It was not so long ago when we all suddenly realized that our summer plans (and everything beyond that for the unforeseeable future) have all come to a halt because of a little pandemic called COVID-19. How rude. Let us take you down memory lane to March 2020...
The world went into lockdown. Our reaction, with millions of others in the world, was to start cancelling our trips and plans. Remember the ridiculous wait times on hold? I was once quoted 13 hours, and the only type of rage I’ve ever experienced of this magnitude was because after someone did finally pick up my call, the call dropped. All this just to cancel my stay at a hotel and get my money back.
We’re not alone in this horrendous experience. As difficult as it was as a consumer, we can only begin to imagine what it was like for hotels during that time. In our minds - wasn’t the solution to all of this back and forth simply this: make hotel cancellation rates a thing of the past?
Cancellation trends after COVID-19
In December 2019, Fornova conducted research that included over 200,000 hotels all over the world to gain insights on hotel cancellation rates and policies across the industry. At the time, and well before the pandemic hit, 38% of hotels had free cancellation policies, while 62% had a no-refund policy. In July of 2020, they ran the same survey and the results were dramatically different. 58% of the hotels now offer free cancelations, while 42% of those hotels are still refusing to offer a refund. The shift was greatly impacted by the pandemic and now a year later, the trend stands.
This has had a direct impact on how the global pandemic has affected consumer behaviour and expectations on travel and accommodation. The uncertainty of the world and the traumatic experiences of trying to cancel any type of travel in 2020 resulted in lost money, stress and fear of having to go through that ordeal ever again. Even for us, we’re not booking until we see a “free cancellation” button with the room.
What does this mean for hotels?
The reality is that hotels didn’t really have a choice in the matter. Getting rid of hotel cancellation rates and offering free cancellations have become an expectation and a major criteria whether or not someone books with you now. This, coupled with already low occupancy rates because of global travel restrictions pose a major challenge to hoteliers who have already had to slash prices to compete.
Another trend we’ve seen as a result of this new policy norm is an increase in re-booking activity where price-sensitive guests can cancel an existing booking and rebook the same room for a new, lower rate as hotels continue to slash their prices to secure occupancy.
In addition, OTAs will also be retargeting potential travellers and feature price drops across a hotel’s competitive set. This increases the risk that a potential guest may decide to cancel their current booking for a more favourable rate at a competitor's property.
But the future is not completely dim. With the hospitality industry in full recovery mode, we are feeling that pre-pandemic momentum as different parts of the world are starting to fully open up. This means hotels, while remaining flexible, will have more say regarding their hotel cancellation rates or policies in the near future.
Hotels may choose to implement black out periods where free cancellations aren’t possible during certain high seasons of the year for example. Other things to consider are small % down payments that may not be refundable or a free refund window that is more flexible to guests.
One thing is for sure: flexibility in traveling is the new normal and only time will tell what that will look like in a post-pandemic world.
