Modelling the Cancellation Behaviour of Hotel Guests

International Journal of Contemporary Hospitality Management, Forthcoming

Posted: 27 Mar 2018

See all articles by Martin Falk

Martin Falk

Independent

Markku J. Vieru

University of Lapland - Faculty of Social Sciences, Multidimensional Tourism Institute

Date Written: January 18, 2018

Abstract

Purpose – The aim of this study is to provide new insights into the factors that influence cancellation behaviour with respect to hotel bookings. The data is based on individual bookings drawn from a hotel reservation system database comprising nine hotels.

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 level. Detailed and unique data from a hotel reservation system allows for new empirical insights into this behaviour.

Keywords: hotel management, cancellations, booking channel, online booking, probit model

JEL Classification: C25, D12, L83, R41

Suggested Citation

Falk, Martin and Vieru, Markku, Modelling the Cancellation Behaviour of Hotel Guests (January 18, 2018). International Journal of Contemporary Hospitality Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3146834

Martin Falk

Independent ( email )

Markku Vieru (Contact Author)

University of Lapland - Faculty of Social Sciences, Multidimensional Tourism Institute ( email )

P.O. Box 122
Rovaniemi FIN-96101
Finland
+358 400 377641 (Phone)
+358 16 341 2600 (Fax)

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