Well, it is quite simple. When a hotel cannot accommodate more guests, because it is fully booked at that time, then their response to the potential customers' request is called a Denial.
Every year, many hotels around the world have to deny reservations to people eager to stay with them, but that is the nature of the Hospitality Industry, unfortunately. It is good for a fully-booked hotel, of course, but not for the people who really want to stay there!
Keeping a record of Denials is always a good idea for a hotel. Why? Because it can help them in their customer monitoring. Having such data at hand can help hotels to more effectively yield on their limited inventory, achieving the best last room value. Also, knowing how many denials you have in Year 1, for example, will give you an insight into how much extra capacity you might endeavour to create in Year 2.
Tracking Denial statistics can give an indication of how much unfulfilled demand a hotel has for a certain date, too. For example, if a particular hotel in Chicago always has an increased demand for bookings on the eve of the Patrick's Day Parade, they can adjust their prices for that date to ensure that they are maximising profits – the people who can pay increased prices get the rooms (rather than being denied them).