When it comes to running hotels, it's never business as usual. It may be because spontaneity is a big part of traveling. Perhaps it's the economic uncertainty that wreaks havoc on your schedule, or is it a generation that believes in the "Now" and expects a top of the line service for every buck. Whatever the case, the customer continues to be right. And, if the customer feels like canceling his or her stay at the very last moment, who are you to ask about their reasons? Yours is to smile, nod and thank them.

At least that's how your bookers see it.

Cancellations and no-shows have become a regular practice in today's hospitality world, and at the hotelier's expense. They cause a huge revenue loss, apart from causing huge problems for relationship management, not to mention staff scheduling and financial viability. Though eliminating them might be impossible, there are a couple of strategies that can help you prevent casual customers from putting your business in dire jeopardy.

The Importance of Clear Cancellation Policies

Before we introduce the first technique, let's determine the difference between cancellations and no-shows. Most customers cancel their rooms via the same channel they've previously used to book them. If there's no easy and quick way to do that, they will decide to skip the step and never to show up.

This leads us to the hassle-free user experience that must be provided on all channels. Effortless cancellation options thus prevent a large number of no-shows, but they still don't solve the problem of empty rooms. To kill two birds with the same stone, hoteliers must have a clear cancellation policy.

A cancellation policy is part of the booking contract and therefore makes the customer legally liable. Of course, this applies only to policies that are fully transparent, and that customers can read in detail before booking and officially opt-in through Terms and Conditions. That way, they are legally binding.

Pro Tip

Think about the eventual emergencies that would release guests who cancel from legal responsibilities. Obviously, these are illness and death in the family, but should also include jury service, any form of emergency, canceled plane flights, the departure date being postponed, and redundancy. Also, establish guidelines for handling them on a case-by-case basis.

The Deposit and Cancellation Fee Conundrum

These policies are good only if they establish a clear cancellation time limit and fee. Most hotels allow guests to cancel their rooms up until 24 hours before arrival; some are less flexible and reduce that time limit to 48 or 72 hours, or to one week in peak seasons. These are all equally effective.

Cancellation fees, however, can be somewhat problematic, and the same goes for deposits. As both of them can drive potential guest away, many hoteliers decide to avoid them. The rule of thumb is to use fees in combination with time limits so that the penalty applies only if the policy is breached.

Cancellation insurance is a great alternative for this - upon booking, a guest is required to make a premium payment that covers the penalty he or she would be obliged to pay in the event of cancellation. When the guest arrives at the hotel, the cancellation insurance is returned back to him.

Pro Tip

Another widely used practice is giving discounts or special treats to guests who confirm their bookings in due time. These can be anything from a coupon for a lunch at a partner restaurant or a voucher for a free day at your hotels' spa. At the same time, this is a great marketing hack to attract new guests.

Managing Cancellations with Hotel Software

Guest relationship management tools are used in all guest-facing industries, and many of them are now designed especially with hoteliers in mind. These are your cloud management software systems that include both hotel booking engine features and hotel check-in software functionalities.

How do they help? cloud-based hotel pms for hoteliers can establish a sturdy confirmation system that sends out reminders to future guests a couple of days before the cancellation deadline. Instead of canceling the room via website or phone, guests can automatically respond to this email and confirm their arrival.

But this software can also serve as a centralized tracking system that unifies all of your channels, in case the customer prefers to use website, email or social media for booking and cancellation. That way, you'll have it all in one place, from where you can control your schedule, payments, and policies.

Pro Tip

If you integrate this system with a hotel booking engine, then you can also use it to collect customer data. Whether your booking system requires a deposit or not, you can still ask your guests to disclose their personal information, and store it in CRM for future retargeting, follow-ups and retention tactics.

Clear cancellation policies, smart fee decisions, and PMS technology cannot eradicate cancellations and no-shows, but what they can do with utmost efficiency is to make a balance between what's fair to your guests and what's profitable to your business. That way, you can smile, nod and thank your customers without ever having to fear that your hospitality and politeness will be taken as leniency.

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