Modelling the cancellation behaviour of hotel guests

Purpose: The purpose of this study is to provide new insights into the factors that influence cancellation behaviour with respect to hotel bookings. The data are based on individual bookings drawn from a hotel reservation system database comprising nine hotels. Design/methodology/approach: The determinants of cancellation probability are estimated using a probit model with cluster adjusted standard errors at the hotel level. Separate estimates are provided for rooms booked offline, through online travel agencies and through traditional travel agencies. Findings: Evidence based on 233,000 bookings shows that the overall cancellation rate is 8 per cent. Cancellation rates are highest for online bookings (17 per cent), followed by offline bookings (12 per cent) and travel agency bookings (4 per cent). Probit estimations show that the probability of cancelling a booking is significantly higher for early bookings, large groups that book offline, offline bookings during high seasons, bookings not involving children and bookings made by guests from specific countries (e.g. China and Russia). Among the factors, booking lead time and country of residence play the largest role, particularly for online bookings. Research limitations/implications: The analysis is based on individual-level booking data from one hotel chain in Finland, and therefore cannot be generalised for the total population of hotels in the country under observation. Originality/value: The main contribution of this paper is a thorough investigation of the factors that influence cancellation behaviour at both the theoretical and empirical levels. Detailed and unique data from a hotel reservation system allow for new empirical insights into this behaviour.