How to prevent hotel no-show and last-minute cancellations?

Is your hotel being haunted by no-shows? In the hotel industry, guests who fail to show up without notice (no-shows) and last-minute cancellations pose significant challenges, affecting both planning and profitability. In the hospitality sector, the no-show rate for hotels is commonly between 1-5%, providing insight into the revenue lost by hoteliers each year.

As flexible policies and competitive offers increase, booking habits are evolving. A June 2023 report by Statista reveals that 66% of Gen Z adults and 64% of Millennials are willing to pay extra for flexible cancellation options when booking hotels. This growing preference for booking flexibility allows more guests to modify or cancel their reservations, which, in turn, raises the risk of cancellations and no-shows, posing challenges for hotels in managing occupancy and revenue.

Certain customer profiles are more likely to exhibit these behaviours, particularly those who frequently make multiple reservations or change their plans at the last minute. According to our 2024 Hotel Distribution Report, hotel booking cancellation rates range from 18% to 42%. In Europe, the cancellation rate for direct bookings was 18% in 2023, with Asia close behind at 23%. However, these rates increased for OTA bookings: in Europe, Expedia had a cancellation rate of 31%, while Booking Holdings reached 42%. A similar trend was observed in Asia, where Booking Holdings had a 40% rate, and Expedia performed better at 24%.

Here are our top strategies to cut no-shows and last-minute cancellations for hotel bookings.

To reduce no-shows and last-minute cancellations, balance hotel cancellation policies with commitment-driven booking options. Travellers are now used to flexible bookings and will often seek a booking with a free cancellation period. Shortening this period (e.g., 24 or 48 hours before check-in) can enhance guest commitment, improving hotel occupancy management efforts. Prepayment strategies for hotels also reduce cancellation risks while attracting committed customers. While configuring rates, sales conditions, and pricing strategy in your CRS, you may also try to add a cheaper, non-refundable rate.

We feel compelled to challenge a common assumption. As Thomas Roche, Lead Product Manager of Payment, explains “It has been widely accepted by hoteliers that they can debit a validated card when there’s been a no-show. However, it is questionable: the transaction was made without the customer agreement or 3D secure. Online payment is highly regulated and always in the customer’s favour. If the guest contests the transaction it would mean wasteful procedures and bank charges for hoteliers.” Rather than making manual and disputable debits, Thomas advises “Separate pricing strategies from your hotel cancellation policies. You can request prepayment while still offering flexible cancellation terms. Remember, the cancellation rate for prepaid bookings is typically 50% lower than average! Prepayment increases guest commitment, as they won’t want to lose money.”

Between emails, push notifications, and direct messages, it’s easy for guests to feel overwhelmed and potentially forget or misinterpret their booking details.

That’s why frequent and customised messages to your guests are essential to prevent hotel no-shows and last-minute hotel cancellations. Sending regular reminders via email or text helps lower the chance of guests forgetting their reservation, while offering them the option to modify, upsell or cancel early if need be. To ensure you are not overflowing your guests with communication, we recommend sending three well-timed reminders: 

• Booking confirmation
• Pre-arrival reminder (about 3 to 7 days before the check-in)
• Day-of reminder

Automated messages can also be an easy way for guests to confirm their arrival. This will help you plan room assignments more effectively and ensure each room is fully prepared on time.

This requires a trusted hotel CRM to help you create and automate emails to send to guests pre-stay, in-stay, or post-stay with reminders, promotional offers, hotel amenities, and third-party attractions! At D-EDGE, we are convinced your guests should be at the heart of your ecosystem. That’s one of the reasons why we have decided to join forces with LoungeUp, a hospitality CRM to Empower Hoteliers with Full Control and Optimisation of the Entire Guest Journey.

After implementing strong internal strategies, let’s evaluate external factors, such as booking channels.

Hoteliers are aware that cancellation rates vary significantly depending on the distribution channel. According to D-EDGE’s data (October 2024), the GDS typically sees a cancellation rate of around 4.6%. while platforms like Booking Group see much higher rates at 37.2%. Knowing which channels are more likely to lead to cancellations is essential for adjusting your strategy effectively.

With a cancellation rate of just 4.6%, the GDS has the lowest rate among your hotel’s distribution channels. This is because it attracts corporate travellers, booked exclusively through travel management companies. These guests are ideal for many hoteliers, as they tend to cancel less, stay longer, and bring in higher daily rates. The question is: are you overlooking this valuable channel?

As second best with an 11.1% cancellation rate, direct booking is another channel you should prioritise. Although OTAs provide visibility, their commission fees can strongly affect the profitability of your establishment. At D-EDGE, we are convinced your hotel’s website should remain your most profitable sales channel. 

Finding the right balance among booking channels is crucial for an optimised distribution strategy. To achieve this, consider getting your hotel a powerful ally, a Channel Manager that can enhance your online distribution efforts. It’s essential to continuously monitor the performance of your different channels to ensure a distribution strategy that cuts down the impact of no-shows and late cancellations. Not sure how to get the right distribution strategy across all platforms? 

By now, it’s clear that booking flexibility is essential to reducing last-minute cancellations and no-shows. Dynamic pricing is an effective way to manage these issues by adjusting rates in real-time, based on customer behaviour, occupancy, and demand. This approach helps optimise revenue, even when rooms unexpectedly become available.

Hotel revenue management tools are essential for tracking market trends and helping hotels boost earnings by filling rooms that would otherwise remain empty. For example, during periods of low occupancy, lowering prices can attract more last-minute bookings, whereas during high-demand periods, increasing rates can capitalise on scarcity. Explore our RMS partners to see how these tools can enhance your hotel’s pricing strategies.

For optimal results, you will need your tools to be adaptable to your hotel(s) and market. Our Booking Engine understood the assignment: 

• Target specific markets at the right price using geo-pricing
• Adopt practices from OTAs such as mixed-rates capacity
• Cross-sell your hotels if you have several hotels in the same area

Intentional overbooking is an effective strategy to offset the impact of no-shows and last-minute cancellations. By leveraging predictive algorithms and historical data, you can adjust your overbooking plan to maintain full occupancy without surpassing capacity.

The key is smart forecasting—by analysing patterns like seasonal demand and customer habits, you can confidently overbook by just the right margin. When done thoughtfully, this approach helps offset potential revenue loss while minimising guest displacement. With the right tool, such as our performance analysis module, hoteliers gain a clear view of their distribution channels and guest behaviour. This comprehensive overview of your business activity allows you to make informed decisions to boost revenue.

Smart overbooking is a popular strategy to reduce no-shows and cancellations. Hoteliers typically set overbooking levels between 2 to 10%, but it’s important to tailor this approach to your hotel’s specific characteristics.

The 2024 Global Travel Trends Report by American Express reveals that 78% of respondents say that spontaneous trips appeal to them. This shift highlights a move away from the traditional tourist model, where detailed, pre-planned itineraries dominated. Instead, travellers are increasingly embracing flexibility. Notably, 77% of millennials and Gen Z travellers have booked last-minute trips, a significant increase compared to 65% of Gen X and 52% of Baby Boomers, reflecting a generational trend toward more spontaneous travel experiences.

Using these insights, offering last-minute booking promotions can quickly fill vacant rooms caused by cancellations. The promotions can be distributed through various channels, including hotel website, email campaigns, and OTAs. To properly send them, choose an automated planning management tool. You will easily craft your own set of rules: for example, a rule to decrease the price when a booking gets cancelled less than 3 days before, and all your hotel distribution channels will be updated in one click.

All these strategies can greatly help compensate for unexpected last-minute hotel cancellations and hotel no-shows. 

Addressing no-shows and last-minute cancellations with empathy is essential in the hospitality industry. A thoughtful follow-up with a personalised message to guests who didn’t arrive as planned can build goodwill, showing that their presence is genuinely valued. This gesture not only encourages them to consider staying with you in the future but also presents an opportunity to gather insightful feedback. Understanding why a guest had to cancel or didn’t show up can reveal important trends and help refine your offerings to better meet their needs and expectations.

In addition to these personalised communications, regularly analysing booking and cancellation data is key. Identifying peak cancellation periods, guest types prone to last-minute changes, and channels that often lead to cancellations allows you to make more precise adjustments to your policies and pricing strategies. This knowledge enables hoteliers to make data-informed decisions, such as increasing flexibility during certain seasons or offering incentives to guests who confirm their stay.

Successfully managing no-shows and cancellations requires a comprehensive approach. Strategies like dynamic pricing, thoughtful overbooking, timely promotions, and leveraging data insights enable hotels to better satisfy guests, keep occupancy high, and stay competitive in an evolving market. Embracing these methods ensures not only improved revenue management but also a stronger relationship with guests, enhancing overall brand loyalty.

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