Industry, Product  |  20 July 2021 |  Tom Brown

How to minimize hotel booking cancelations

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Picture the scene: it’s your managers' meeting, and you’re looking at occupancy for the coming month. It’s very encouraging, all things considered, and it feels like guests are truly ready to return. A couple of days later, the government announce a rise in Covid cases and a change in travel rules. Suddenly, your platform is flooded with cancellations, leaving you with little time resell the now-vacant rooms. 

Unfortunately, this is a story many hoteliers are all too familiar with. Such is the uncertainty surrounding travel restrictions, many guests are booking two holidays for the same period and only cancelling one of them with extremely late notice. Whichever side you’re on, there’s danger: foreign bookings are at risk if rules tighten, whereas domestic bookings could suffer if travel starts to open up faster than expected. 

So how can you avoid being the booking that’s canceled? Of course, your cancelation policy plays a huge part here, but there are also things you can do in order to make your booking more ‘sticky’. Here are a few of them. 

 

Consider your cancelation policy 

Sometimes a law change makes it impossible for guests to travel to your location and fulfill their booking with you. Your cancellation policy, therefore, has never been more important – for you as well as your guests. You have to weigh up the risk of losing revenue against the danger of losing bookings in the first instance. Too strict a cancelation policy (i.e. no refunds) is likely to deter many guests from booking a stay with you at all. Too generous a policy and you could be left with no revenue and rooms to sell with only 24 hours' notice. 

Perhaps your best recourse if a guest requests to cancel is to persuade them to transfer their dates or refund them with a voucher for their stay. They’ve already chosen your property as somewhere they’d like to visit and they’re likely to be disappointed if they can’t stay with you. Offering them a voucher and the opportunity to rebook takes advantage of that disappointment. 

Rodamón Hostels is a boutique hostel chain with properties in five countries across Europe and Africa. They’ve been asking customers to rebook rather than cancel, with increasing success. Albert Polo Aibar, General Manager at Rodamón Hostels: 

“We contacted customers with an email campaign for which we created a special video that basically said, ‘Hey guys, take into consideration that it's a bad situation for us too – we will come back, so please just change your dates.’ That was the aim of the first email, and they can use that voucher until the end of 2021, so there’s plenty of time. 

“Then we tried a second email and then a third, and if they still wanted their money back, we gave it to them. At the beginning, a lot of people were asking for their money back because nobody knew what was going to happen, when we'd be able to travel again. Now, everybody's more aware of the situation and almost everybody's willing to take that voucher.” 

At the start of the pandemic, Airbnb offered refunds for the vast majority of bookings affected by the pandemic, perhaps fearful of eroding guest loyalty. This move, while popular with travelers, was largely at the expense of their hosts. In May of this year, however, the company changed its refund policy, claiming that any Covid-related cancellations were no longer unforeseen. Responsibility now lies in the hands of individual hosts and guests need to be much more wary when booking. 

 

Focus on upselling and cross-selling 

Upselling isn’t just a means of securing a little more vital revenue – it’s also a good way of ensuring your guest doesn’t cancel their booking with you. Let’s say a guest has booked your hotel and another hotel for the same period. It’s a week before arrival and both options are still on the table for them. Both options are amazing, so how do they decide? 

That decision is much more likely to go in your favor if they’ve also booked a spa package with you, a dinner at your restaurant, and a cycling tour with one of your partners. It means they’ll be much more invested, both psychologically and financially, in your property. Not only might it be a hassle for the guest to cancel all of these activities, it will also create more disappointment than cancelling just a single room reservation – so they won’t want to do it. Use tailored hotel pre-arrival emails to upsell; waiting until guests arrive to push your other amenities may well be too late. 

 

Drive direct bookings 

You shouldn’t think of your cancelation rate as a single percentage. Booking channel origin makes a huge amount of difference to whether a guest cancels or not, and the data consistently comes out in favor of direct bookings over OTAs. One study found that in 2018, Booking Group bookings had 49.8% of its on-the-books revenue canceled before arrival. Direct website bookings only lost 18.2% of revenue due to cancelations, significantly lower than Booking Group and the industry average of 39.6%. 

There are plenty of methods to encourage direct bookings. Obviously, you’ll need a modern booking engine that’s easy to use for guests and that’s great for conversions (yes, we recommend Mews Booking Engine). You’ll also need competitive rates to compete with the OTAs, potentially with a special offer thrown in too. A free drink at the bar is very little cost for you, but can be enough to persuade a guest to book direct.  

Also, make sure you’re seen. Improve your meta data to boost your SEO ranking, and take advantage of the new Google Hotel Search updates. Hotel loyalty programs are also a good way of ensuring return guests book direct, but it takes a little more effort to think through and set up. 

 

Experiment with partial pre-paid rates 

Demanding 100% payment up front can cause people to look elsewhere when booking. Try taking a deposit or payment by installments; our friends at Profitroom suggest taking a payment of 30% at the time of booking. You could collect the rest upon check-in or even continue to stagger it, for example taking another 20% two weeks before check-in, and the final 50% upon arrival. If you do test this approach, be sure to track the data and assess how it affects your cancelation rate. 

 

Offer something unique 

What sets your property apart? What can a guest experience at your property that they wouldn’t find with their other booking? This is where your brand comes into play. Your angle depends on what type of property you are: if you’re a stylish boutique hotel, highlight your uniquely designed rooms and exciting restaurant menu. If you’re less flashy and part of a larger chain, emphasize the expertise of your service and the diversity of your amenities. 

Build your USP into your guest communications. Booking confirmation emails, for example, don’t have to be dry and factual. Use them to really heighten a guest’s excitement and let them know that they made the right choice in picking you. The more emotionally invested they are in your property, the less likely they are to cancel. 

 

How to deal with cancelations 

Even before Covid, every hotel had to deal with its fair share of cancelations. One way to mitigate potential losses is through an overbooking strategy. Although understandably scary for some hoteliers who shudder at the thought of having to turn away a booked guest because there’s no room, for many properties it makes sense. You can adjust your strategy depending on the time of year: maybe during the slower months you don’t overbook at all, but during peak summer months and during big events you have a more aggressive overbooking strategy. In the event of a true overbooking, be sure to have a contingency plan, like a special, reciprocal partnership with a nearby hotel. 

If a guest does cancel a booking, just follow your cancelation policy – that’s exactly what it’s there for. Rather than a straight refund, get in touch with them to see if they’d like to change their dates or take a voucher. And make sure you’re empathetic and friendly when you talk to them; even though you’re frustrated, kindness goes a long way and will encourage a guest to book again with you in the future.

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Tom Brown
20 July 2021