Guests that cancel & re-book hotel reservations can wreak havoc on your demand forecast
Blog Soundbites:
- Thousands of people cancel & re-book reservations every day
- This practice has many revenue implications for today’s hotels
- IDeaS’ exclusive technology helps hotels balance price, cancellations & re-bookings
Why do guests cancel and re-book hotel reservations? Well, that’s easy: Because they can, and because it makes economic sense—people don’t want to spend more money than they have to. In the eye of the traveler, freeing up money on a hotel stay frees up money to spend on other enjoyable aspects of a trip.
And because guests can do it, they do it. Thousands of people cancel and re-book online reservations every single day. In fact, there is automated technology specifically designed to alert travelers to new price reductions. For many of today’s travelers, this tempting practice has not only become a no-brainer, but advancements in technology make it pretty damn easy for them to do it.
So how does this affect revenue and profit? Unfortunately for hotels, there are a couple of revenue implications. Let’s start with a common scenario:
Jamie booked a fully flexible reservation at your hotel for a future trip. Every once in a while, Jamie gets bored at work, thinks about his upcoming vacation and continues to surf hotel and travel rates online—checking both your website and comprehensive metasearch sites—just in case he spots a better deal.
The first implication in this scenario is what Jamie’s going to do if he sees a lower rate offered over the dates of his future stay. Aside from losing the monetary difference in rate, what happens to the hotel if Jamie cancels his original reservation and re-books at a lower rate?
And then there’s another consideration: For technology utilizing regrets and denials data in their forecasting algorithm, how does Jamie—as a shopper “shopping” for a room he’s already booked—potentially skew the hotel’s demand forecast? If every repeat shopper is counted as a new unit of hotel demand, how significantly does that inflate the demand forecast for that time period?
There are psychological aspects that play a part in the buying (and returning) process as well. Regardless of whether someone buys retail, airline tickets or hotel rooms, it’s not easy to accept later on that the same product they purchased is worth less than its original price. Without final sale or advance purchase restrictions, people, by nature, are willing to return and re-buy purchases if it means saving more money.
When hotel rate reductions cause guests to cancel and re-book reservations, it has the potential to wreak havoc on your forecast. In addition to this, the majority of revenue technology on the market today can’t account for this specific guest behavior. It’s one of the areas that today’s revenue technology has historically been ineffective at fully solving for—until now, that is.
At IDeaS, we thrive on the challenge of continuous innovation, and we make it a top priority to evolve our technology and solutions with a progressive, growing and interconnected industry. So much so that one of our newest and exciting features is the ability for hotels to account for this specific guest buying behavior.
Before even making a reduction in rate, hotels are able to use our revenue technology to automatically account for any potential revenue lost with guests cancelling and re-booking at the lower rate. With cancellation and re-booking patterns varying by property, market, season and day-of-week, this exclusive feature layers even more powerful analytical insight into using your revenue solution to optimally balance price and demand.
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