Advice: How to minimize cancellations and maximize occupancy

The following scenario—or should I say headache—is likely familiar to anyone reading this article. You’re heading into the weekend feeling confident about the sold-out status of your hotel. Then, 25 hours before check-in, one hour before the penalty kicks in, cancellations start filling your inbox and it’s a mad dash to try to increase occupancy at the last minute.

Is there a silver bullet solution to this issue? Unfortunately not. But don’t despair. We crunched some numbers, took a look at traveler behavior patterns, and came up with the following recommendations to help set a distribution strategy that minimizes the likelihood of cancellations.

OK, so the ideal scenario is to prevent a cancellation from ever happening in the first place. To do that, consider implementing a mix of the following low-cancellation channels, which make up a robust 75 percent of our business at Expedia.   

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Hotel Optimization Part 3 | January 27, 2021

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1.    Non-refundable bookings:
With exactly zero percent effective cancellation rate, these are clearly more appealing to the hotelier than to the traveler. However, travelers have certain events, like a family reunion or graduation, where their attendance is all but guaranteed, so if the rate is competitive they’re likely to lock it in. Even if someone does cancel, you keep the money and can re-sell the room.

2.    Packages:
Some customers prefer purchasing travel through vacation packages, which combine multiple products like air, car and hotel. In fact, last year we sold nearly three million packages worldwide. For hoteliers, packages are a great way to build a strong customer base without eroding retail rates. When these products are bundled, customers save money without seeing where the savings is occurring. Here are the facts: the average customers who purchase packages book their stay more than two times further out than customers who purchase hotel only, they stay on average two times longer and their bookings feature .25 cancellation rate of agency. To highlight the importance of packages, we now have more placements than ever on our sites to feature them—like on our flight search results banners, and responsive and mobile web pages —more visibility means more bookings for you. 

3.    Opaque:
This unique targeted model allows hotels to generate incremental and guaranteed (read: zero percent effective cancellation rate) business without compromising the brand’s integrity. Opaque is a great way to target your need periods, like specific weekly stay patterns or seasonal softness and especially last minute, and to build a valuable non-refundable customer base. Again, if someone books and cancels, you can resell the room.

4.    Merchant: 
With the merchant model, the traveler pays for the room upfront on our site at the time of booking. This results in half the cancellation rate of an agency booking. 

In addition to this distribution mix, here are some general observations to keep in mind:

-    Go for global
Use promotions to reach a targeted international audience. While international guests aren’t any less likely to cancel a booking than a domestic guest, they do tend to cancel much further out—almost a month before their stay, whereas domestic travelers typically cancel about four days ahead of time. This gives you more time to recoup your losses and get a new booking. 

-    Keep it competitive
If your competitor is much less expensive for a similar product, customers may be tempted to cancel and rebook. To keep an eye on that you now have the ability through Expedia PartnerCentral’s portal to create your own competitive set. Choose at least five competitive hotels in your market, and then track your performance against those hotels and take action to adjust rates to stay competitive.     

-    More options, more bookings
We’ve found over and over that providing consumers with options increases the ultimate conversion of lookers to bookers. The math is simple—more reservations mean you’re less affected by cancellation drop-off. To offer travelers additional choice, Expedia implemented Expedia Traveler Preference (ETP), a program that allows travelers to pay Expedia now or pay the hotel later for their booking. Hotel partners typically experience the following benefits when upgrading to the ETP model: Increased conversion by offering pay now or later options; access to package customers and corporate travelers through Egencia; global distribution across 7,500 affiliates; and lower cancellation rates than the market average. Our latest numbers show a global NRN uplift of eleven percent for properties that offer this choice.

Last but not least, despite best efforts, some last minute cancellations are inevitable. What to do? Make it up on mobile- more than 50 percent of mobile bookings are completed within two days of the stay. So create an attractive, last minute mobile rate. On Expedia, we launched Sell Tonight earlier this year. This feature allows you to quickly and easily load rates and be immediately available to sell last-minute rooms across all our websites and gives you a sort boost on our Expedia mobile app and site.

Adam Anderson is managing director of Industry Relations at Expedia.