Businesses Impose Cancellation Fees to Combat No-Shows

In an effort to combat no-shows and last-minute cancellations, businesses across various industries are increasingly charging clients who fail to show up or cancel appointments without notice. This trend, once primarily limited to doctors' offices and high-demand restaurants, has now spread to sectors such as salons, personal training, and housecleaning services.

Why this matters: The rise of cancellation fees reflects a shift in the power dynamic between businesses and consumers, with businesses seeking to protect their revenues and time. As this trend continues, it may lead to a reevaluation of the value placed on time and services in various industries.

The rise in cancellation fees has been fueled by the adoption of digital booking and payment platforms, which enable businesses to automate the process of charging for missed appointments. According to data from Square, a popular platform among service providers, 16% of beauty professionals charge cancellation fees in 2024, up from just 5% in 2021. Similarly, the number of restaurants on Resy that charge at least one cancellation fee has more than quadrupled from 2019 to 2024.

For business owners, implementing cancellation fees has become a necessary measure to protect their revenues and ensure the efficient use of their time and resources. Greg Krupa, owner of Harbor Barber in Huntington Beach, California, charges up to $100 for missed appointments. "We're not like Supercuts where I have to worry about your corporate feelings," Krupa states. Songe LaRon, founder of Squire, a digital booking platform for barbershops, notes that "consumers nowadays are quite used to paying for services ahead of time. It's the Uber-ification of the world."

The impact of cancellation fees on reducing no-shows and late cancellations is significant. Barbershops using Squire saw a 43% increase in shops collecting payment information in advance since January 2020, resulting in 45% fewer cancellations and 82% fewer no-shows. Gail Gallaher, a science and test prep tutor in Pasadena, California, charges 50% or 100% of her normal rate for last-minute cancellations or no-shows. "If you want that flexibility without me being mad at you, pay me," Gallaher states.

However, the rise in cancellation fees is not without controversy. Some customers argue that these policies unfairly punish them when life's unpredictabilities cause them to miss appointments. Reagan Morey, a mother of three in Olympia, Washington, experienced a canceled dentist appointment and believes businesses should give customers the same grace they expect for themselves.

Experts note that businesses tend to tighten their cancellation policies during economic downturns, as they seek to safeguard their revenues. Karen Xie, an associate professor of business data analytics at the University of Connecticut, observed that many companies raised fees and shortened rescheduling windows during the COVID-19 pandemic.

Interestingly, a 2000 study by economists Uri Gneezy and Aldo Rustichini found that imposing a fee to stop parents from picking up their children late at a daycare center actually increased late pickups. The introduction of the fee made the practice more acceptable and turned the staff's time into a commodity.

As businesses across various sectors continue to struggle with the challenge of no-shows and late cancellations, the trend of implementing cancellation fees is likely to persist. While these policies provide a measure of protection for service providers, they also raise questions about fairness and the potential unintended consequences of monetizing previously unquantified aspects of customer relationships.

Key Takeaways

• Businesses across industries are increasingly charging clients for no-shows and last-minute cancellations.
• 16% of beauty professionals and many restaurants now charge cancellation fees, up from 5% in 2021.
• Cancellation fees reduce no-shows and late cancellations, with a 45% decrease in cancellations and 82% decrease in no-shows.
• Customers argue that cancellation fees are unfair, while businesses see them as necessary to protect revenues and time.
• The trend may lead to a reevaluation of the value placed on time and services in various industries.