Hotel Cancelation Policies, Distributive and Procedural Fairness, and Consumer Patronage: A Study of the Lodging Industry

Hotel cancelation policies (CancPols) are designed to minimize losses for the lodging companies. Liberal CancPols have resulted in revenue forecasting errors and eventual loss of revenues. The current study investigates the effect of different CancPols on consumer patronage and willingness to pay. In addition, the effects of distributive and procedural fairness in hotel CancPols are addressed. Results indicate that there is no loss of consumer patronage between open option policies and 48-hour CancPols. No-refund policies were found to be too restrictive and affected consumer's patronage. Consumer patronage was also significantly affected when fairness policies were violated.