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What is Cancellation Rate?
Cancellation rate is a key performance indicator (KPI) in the vacation rental industry that measures the frequency of booking cancellations. It is calculated by dividing the number of cancelled reservations by the total number of reservations made during a specific timeframe, then expressed as a percentage.
This metric helps property managers and owners gauge the stability of their bookings and identify potential issues with their listings, pricing, or policies.
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How it works
To calculate the cancellation rate, you first define the period to analyze, such as a month, quarter, or year. You then tally the total number of bookings created and the number of those bookings that were subsequently cancelled.
The formula is (Number of Cancellations ÷ Total Bookings) × 100. For example, if a property received 40 bookings in a quarter and 4 were cancelled, the cancellation rate would be 10%. Vacation rental software automates this calculation, and property management systems like Lodgify often include reporting tools to help hosts monitor this KPI.
Why it matters
A high cancellation rate negatively impacts revenue and operational efficiency. It creates gaps in the calendar that can be difficult to fill, especially at the last minute, resulting in lost income.
It also increases administrative tasks related to processing refunds and re-marketing the property. Many OTAs factor cancellation rates into their search ranking algorithms, meaning a high rate can reduce a listing's visibility and future booking potential.
Examples
- A host notices their cancellation rate is 25% for reservations made more than 90 days out. They adjust their strategy by applying a stricter cancellation policy specifically for these long-lead-time bookings.
- After multiple guests cancel citing discrepancies with the property photos, a manager invests in a professional photographer. The following quarter, their cancellation rate drops from 18% to 6%.
- A property owner in a seasonal beach town accepts a higher cancellation rate during the unpredictable shoulder season by offering a flexible cancellation policy, aiming to secure more tentative bookings and increase overall occupancy.
- A manager compares their 8% cancellation rate against a market average of 12% provided by a data tool like AirDNA, confirming their stricter policy is effective at securing bookings.
Frequently asked questions
What is a good cancellation rate for a vacation rental?+
How can I lower my property's cancellation rate?+
Do booking sites like Airbnb and Vrbo penalize hosts for high cancellation rates?+
How is cancellation rate different from no-show rate?+
Related terms
Cancellation Policy
A set of rules defining the penalties a guest incurs for canceling a reservation and the conditions under which they may receive a refund.
Flexible Cancellation
A flexible cancellation policy is a booking term that allows guests to cancel their reservation for a full refund up until a short period before their…
No-Show Rate
The no-show rate is a key performance indicator that measures the percentage of guests who make a reservation but fail to arrive without providing prior…
Analytics Dashboard
An analytics dashboard is a centralized interface that visually displays key performance indicators (KPIs) and data points for a vacation rental business. It…