Study: Cancellation rate at 40% as OTAs push free change policy

Nearly 40 percent of on-the-books revenue is canceled before arrival, according to a study conducted by D-Edge Hospitality Solutions, the Accor-owned hotel technology group that includes the AvailPro and FastBooking platforms. The company analyzed the online distribution performance of more than 200 different channels for 680 properties in Europe between 2014 and 2018.

The average cancelation rate in 2014 was 32.9 percent and increased to 39.6 percent in 2018. It reached a high of 41.3 percent in 2017.

Booking Holdings (owner of had the highest cancellation rate of the online travel agencies, coming in at 50 percent in 2018 and at an increase of 6.4 percent over four years. Expedia Group ( and Expedia) was markedly lower at 26.1 percent in 2018 but still up 6 percent since 2014.

Cancellations from direct bookings on a property’s website were the lowest at 18.2 percent, only increasing 2.8 percent over the four-year period. 

Reservations with lead times longer than 60 days were 65 percent more likely to be cancelled. 

The reports states that guests have become accustomed to free cancellation policies that have been made popular (and encouraged) mainly by and channels and apps such as Tingo or Service, which are designed to cancel and rebook hotel rooms at each rate drop.

This customer behavior hinders accurate forecasting, eventually resulting in non-optimized occupancy, the report reads. "Other factors come into play with cancellation rate increased but we believe none are as pervasive as the increased behavior and marketing of 'free cancellations,' according to D-Edge.

Hotels are urged to favor nonrefundable rates with OTAs or ensure their channel-management tools can feed back canceled bookings in real-time. “Favoring not-refundable rates over flexible ones or implementing more rigid cancellation policies can also help to limit the issue,” the report advised.

Online Distribution

The study also revealed that online distribution grew 46.7 percent between 2014 and 2018. About 71 percent of online distribution for independent hotels was generated by online travel agencies in 2018. Booking Holdings held 68 percent of the OTA market share in 2018. 

Website direct remains the second most important sales channel with 20.9 percent of market share. While the second best channel, website direct has lost 6.3 percent in the past five years. 

Market Share

The market share distribution channels have remained relatively stable but trends are showing that both OTAs (especially Booking Holdings’ distribution channels) and wholesalers grew, while more channels with lower costs per client acquisition (such as direct) lost share. In 2018, eventually, this negative trend started to reverse, with direct regaining 1.6 percentage points over the previous year. The trend is somehow reassuring, even though the results are lower than what they were back in 2014, with a 23 percent decrease in market share, the report states.

The Booking Holdings group leads the market share of distribution channels in Europe at 48.3 percent and direct is at 20.9 percent. 

The average length of stay diminished by 12 percent but after four years of decline, the industry experienced improvement in both length of stay and reservation value in 2018. 

In the current market situation, hotels seem more focused on channel optimization, as is evident in 2018's distribution mix, according to the report. While almost all channels increased in revenue over the period analyzed, website direct had an important shift in 2018 where it regained market share for the first time in five years.

“Even though there is undeniable value in focusing on more profitable channels, we recommend reviewing the market share at least quarterly in order to avoid some channel(s) cannibalizing the others and keeping a healthy and profitable distribution mix,” the report reads.