In the travel and hospitality industry, last-minute cancellations are inevitable. A cancellation here and there may not be a big concern, but you may start to sweat if you’re running a hotel and a large group has cancelled its reservation for a dozen rooms. Even though you can’t eliminate the risk of cancellations, you can make them less likely and reduce their impact when they occur. Here are some tips on how to manage last-minute cancellations, including strategies on how to prevent them and advice on how to respond when they happen.
Provide Incentives for Upfront Payments
When your customers have paid upfront, you’re less likely to deal with no-shows and cancellations, especially if your terms state that payments are nonrefundable. One of the simplest and most effective ways to encourage upfront payments is to offer a discount for making them. Travellers enjoy any opportunity to save money, so a discount is a win-win situation for both of you. You’re guaranteed payment, and your customer spends a bit less.
Another good strategy is to offer package deals to customers. If you’re operating a hotel, you could offer a package that includes a room, a meal at a nearby restaurant, and an evening of entertainment, all at a lower rate. In addition to saving money, the customer is more likely to stick to this deal because now they have new activities planned in your city.
Set Up a Clear Cancellation Policy
Whether the customer books with you online, over the phone, or in person, make sure you have a cancellation policy that you, your business website, or your representative can explain clearly. This policy should specify how soon the customer must cancel a booking to get their money back. Include your cancellation policy in any booking confirmations you send the customer.
If you don’t charge the full booking amount upfront, you may want to opt for a smaller nonrefundable deposit instead, such as 50% of the total. You can charge the remainder on the day of the reservation. Make sure that if you’re saving a customer’s payment information, such as to charge them for the rest of their booking total later, you follow the proper cyber security practices to keep payment information safe.
Try to avoid disputes when a last-minute cancellation occurs, even if your business is in the right. Travel and hospitality is an industry that relies on relationships, and sometimes taking a financial hit is the right move if you save a client relationship in the process.
Send Trip Reminders
Customers who lead busy lives often forget about their upcoming bookings and travel plans. Periodic trip reminders are a smart way to help your customers remember they’ve made reservations with you. Reminders reduce the chance of a customer accidentally making plans for the same date as the reservation and not showing up to your business. If a scheduling conflict comes up and a customer needs to cancel, a trip reminder could mean the difference between the customer cancelling one day in advance, leaving you in a tight spot, or cancelling a week beforehand so you have time to find a replacement.
Emails are the best way to send trip reminders, since people check them every day and they’re less intrusive than text messages. At a minimum, it’s good idea to send reminders one month, one week, and one day ahead of the reservation. Just make sure you include an unsubscribe link in each email to avoid annoying your customer.
Make a Cancellation Response Plan
Despite your best efforts, the occasional cancellation is inevitable, so you need a response plan to fill any open reservations. This is where the relationships you’ve built, such as with customers and travel agencies, can come in handy.
Start by contacting online travel agencies with whom you’ve worked before. If you put all your open rooms on the agency’s site, you may not have much luck. When you get in touch with market managers at the agencies, they can set up packages and offers designed to bring in last-minute business.
Try sending discount deals to your most loyal customers to drum up business. One drawback to this method is you make less money with customers who want to book with you anyway, but a full room is always better than an empty one.
When you’re down to the wire, see what a last-minute booking service can do. Customers go on booking service sites to look for the best deals, so you may need to cut rates quite a bit to get their attention. Even though this arrangement isn’t ideal, keep in mind that your goal is to make what you can on the room. Also, customers who shop on these sites are more interested in bargains than company loyalty, so you don’t need to worry about them expecting low rates from your business every time.
Cancellations are inconvenient and often ding your business, especially ones that come at the last minute. Fortunately, a few simple strategies can keep cancellations to a minimum so you can avoid taking heavy losses when they occur.