Why Flexible Rates Can Be a Hotelier’s Secret Weapon

“What if too many guests cancel with fully flexible rates?” It’s a common concern among hoteliers, but one that might be rooted in misplaced fears. Niko Krauseneck addressed this issue by highlighting the power of the Endowment Effect—a psychological principle where people value something more once they perceive it as theirs.

When guests book a room, they don’t just secure a date—they begin to imagine the experience. They picture themselves unwinding in a cozy suite, savoring a welcome drink, or waking up to scenic views. This mental “ownership” makes the booking feel more valuable, significantly reducing the likelihood of a cancellation.

So why should hotels lean into flexible rates despite the perceived risk?

• Higher Conversion Rates: Flexible policies eliminate the fear of financial penalties, encouraging more bookings.
• Fewer Cancellations Than Expected: That sense of ownership makes guests less inclined to cancel.
• Stronger Guest Loyalty: Flexible policies create trust and foster repeat business.

The real mistake, as Krauseneck noted, is overvaluing the potential “loss” of cancellations while undervaluing the “gain” of increased bookings and long-term guest relationships.

For the truly cautious, smart overbooking strategies can act as a safety net to fill any last-minute gaps. Instead of fearing flexibility, hoteliers can leverage it to create a stronger bond with guests, turning tentative bookings into long-term loyalty.

In the end, offering flexibility isn’t just about policies—it’s about understanding guest psychology and using it to build trust and enhance the overall experience.