A cancellation occurs when a confirmed reservation is annulled before arrival, directly affecting
expected occupancy and revenue.
Why it matters:
High cancellation levels reduce forecast reliability and increase the risk of unsold inventory.
Practical use:
Hotels design cancellation policies and overbooking strategies based on historical cancellation
patterns.
Real-life examples:
Flexible cancellation rates lead to high last-minute cancellations, forcing the hotel to rely on
discounting to refill rooms
