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No-Shows and Cancellations Policies in Hotels A Boon or A Bane?

During the depression, many hotels were reliant on attrition, cancellation and no-show fees to boost revenue as they struggled with occupancy and the ability to drive rate (Stephanie Wharton, 2012). But, since this years revival, it appears some hoteliers are taking a more generous approach and are shying away from cancellation-fee policies (Stephanie Wharton, 2012). For example, in the 2012 Lodging Survey, the American Hotel & Lodging Association found the percentage of hotels charging for late cancellation in 2012 was 68%, a nine-point drop from 2010. Mike Marshall, president and CEO of Marshall Hotels & Resorts said, I think that has more to do with customer satisfaction and retention than anything else. Doing away with no-show and late-cancellation fees might work at some properties, more so at hotels with a greater share of transient business, but hoteliers in resort destinations or in a convention hotel need to be more careful, Marshall said. For example, Gaylord Hotels, a chain that has a customer base of 78% group and 22% transient relied heavily on fee collections to offset declines in revenue per available room during the recession (Stephanie Wharton, 2012). According to Executive VP and CFO Mark Fioravanti of Ryman Hospitality Properties, the real estate investment trust previously known as Gaylord Entertainment. During a presentation at the Deutsche Bank 20th Annual Leveraged Finance Conference earlier this year, Fioravanti said attrition and cancellation fees peaked in 2009 at $27.7 million when Gaylord Hotels occupancy hit a 66% low for the year. In 2011, occupancy was at 72% and attrition and cancellation fees collected were only $9.2 million (Stephanie Wharton, 2012). Nothing like transient business, the group segment is a lot more difficult to recover from if there are last minute cancellations or no shows, said Gerry Chase, president and COO of New Castle Hotels & Resorts. Marshall said, The prospect of getting someone to walk in at the last minute to cover someone who canceled is minimal. Unfortunately for the hotel business, hoteliers are selling space and time, which means that once it is lost, it is lost forever. Despite the fact that convention hotels were sticklers for cancellation policies during the recession, it was a different story at many transient properties (Stephanie Wharton, 2012). Rather than sticking to their customary policies, hotel staffs worked with guests during the downturn (Stephanie Wharton, 2012). Guests would receive cancellation-fee bills for services they did not use, which especially didnt make them happy during tough economic times (Stephanie Wharton, 2012). During the depression, we were more flexible with it because of our competition situation, Chase said. As the industry moves on from the recession still, hoteliers have to start holding guests accountable. In some hotels, it can be a productive source of revenue, Marshall said. Guests are aware they

will be charged for late cancellations and failure to keep a reservation, which means there should be no surprises when a bill arrives (Stephanie Wharton, 2012). With most online booking websites, you have to check and agree that youve read the cancellation policy, he said. While hoteliers need to stick to their policies to avoid leaving money that could be difficult to recover on the table, they need to be flexible during emergencies as well, Chase said. If guests fail to show up for a reservation, they should be held responsible, but if the guest does show up and the hotel does not have enough space for the guest, the hotel should also act conscientiously (Stephanie Wharton, 2012). Data Analysis and Findings Hotel managers have all uttered their concern about the problem of no shows and cancellations and their growth. In the market of Gurgaon, the cost of an increasing number of No-shows for guaranteed reservations can have a significant impact on the hotels bottom line. This research discovered several important steps that some hotels and their managers are taking to successfully reduce losses from no shows and cancellations. The study showed the industrys average no shows and cancellations with the retention charged as 1-2% of all reservations. When the number of no shows rooms is multiplied by the ARR, the outcome is a projected expense to the hotel industry of 3000 to 6000 million per year. Hotel executives were interviewed about their perceptions of why No-Shows and Cancellations occurred, and asked what procedures were already in place to prevent them. Researchers also conducted quantitative research with the same hotel companies, making and canceling 400 hotel reservations to track whether the stated procedure were being followed. The rationale mentioned by hotels to explain No-Shows and Cancellations incorporate: Multiple bookings made on one account number Guests checking in at the correct hotel brand, but the wrong property Inability of hotels to locate a reservation if a guest calls the property to cancel before the central reservation office (CRO) reservation has been received and logged. Cancellation of the wrong reservation because the guest was not given a confirmation number when the reservation was made. Guests calling the CRO to cancel and being told that it is after the propertys deadline. The property is therefore unaware that the guest tried to cancel. Approximately three to five percent of No-Shows are from administrative mix-ups such as incorrect date, wrong name-spelling, etc. Guests calls CRO to cancel a direct reservation and is told to call the property and the guest balks.

Quantitative research findings revealed a number of problems in reservation confirmation and cancellation procedures problems that are largely avoidable when proper procedures are followed consistently. Program Steps for Reducing No-Shows The following recommendations, gathered during the qualitative portion of the Visa research, will help your property successfully reduce No-Shows: Require advance deposits for peak times, such as legal holidays and holiday weekends, for prime resort seasons, and for special sports events and major conventions. Always disclose the penalty for not canceling the reservation over the phone during the reservation process. For your busiest times, do call-backs a few weeks to a few days before the scheduled arrival date. When you reach the guest, explain the cancellation procedure again to be sure they understand. Do daily sweeps to check for duplicate reservations, similar name scans, and date discrepancies. Develop a partnership with your top travel agents and review their future bookings with them on a regular basis. This is especially important during peak times or with group bookings. Require an advance deposit if a guest wants to reserve multiple rooms on a Visa card. Have someone designated as the trained reservationist on the property at all times. Mail confirmations whenever possible. Be sure to include the cancellation information. If you are unsure of how the expense and benefit ratio works, test mailing confirmations and then analyze the results on your No-Show rate. Train your staff at regular intervals on accepting reservations and cancellations. Make agreements with all nearby properties to let you know when a guest mistakenly checks in at their hotel instead of yours and vice versa. Ghost shop your own property. Or have a friend do it for you. Give staff incentives for proper call-handling for both reservations and cancellations. Implement remedial training when necessary. Only accept reservations from the person named on the Visa card. Analyze your source of No-Shows and develop solutions specific to those sources. When processing a No-Show to a Visa account, consult your merchant bank or processor about the proper procedures to use with your point-of-sale equipment, and how to set the No-Show Indicator. No-Show indicators should be set for all No-Show transactions. Always issue cancellation numbers.