What is the meaning / definition of Cancellation Rate in the hospitality industry?

Cancellation Rate, often displayed as a percentage, highlight the rate at which a hotel has its bookings cancelled. Hoteliers should be inclined to keep their Cancellation Rate as low as possible.

Its an important rate to consider as it allows insight on how to reduce cancellations in the future. If a cancellation rate is too high, a hotel can implement or change their cancellation clause to reduce future cancellations. Examples of a cancellation clause that reduce cancelations is increasing the amount of days before a guest can cancel with no cancellation fee. Cancellation rates tend to be higher with OTAs than via direct bookings. Revenue Managers, could take this into consideration when allocation rooms to certain OTAs, as cancellations might lead to a loss in revenue. .

How to calculate Customer Retention Rate?

To calculate a cancellation rate is to identify the number of customers at the end of a certain amount of time minus the number of new customers acquired during this same amount of time. Once calculated, divide that number by the number of customers at the start of the same time frame. Then you multiply that number by one hundred.

Customer Retention Rate

  • The formula looks like this: ((CE-NC)/CS) X 100 = Customer Retention Rate
  • (End Customers: CE – New Customers: CE – Customers at the Start: CS)

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