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Go moderate! How hotels' cancellation policies affect their financial performance

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Listed:
  • Mehmet Altin
  • Chih-Chien Chen
  • Arash Riasi
  • Zvi Schwartz

Abstract

Hotel cancellation policies have shifted considerably in recent years. This is mainly in response to growing rates of last-minute cancellations and no shows and the resulting negative impact on the hotel’s performance. This study explores how two key policy elements, the penalty and the cancellation window, are likely to benefit the hotel. That is, how the severity of the policies is likely to positively impact the hotel’s financial performance. We developed a mathematical model and used cancellation and performance information data from a random sample of over 500 U.S. hotels to examine the effectiveness of a range of cancellation policies. The empirical findings support the mathematical model’s prediction that moderate cancellation policies are likely to generate better financial performance levels, compared to more lenient or more stringent policies.

Suggested Citation

  • Mehmet Altin & Chih-Chien Chen & Arash Riasi & Zvi Schwartz, 2023. "Go moderate! How hotels' cancellation policies affect their financial performance," Tourism Economics, , vol. 29(8), pages 2165-2182, December.
    • Handle: RePEc:sae:toueco:v:29:y:2023:i:8:p:2165-2182
    DOI: 10.1177/13548166221128450
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    References listed on IDEAS

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    1. Tsung-Hsien Tsai & Chien-Min Chen, 2019. "Mixed logit analysis of trade-off effects between international airline fares and fences: a revenue management perspective," Current Issues in Tourism, Taylor & Francis Journals, vol. 22(3), pages 265-275, February.
    2. Arash Riasi & Zvi Schwartz & Chih-Chien Chen, 2019. "A paradigm shift in revenue management? The new landscape of hotel cancellation policies," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(6), pages 434-440, December.
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    5. Zvi Schwartz & Mehmet Altin & Manisha Singal, 2017. "Performance measures for strategic revenue management: RevPAR versus GOPPAR," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 16(4), pages 357-375, August.
    6. Liang Guo, 2009. "Service Cancellation and Competitive Refund Policy," Marketing Science, INFORMS, vol. 28(5), pages 901-917, 09-10.
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