to reduce reservation cancellations 

Good practices and carefully designed sales strategies can help reduce cancellation cases. Here are some tips. 

1. Find out what’s behind it: analyze the data and trends 

As we often say, there is no one-size-fits-all formula, and even the suggestions that follow must be adapted and adopted differently on a case-by-case basis. More importantly, investigating the trend of cancellations in one’s property and understanding what they are influenced by is crucial. An analysis that must be conducted on a quantitative and qualitative basis, with precise indicators such as: 

  • the season in which cancellations are most concentrated;
  • The reservation period that results in the highest number of cancellations;
  • sales channels with a higher cancellation rate; 
  • The number of cancellations “cancelled” because you were able to sell the accommodation again;
  • whether there have been, and how many, “advantageous” cancellations because of cancellation policies with penalty;
  • audiences most likely to cancel (groups, leisure, business).

Another element not to be overlooked at this stage concerns the motivations of users who decide to cancel their reservations. Whenever possible, it is advisable to try to get feedback on what prompted travelers to cancel, perhaps by sending them an e-mail with a request for feedback.

With this overview, it will be much easier to identify any weaknesses and plan next steps.    

2. Review your cancellation policies

In light of the data collected, you need to study and possibly tweak your cancellation policies, adjusting them to the season and channel. For example, you might decide to sell at flexible rates during the low or mid season, eliminating this option for busier periods. Or, to always maintain free cancellation but with increased prices over the base rate, instead offering dedicated discounts for those who book well in advance on non-refundable terms. Or again, to open to free cancellation only on certain channels, such as your site (remember, however, that for some OTAs such as Booking.com a varied pricing plan is a ranking factor).

Moreover, you could limit the number of nights for the stay with flexible rates, to counteract the damage in case of cancellation; or decrease the reservation window, shortening the period within which you can take advantage of this rate before check-in.  

In any case, remember to leave several options open, especially if your property serves more than one type of clientele: families and business travelers, for example, may not be sensitive to the same policies, and providing for more than one may help you meet the expectations of both.

Rates are also a deciding factor for potential guests (especially those who prefer convenience): check competitors’ rates, you’ll avoid being left behind on budget issues. 

3. Communicate well and early with one or more pre-stay emails  

As we have mentioned, the reasons why someone decides to cancel can be many. One of them is the hotelier’s shortcoming of clarity about the conditions of the stay and the property’s rules. A few days before arrival, be sure to send your future guests an e-mail with all this information: it will be an opportunity to highlight your strengths and any additional services. And, most importantly, to make initial contact with your guests, remind them of the reservation (reducing the risk of no-shows as much as possible) and make them feel welcome already.

In some cases, it might be useful to propose a dedicated offer to be taken advantage of during the stay: loyalty starts here!

4. Encourage direct reservations  

Direct reservations – that is, those that take place on your sales channels, especially the website – eliminate the cost of intermediation and, speaking of cancellation, can have an added advantage. In fact, those who cancel reservations also tend to do so because it is a simple process in which there is little or no relationship with the property. This is not necessarily the case when reservations are made on the corporate site, so the cancellation process may require sending an email or a phone call – nothing complex for the user, but certainly less immediate.

In addition to this indirect deterrent, personal communication with the customer makes it possible to recover any cancellations by ” raising” with impromptu offers that convince travelers to retrace their steps, confirming their stay.

So how to stimulate direct reservations? For example, with dedicated online marketing campaigns and offline partnerships to increase visibility and traffic to your site.

5. Run for cover with last-minute rates

 So far we have focused on the most effective ways to prevent cancellations. However, it is just as important to be prepared when they occur, and to take corrective action in the best way possible. How? For example, by quickly setting last-minute rates without free cancellation. By doing so, you will be able to limit the risk of unsold rooms and losses related to reservation cancellations as much as possible.

Then there is another technique, not without risk itself, and that is controlled overbooking: a practice that involves selling more rooms than are actually available and therefore requires careful analysis of flows and the preparation of alternative solutions for guests.

Measuring data, modifying and updating cancellation policies, communicating with customers and managing direct bookings are all time-consuming and precise actions, so you need the right technology to automate the steps and make operations smooth and fast. In other words, you need a good PMS for hotels, such as WuBook’s Zak, which, thanks to its integration with Booking Engine and Channel Manager allows you to control every stage of reservations, across multiple channels, and coordinate activities related to cancellations.

A guarantee for your customers and for you.

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