With global markets fluctuating amid concerns over the potential impact of international tariffs, the discretionary spend of consumers and their travel budgets are likely to be affected. A recent report by Tourism Economics has already indicated that international travel to the US is projected to decline by 5.5% this year, reversing earlier optimistic forecasts of a 9% growth for 2025.
It is not only the potential of softer booking conditions that hotels will have contend with over the coming months; hotels will also face a growing challenge with rising rates of cancellation. Hotel cancellations are a real concern for hoteliers across the APAC region, with a recent study showing that hotel bookings made via third-party online travel agencies (OTAs) finding that cancellations in Asia reached a significant 40% of revenue on Booking.com and 24% of booking revenue on Expedia.
What is driving hotel cancellations?
While a potential spike in hotel cancellations may be in-part attributed to more economically minded consumers, it is also fuelled by the industry’s shift toward more flexible cancellation policies, driven largely by competition among OTAs. These same platforms (Booking.com and Expedia) which carry high cancellation rates, emphasise consumer-friendly policies to attract bookings, inadvertently making cancellations not only simpler but more common.
Thanks to online travel aggregator websites, it has also never been easier to travel prudently. The sites allow consumers to quickly and easily compare services to find their best (and cheapest option), exposing quickly any hotels whose pricing appears out of synch with real-time local market conditions. This not only presents hoteliers across the APAC region with challenges to attract the guests at the right price, but also in terms of keeping their original booking. Travellers like and actively seek out flexibility with their travel bookings today. Research indicates that younger travellers (particularly Millennials and Gen Z) prioritise flexibility and are willing to pay extra for the option to cancel, with Statista reporting that 66% of Gen Z adults and 64% of Millennials actively seek out flexible cancellation options.
The trend towards cancelling and rebooking
Compounding challenges for hotels is the practice of guests cancelling and rebooking the same property at a lower rate. Today’s digitally savvy travellers are often using automated technology that alerts them to price drops, enabling them to cancel and rebook the same hotels at a more favourable rate. For many, this practice has become second nature and if they can save money, they will.
While beneficial to the traveller, this practice creates significant revenue implications for hotels. When guests rebook at lower rates, hotels lose out on revenue from the initial higher-priced booking. Additionally, frequent cancellations can also distort a hotels own forecasting models. Hotel demand forecasts usually factor in the initial booking, without adequately accounting for guests repeatedly “shopping” for better rates. These guest behaviours inflate demand and make it challenging for revenue management professionals to accurately forecast and develop effective pricing strategies without the support of advanced analytics.
How can hotels minimise the impact of cancellations?
To limit the volume and impact of hotel cancellations in an uncertain economic environment, hotels should consider balancing flexible cancellation policies with incentives for confirmed bookings. Hotels can promote discounted rates for advance purchases or partially prepaid bookings, which can lock in revenue for the hotel early. These non-refundable rates (if priced attractively and promoted in the right way) can also minimise cancellations without alienating price-sensitive travellers. The strategic promotion of last-minute deals through private sales or non-public channels like a hotel’s own database can also help convert cancelled reservations into fresh bookings, helping to maintain occupancy rates. This strategy allows hotels to fill rooms that might otherwise remain empty due to late cancellations.
Hotels should also focus on attracting more direct bookings. These types of reservations generally have lower cancellation rates compared to OTA bookings, as travellers booking directly often demonstrate higher commitment to a property or brand through taking the extra step of navigating a hotels own booking platform. Hotels can help drive direct bookings through targeted promotions or with value-added packages.
Retargeting past visitors is another effective strategy for increasing direct bookings. Potential guests typically explore multiple travel websites and OTAs during their research process before making a final decision. By leveraging technology that customises advertisements based on a visitor’s previous behaviour or activity on the website, hotels can keep their property top of mind. This approach not only increases the likelihood of a return visit to the website but also boosts the chances of securing a direct booking.
Utilise the power of advanced revenue management systems
To help hotels address the growing challenge of cancellations, leading revenue management systems (RMS) incorporate data around cancellation and rebooking patterns, which vary widely based on factors like market, property type, seasonality, and day-of-week dynamics. Advanced solutions, like IDeaS G3 RMS, allow revenue managers to predict and mitigate cancellation risks by analysing segment-level price elasticity and evaluating the potential impact of rate changes before implementation
For instance, if a large group cancels reservations shortly before arrival, a hotel might traditionally have rushed to lower rates to refill the rooms. With an advanced RMS in place, however, revenue managers can take a more strategic view. These solutions help validate whether reducing rates would genuinely generate incremental revenue or merely encourage existing flexible-booking guests to cancel and rebook at lower prices. This ability to analyse cancellation patterns and predict their financial implications in real-time provides hotels with powerful tools to optimise both occupancy and revenue.
Adapt to secure business
Addressing hotel cancellations requires a proactive, data-driven approach. Hotels must strategically balance flexible booking options with targeted policies and advanced analytics to minimise the financial impact of cancellations. Those hotels which can effectively adapt to evolving consumer behaviours are best positioned not only to secure immediate bookings, but also to foster long-term guest loyalty and sustained revenue growth
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