Differentiation of cancellation policies in the U.S. hotel industry

Hotel cancellation policies not only generate revenues but also affect consumers’ reservation behaviors. The objective of this study is to develop the typology of hotel cancellation policies with regard to cancellation fees and deadlines. A nationwide survey of cancellation policies was conducted in order to understand the cancellation policies that are practiced in the U.S. hotel industry. Multiple correspondence analysis was used to spatially map cancellation policies with fees and deadlines, followed by a two-step cluster analysis identifying hotel segments. The results indicate that U.S. hotels could be grouped into two mutually exclusive segments. Each of the hotel segments possesses unique characteristics. This study shows that hotel differentiation is important in setting cancellation policies.

► We develop the typology of hotel cancellation policies with regard to cancellation fees and deadlines.
► U.S. hotels could be grouped into two mutually exclusive segments. Each of the hotel segments possesses unique characteristics.
► We show that hotel differentiation is important in setting cancellation policies.