Your hotel’s guest cancellation policy is one of the unsung weapons in winning over more direct bookings. This is a crucial tool in helping you to effectively and efficiently manage your room inventory but, finding the right balance between a suitable window for cancellation and being overly tight with that window or having too strict a policy can put guests off booking.
In some cases, the cancellation policy can be a deciding factor for guests choosing between two hotels of a similar price and amenities. In effect, this means those hotels that fail to strike the right balance could easily lose direct bookings to competitors.
This is something of a hot topic in the hotel industry currently as a number of the bigger chain hotel groups have recently taken moves to tighten up their cancellation rules. In the USA in particular, larger hotel brands have moved to invoke tighter policies with stricter terms for guest cancellation in recent months. The fuel behind this change in policy is the hope that less lenient cancellation terms will allow the accommodation to leverage better control over guestroom inventory.
Hotel brands including Marriot, Hilton, InterContinental and Hyatt have all changed their cancellation policies this year. The most common change has been to move from the standard 24-hour window to a 48-hour window.
Hilton says it made the move initially because of a huge increase in last minute cancellations. With last minute cancellations, especially at higher volumes, managing room inventory becomes more difficult and the costs get passed along the chain, until guests end up paying a higher price. The hotel group says requiring guests to notify them of a change in plans earlier has cost-saving benefits. In some areas, it is looking to increase the cancellation policy even further, to 72-hours.
Marriot took similar steps in June, and increased its cancellation policy to 48-hours at its hotels in the Americas and says consumer response has been largely positive.
In New York, cancellations average 30-40% in the height of the summer months, with these last minute changes having an impact on revenue, occupancy and other bookings. It’s a similar story elsewhere, but, independent hotel brands disagree with the moves by their larger rivals and, say that they prefer to maintain a more flexible policy.
Industry sources say that independent accommodation providers are more inclined to build flexibility into their cancellation policies. Some brands say that they take a property-by-property approach rather than having a blanket cancellation policy in place. This allows each accommodation to better serve the needs of its guests.
Some independent hotel managers say that they don’t want to follow in the footsteps of bigger brands and insist guests cancel 48- or 72-hours before their stay to avoid having to pay the cost of the room because they don’t want to upset guests or give them reasons to go elsewhere.
While some recognize that more stringent cancellation policies allow for better room management and business forecasting, guest communication is key. Each hotel’s policy needs to reflect its business model and the reasons guests choose that property over rivals. In some instances, it’s more beneficial to speak to the client and ascertain the reason for cancellation and move the booking if possible to retain that business.