The impact of booking lead time on hotel customers' willingness to pay for more lenient cancellation terms
Date
2024
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of Delaware
Abstract
In the post-pandemic world, travelers have become acutely aware of the risks and uncertainties related to future travel. Lenient cancellation terms are regarded as an effective means to alleviate travelers’ worries and encourage them to make reservations. However, more lenient cancellation terms can negatively impact hotel revenue. Previous research found that travelers are willing to pay for lenient cancellation terms and that the value decreases as the check-in date approaches, but it did not distinguish between different types of travelers. This study addresses that gap by separating leisure and business travelers and varying the levels of cancellation terms. The study employs conjoint analysis and finds that leisure travelers are more willing to pay for more lenient cancellation terms further from the check-in date, with a decreasing value within 30 days of check-in. Beyond 30 days, the willingness to pay decreases. For business travelers, WTP generally remains stable from 60 days ahead to 7 days ahead, except for a drop 3 days before the check-in date. These findings partly differ from the hypothesis that the willingness to pay will decrease as the check-in date approaches for leisure travelers and remain stable for business travelers. The reason may be relative to customers’ purchase behavior that leisure travelers prefer to search for the best deal until the last minute, while business travelers prioritize meeting their travel requirements. These findings will provide valuable insights for the hotel revenue practice.
Description
Keywords
Uncertainties, Leisure travelers, Lenient cancellation terms, Willingness, Purchase behavior