Tackling the Challenge of Hotel Booking Cancellations
Tackling the Challenge of
Hotel Booking Cancellations
The hospitality is a very competitive industry and in order to stay competitive, hotels usually offer an attractive free 24-hour cancellation as their general policy, however, these policies are a double edged sword, as they are equally hurting the very same industry.
According to a research released by Dohp some 19% of hotels that are booked online are canceled before the guest arrives at the hotel. By the day of the week, Tuesday shows the least amount of cancellations at an average of 14.3 per hotel, and Friday the most with an average of 20.1 canceled rooms per hotel. Additionally, almost a third (31%) of bookings via Dohop were found to be made via a mobile device.
More recently, Mirai chose 40 of their channels and analyzed the cancellations (% on room nights) between the months of January-April 2016, of their three most important online channels: Booking.com, Expedia and the website itself. The results are truly an eye opener.
According to their results, the Booking.com cancellations are 104% more than the direct channel ones, while they are 31% up in the case of Expedia. The relation between Booking.com and Expedia is a whopping +56% in favor of the former.
THE CAUSE OF HIGH CANCELLATION RATES
In general, hotels apply the same cancellation restrictions on all hotel booking channels, with a few minor exceptions, so why are we seeking such high cancellation rates specifically from Booking.com?
A lot of it has to do with the culture of the channel. For example, Booking.com increasingly pressures visitors to book even if they’re unsure if they’re going to travel at all. We’ve all seen the “book now or you’ll lose the room” prompt show up when you’re simply comparing prices, or planning your trip. This generally leads to unqualified booked rooms, and ultimately a higher cancellation rate.
Expedia, on the other hand, charges clients directly ahead of time. It has been psychologically proven that if customers pay in advance, they’re far less likely to cancel their plans or request a refund.
Bjorn Hanson, a clinical professor of hospitality and tourism at New York University, agreed that the proliferation of third-party booking tools had made hotels’ jobs more complicated. “It’s a bit of a circular issue because the behavior makes it more of a challenge, which causes there to be more volatility in room rates,” he shared with NYTimes.
As a result, hotels have to contend with a rising number of cancellations, often within days or even hours of when a guest is scheduled to arrive. To fill those rooms, they use third-party sites or apps, sometimes at considerable expense.
CANCELLATIONS IMPACTING THE BOTTOM LINE
Every day in the U.S. alone, more than 221,000 hotel rooms are canceled and paid for, resulting in a market which sees $8.6 billion wasted annually on nonrefundable hotel room cancellations.
In an attempt to gain better control over their inventory and pricing, back in 2015 hotels started to tighten up their transient cancellation policies. Some of the major hotel companies began to extend the time required by guests to provide notice that they will not be arriving and avoid being charged any cancellation fees. Prior to that, hotel companies introduced discounted non-refundable room rates similar to those in the airline industry.
Marriott International, which recently acquired Starwood Hotels and Resorts recently announced that they would be putting into effect a 48-hour cancellation policy for new bookings within the Marriott and Starwood brand families in the United States, Canada, the Caribbean and Latin America. Hilton Worldwide is imposing a similar cancellation policy in the United States and Canada for new bookings as of the end of this month.
BATTLING CANCELATION CHALLENGES
One of the methods that are starting to get more popular with hotels towards battling hotel cancellations is by communicating with guests prior to their arrival to the hotel. Reaching out to hotel guests prior to their arrival can be as simple as asking if they have a specific room preference, or if they need assistance getting to the hotel from the airport. Proactively communicating with guests can significantly reduce cancellation rates by making the guest feel more important and welcomed.
It’s important to note that 80% of guests expect a hotel to communicate with them prior to their visit.
Viggo provides hotels with the ability to communicate with guest immediately after their reservation.
Usually, OTAs don’t provide the hotels with any information about the guest, however, it does always send an email confirmation to them. This email can encourage the guests to download a dedicated app, such as Viggo’s Smart Stay app which opens a direct line of communication between the guest and the hotel.