Cancellation policies in the hotel, airline and restaurant industries

Littlewood’s Rule and Expected Marginal Seat Revenue (EMSR) maximize revenue through the allocation of various fares quoted for different levels of customers’ willingness to pay. Both assume no cancellations or no‐shows, an unrealistic assumption. The airline industry, by contrast, has been consistently stringent about such policies. The purpose of this research is, therefore, to provide an overview of cancellation policies across airline, hotel and restaurant industries. Specifically, this study demonstrates the origin of cancellation policies, mathematics modeling of cancellation policies, how major changes have occurred and their consequent impacts that currently allow for cancellation sophistications in industries.