Yet, a lot of hotels don’t pay enough attention to it. 

Caution: These hotels would suffer just as those people who don’t give enough importance to sanitizers. 

Wondering, why am I saying this?

Wait till I explain all the whys, whats and hows. 

In this blog, I’ll talk about:

Let’s dig in right away.

What is a hotel cancellation policy?

In simple terms, a cancellation policy is a statement given by a service supplier that explains the terms and conditions for cancelled services. It involves all the clauses as well as conditions of the penalties, actions, and refunds. 

Moving on, let us see,

What are the different types of cancellation policies?

The cancellation policy depends on a wide range of factors, such as booking lead time, type of booking, and length of stay. 

Majorly, there are two major types of cancellation policies that hotels prefer:

1. The “cancel by certain date” policy

This type of cancellation policy gives your guests the option to cancel hotel reservations free of charge up until a certain date. Once this date passes, you can either charge:

• A standard cancellation fee
• Full payment for the reservation

2. The “one-night penalty” policy

This type of hotel booking requires the full payment of the reservation at the time of booking and is non-refundable. In this case, the hotel charges a cancellation fee equivalent to one night’s stay at the hotel. 

A majority of hotels adopt either of these cancellation policies. Other than this, most of the online travel agents (OTAs) have their own set of cancellation policies. Have a look at Airbnb’s different cancellation policies. 

If a booking is received from an OTA, then the cancellation policy of that particular channel is applicable. 

Similarly, if a booking is received from your own website or is a walk-in, then your hotel’s cancellation policy is applicable. 

Since every hotel or accommodation provider has a cancellation policy, does this thought ever come across your mind – Why is it even important to have a cancellation policy?

Well, let me tell you:

What is the importance of the cancellation policy?

Cancellations are inevitable in our industry. Ours is a very competitive industry, and it’s the cancellation policy that will help your business to survive. 

Here are the reasons why your property NEEDs a cancellation policy. 

1. Provides Accountability 

It is an assured way to protect yourself from lost business and revenue. 

As discussed earlier, a standard cancellation policy should have a fee or penalty and enough time built into the cancellation notice so you can re-book the spot.

It will hold your customers accountable if they do need to cancel their reservation. 

When a policy is shared with the customer, then they are well aware of what can happen in case they decide to cancel.

2. Guarantees Commitment 

When your guests agree to a cancellation policy, then it shows a commitment to the booking on the part of the customer. 

If your guest books his stay and knows that there is a cancellation fee, then he may not cancel the reservation. 

3. Shows Professionalism

Many hotels have this mindset, that having a cancellation policy will get off their guests. 

However, that’s not the case. It’s actually OPPOSITE!

Your guests feel that having clear policies and details about booking depicts professionalism as a business.

Owing to these reasons, cancellation policy is a must!

Now that you know its importance, let me guide you on,

How to create an effective cancellation policy?

You need to have the right cancellation policy in place. Planning the best cancellation policy takes a lot of groundwork. 

I’ve have broken down that into these simple steps:

Step 1: Understand your customer’s booking pattern

First thing first, you have to gather and analyze your data. 

Unless you know who your major targeted audience is and how they prefer to book: you won’t be able to estimate the reason behind their cancellation.

So first, you have to segment data by the bookings sources and type of guests. 

Once that is done, you can begin to identify consumer trends for each segment.

For example, customers from the OTAs tend to have a higher cancellation rate than those who perform their booking directly with the hotel.

Reason being, OTAs offer a practical platform to compare options and shop around.

When your guests find a hotel they like within their price range, they tend to book it right away and cancel later if they find a better (or sometimes cheaper) option.

On the flip side, there are fewer chances that your direct customers will cancel their reservation later. 

Besides, not all of your guests will dedicate that much time and effort towards their search, but some definitely do.

Step 2: Derive the occurrence and time

From your hotel’s data, find out the particular day or season when you have received maximum cancellations. 

For instance, generally on Tuesdays, you must be receiving the highest cancellation because of any reason. 

If you can pinpoint which day of the week, then you can increase your overbooking limits accordingly and make the most of the increased demand for that specific day.

Similarly, if you can identify that a certain OTA has higher cancellation rates than others, you can rethink on your OTA connections. 

When you know that X percentage of those reservations will cancel at the last minute, you can increase overbooking or raise your rates based on the booking window.

Step 3: Consider group bookings

When a 25-room group calls to cancel their reservations, you have three options:

1. Either you panic 
2. Or expect a miracle to happen
3. Or have a specific cancellation policy for the group bookings. 

Obviously, the last option sounds sensible to me.

To save yourself from such a scenario, you can have a solid legal contract with all the required policies and clauses. 

Whether your customer is looking to book only ten rooms (typical industry minimum for a group) or book your entire inventory, the basic principle SHOULD remain the same.

It has to be profitable even when replacement is involved and you have to be protected against cancellations.

In case of group bookings, the group members either check-in together as a group or they might arrive individually. 

For those individual-arrival groups, you can specify in the contract the minimum room-night number they have to guarantee. 

You should also consider your group contract should protect you against overbooking by the group. 

If they originally wanted ten rooms and you offered them a special discounted rate based on a ten-room piece of business, they shouldn’t end up booking twenty rooms at that special rate.

IMPORTANT: Ensure that such discounted or special rates are not publicly available on the internet. 

Step 4:  Accounting for special days and events

Each and every city has special events happening throughout the year that create a peak in regular demand cycles. 

Be it religious and national holidays, conferences, festivals, entertainment and arts events, enormous sports events such as the Super Bowl or Jonas Brothers’ Music concert. 

If such an event is approaching, then I recommend you to have less flexibility with cancellations and overbooking. 

During events, festivals and long weekends, some hotels get away with no-cancellation policies 

However, you have to be careful not to overprotect your rooms with super strict cancellation policies. 

One good example of such a special event is the 4th of July (American Independence Day- National holiday). 

If 4th July falls on a Wednesday, then there are fewer chances of any hike in bookings. 

On the contrary, if it falls on Friday or Thursday, it will definitely increase demand for hotels. 

So, these are different factors that you have to consider while creating cancellation policies for your hotel.

Once you have created the right set of hotel cancellation policy, 75% of your work is done. 

Now you have to make your guests aware of your policy, and for that, you have to,

Where to highlight your cancellation policies?

Just similar to how your guests check the reviews first and then book a hotel with you similarly they are likely to check the cancellation policies before booking the stay with your hotel.

So, it is your duty to highlight your cancellation policies on different channels from where you are getting bookings.

And believe me, it is very simple: 

1. Share it on the social media handles
2. Highlight it on your website clearly
3. Mention them on OTAs and basically everywhere your hotel is listed

How to manage your cancellation policies? 

No other industry is as dynamic as ours. 

Every now and then, there can be several things, incidents, and trends; which hotels have to keep a tab into. 

For instance: The ongoing pandemic – COVID 19. 

It has hugely affected the travel and hospitality sector. In such a scenario, you cannot be harsh and stay adamant to your policies. 

In this case, you have to be kind and generous. 

You should entertain all the cancellation/amendments requests. In case, your guests have paid any advance, try to refund the amount or give them credit in return. 

Basically, you have to UPDATE your cancellation policies. 

So, the point is creating cancellation policy is not a one-time job. You have to revamp them constantly based on such unprecedented situations, during the time of festival, events or long weekends, and in general as well.

Not to mention, when we talk about all reservation, cancellation, and everything between, a comprehensive hotel software is a must. And if you want to get perfect solution for your hotel, here’s a guide for you.

Conclusion

So, this was all about cancellation policies. 

By far, you have realized that cancellation policy is quintessential. 

I hope that this blog helps you create and manage your cancellation policy in the best way. 

In case you want to have more information on cancellation policies, do let us know in the comment section.

The post How to Set Up Effective Hotel Cancellation Policy? appeared first on eZee Absolute.

However, even though reluctantly, but you need to face an undeniable fact that the higher the number of bookings you get, the higher will be your cancellations and no-shows. 

Regardless of whatever the reason behind those no-shows and cancellations, it hugely impacts your revenue with the loss of booking opportunities.

Major reasons behind these no-shows or cancellations can be, an obvious reason from the guest’s end; OR the guest got a better deal at any other hotel.

So either you bear this revenue loss or find some other way to retain it. But most of the time, it is tough to replace such last-minute cancellations or no-shows with another reservation.

Impact of Last-Minute Cancellations on Hotels

While many think that dealing with no-shows and cancellations aren’t a big deal for hotels, the story is completely different.

This is how it impacts hotels:

• It leaves you with unsold rooms and a loss of income. Over and above, even if you manage to sell the room again, it would probably be at a lower rate.
• It increases stress and work. You keep the room ready for your guests and when there’s a no show, it leaves you with very little room for manoeuvre. Meaning, you need to start from scratch again.

Now, this might not seem like a problem for hotels that are profitable throughout the year. But for hotels that are not in urban areas or the ones that depend on a certain type of guests, it is the worst nightmare; dealing with such situations that directly affect the hotel’s profit margins, is a major challenge.

How to Reduce Last-Minute Booking Cancellations and No-Shows

1. Develop a cancellation policy

A hotel without a robust cancellation policy is prone to various repercussions like revenue loss. It is really important that hoteliers set certain protocols for guests to call their booking off. 

However, devising a cancellation policy lies entirely up to you and the OTA you mostly deal with. While many hotels have their own policy, OTAs apply their own policies through non-refundable bookings.

Try working with a revenue management expert and come up with a doable cancellation policy.

2. Collect deposit on a confirmed booking

Well, this is a no-brainer and the most frequently used means to reduce last-minute booking cancellations by hotels these days. While your guest is making the booking with you, you can simply ask for a minimal deposit amount (mostly it’s a set percentage of the room tariff) before confirming the booking.

Since he’s already paid some amount, the guest will think twice before cancelling the booking or booking with any other hotel.

3. Offer discounts to get confirmed bookings

This is also a widely used way to get more confirmed bookings and eventually reducing your last-minute cancellations and no-shows.

You can ask your guest to give confirmation for his arrival and offer him a discount once he does that. Definitely, you may need to take part in the payment, or complete payment to confirm his booking.

Further, offer attractive discounts or deals on confirmed bookings by promoting them on your website using widgets and even on your social media pages to attract more confirmed bookings.

4. Take complete payment at the time of booking

Several OTAs these days give an option of ‘Pay at Hotel’ while the guest is making the booking. You may also be receiving booking inquiries on the phone which have you hold your inventory till confirmed.

Here, you can send an online payment link to your guest, using which they can make the payment of any amount at their convenience; thereby confirming their bookings in one shot. A similar way can be used to collect deposit amounts from the guests.

Therein, regardless of where the booking is made from, the online payment link can make your payment collection easier and subsequently reduce last-minute booking cancellations and no-shows.

5. Mandate the credit card details to go ahead with the booking

Many a time, companies ask for credit card details to confirm the authenticity and genuineness of the purchase. BUT, when it comes to payments, people tend to avoid giving out important information like credit card details. 

In this case, many of your guests will fill in invalid credit card details just to go ahead with the booking. The only thing you can do here is, wait for the guest to arrive and collect the payment.

But, that guest might turn into a no-show or cancel his booking at the last minute, as a result, you’ll lose a booking opportunity and even revenue. Instead, you can carry out a proper verification of the credit card details, in order to justify the authenticity of the guest and hence the booking.

6. Incorporate length of stay restrictions

Another thing you as a concerned hotelier can do is restrict your guests’ stay length to reduce last-minute booking cancellations and no-shows.

Why?

Because people who book longer stays are less likely to cancel.

Further, before you incorporate this restriction, make sure you do an in-depth compset analysis around it. Try to determine what are your competitors’ policies and are they working fine. 

Note: You can always seek help from revenue management experts to help you curate such strategies and boost your revenue.

7. Send reminders about bookings

One of the best things you can do to mitigate the chances of no-shows is by sending timely reminders to your guests. 

Moreover, do not just keep it about a reminder,  also educate them on cancellation policy and deadlines.

This process of communicating can be automated with the help of a hotel property management system (PMS). Every time you receive a booking you capture guest details and the PMS can use that information to send the right messages at the right time. 

Over and above, this approach of communication also works in building guest experience and boosting your overall revenue. 

8. Implement Overbooking Strategy

Overbooking is often a necessary evil. It can make or break a hotel, depending on the strategy.

The idea behind this is to take more reservations than the available number of rooms. So that if a guest fails to show up, you can still offer the room to someone.

However, despite being an effective strategy, it has severe repercussions. Therefore, you must ensure that this strategy is only carried out by revenue management experts to minimise the risk of miscalculations.

9. Use guest data to learn and adapt your process

Now, one more important thing that many hotels overlook is utilising data when it comes to mitigating last-minute hotel cancellations.

What I mean by this is that hotels must look at their past data and try to understand the reasons guests have cancelled their bookings.

Further, if you have guests’ data that doesn’t have the complete information, you can reach out to them and identify the reason behind the last-minute cancellation and no-shows.

The often you practice this and the better insights you get, the better you can curate your strategies.

Word to The Wise: Don’t Lose Guest Centricity

Apart from all the tips that I have mentioned above, there’s one more thing I would like to shed light on. That is:

Don’t fret when there’s a cancellation or a no show. Before you jump to a conclusion, make sure you reach out to the guest and ask them what’s the matter.

Why am I saying this? Because there are times when guests might face unforeseen events. In that time, you have to be empathetic if you want your guests to trust you and book with you again.

Let me tell you about an incident that my colleague shared with me.

In her own words:

My family was supposed to go on a vacation to Delhi, Nainital, Dehradun, Corbet, and Mussoorie. All our hotel bookings were done.

But unfortunately, every one of us got infected with COVID-19 and we had to call off our vacation.

So, we requested our travel agent to cancel our reservations and get as much refund as possible. However, he said he cannot guarantee how much we will get.

But soon we got a call from our agent and he said the hotels of all the 5 destinations have given us a full refund (only a tiny amount was deducted).

Trust me, it was a huge relief for us. The hotels won our hearts. Even amid these tough times, when the industry is at a loss, they are still sensitive towards their guests.

In future whenever we go to these places, we will surely book the same hotels.

When she told me about this incident, even I felt really good. I asked her the names of the hotels because even I am going to pick them over other hotels.

And I think this is what a brand means — Customer/Guest always comes first!

How can technology help?

Now that you have learned about all the tactics, let me help you understand how can technology be your side-kick in this whole shebang.

Hotels MUST invest in a comprehensive property management system (PMS). When I say a Hotel PMS, I mean the ones based on cloud and streamlines all your operations.

Moreover, before you go ahead and get a PMS for your hotel, make sure the system is equipped with the following:

• It should come with an ‘ePayments’ feature that helps in collecting payments from guests conveniently. With such a feature, you can send online payment links to your guests from the system.
• The system should have a credit card verification feature to verify the credit card details (mostly on the same day of booking).
• The system should be PCI DSS Certified. Meaning, there’s a surety that the credit card details of the guests are secure in the system with no chances of a data leak.

Furthermore, if you want to know how to choose the right software for your hotel, we have a detailed resource.

FAQs

The post 9 Proven Tips to Reduce Last-Minute Booking Cancellations and No-Shows appeared first on eZee Absolute.