Cancellation Rate is the percentage of reservations that are cancelled within a defined period, compared with the total reservations used as the measurement baseline.
Formula
Cancellation Rate = (Number of Cancelled Reservations ÷ Total Reservations) × 100
The calculation should use a clearly defined period and a consistent reservation-counting method.
Practical Example
A hotel receives 500 reservations for a particular month. Before the relevant arrival dates, 75 of those reservations are cancelled.
Cancellation Rate = (75 ÷ 500) × 100 = 15%
The cancellation rate for this example is 15%.
How to Interpret Cancellation Rate
A high cancellation rate can make demand forecasting less reliable and reduce the number of reservations that ultimately convert into occupied rooms. However, the rate alone does not indicate the financial impact: cancellations may occur well before arrival, allowing the hotel to resell the rooms, or they may happen too late to replace the lost business.
Revenue managers should analyze cancellation rates by booking channel, rate plan, market segment, season, and lead time where reliable data is available. They should also distinguish cancelled reservations from no-shows.
Related Terms
Cancellation Policy · No-Show · Booking Pace · Pickup · Demand Forecast · Overbooking · Lead Time