Cancellation Rate
Cancellation Rate is the percentage of confirmed reservations that are cancelled before arrival. It is one of the most important channel-quality metrics in hotel distribution because it directly affects how reliable a booking actually is.
Formula
Cancellation Rate = (Cancellations / Total Bookings) × 100
Why it matters
Cancellation rate affects:
- Forecast accuracy — high cancellation rates require larger wash adjustments
- Channel value comparison — a channel with high gross volume but a 50% cancellation rate may be worth less than a smaller channel with 10% cancellations
- Overbooking strategy — properties with reliable, low-cancellation business need to overbook less
- Inventory management — high cancellation channels can effectively block inventory that won't materialize
Typical patterns
- OTA bookings typically cancel at higher rates than direct bookings
- Free-cancellation rates cancel far more than non-refundable rates
- Long booking windows produce more cancellations than near-term bookings
- Booking.com has historically had the highest cancellation rates among major OTAs, partly because of its dominant share of free-cancel inventory
Why hotels watch it closely
A "soft" booking (high cancellation likelihood) shouldn't be valued the same as a "hard" booking (low cancellation likelihood). Sophisticated revenue management systems weight bookings by expected wash when calculating channel contribution and segment profitability.