Cancellation Policies for Accommodation Businesses

cancellation-policyCancellations are always unpleasant for the host but often also for the guest. Most hosts have a cancellation policy. Which strategy is used can make a big difference in terms of guest relations and revenue management. Common strategies are:

No Cancellation
No matter when or why the guest cancels the full price of the booking will be charged. Except for discounted rates or special booking periods this strategy is very harsh towards guests.

Cancellation Fee
All cancellations or cancellations within a certain period before arrival occur a fee. For example: If a guest cancels outside of 10 days before their arrival  there is a €30 cancellation fee. If they cancel inside of the 10 days, there is a cancellation fee of €100 or the full price is being charged.  Another common strategy is to charge for the first night.

Deposit
If a booking is being cancelled the guest either looses their deposit. For hosts this is very effective and easy because you already have the money and don’t need to fight for it when the guest cancels.

Vouchers
The guest is offered a voucher which can be used to book another date. If the voucher is not being redeemed within a certain period a cancellation fee applies.  Especially  used in combination with a deposit a very creative way to create a win-win situation.

Unrestricted Cancellation
While this is very nice for guests it can hurt your business.

Dual Strategy
Many professional lodgings offer two prices. For the full can be cancelled without restrictions. A reduced rate cannot be cancelled. This is quite clever because you can use the cancellation policy as part of a competetive price strategy.

Some lodgings are very strict regardless why the guest cancels. As long as your policies are fair and clear, most guests understand. The risk is though if you are strict and the guest has a very good reason you are risking a bad review. This is why other hosts are very generous when it comes to cancellations which then also has a negative effect on business.

Which cancellation policy you choose should depend on your chance to resell the lodging and on the efforts you will have to make to do so. If it is almost impossible to resell you might want to enforce a rather strict policy. Depending on circumstances it might be a good idea to have different policies depending on the season.

If you have a cancellation policy make sure it is communicated to the guest. They should be published on your website as a link or full text on your booking engine.

Beds24 online booking system offers a variety of functions which help you handle cancellation policy:

  • Display your policy or a link on your online booking page
  • Deposit collection
  • The cancel function lets you set a cut off date prior to the arrival where cancellations are allowed. It is also possible to set individual cancellation periods depending on season, rate and even per individual booking. If you use this function the guest can log in and cancel themselves within your rules.
  • Set a dual price strategy and offer different prices on your booking page.