An Independent Hotelier’s Guide to Cancellation Policies

Every interaction between a guest and your property counts, and this extends to your cancellation policy. While cancellations are undesirable for hotels, they provide an opportunity to cultivate a positive relationship with your clientele and encourage them to rebook. Here’s how to develop cancellation policies that support your hotel’s bottom line and customer experience.

The Purpose of Cancellation Policies

A cancellation policy protects both you and your customers by:

  1. Reducing the number of no-shows and holding guests accountable. This way, hotels don’t lose revenue from avoidable vacancies and protect their staff’s time and energy from preparing unnecessarily vacant rooms.
  2. Giving guests confidence when booking by allowing them to cancel by a certain deadline for a full or partial refund when unavoidable circumstances arise.

Types of Cancellation Policies

There are many types of cancellation policies for different scenarios and reservation types. WebRezPro Property Management System allows you to create multiple cancellation policies for various unit types and packages. Below are a few common policies and the situations in which they best apply.

Free Cancellations / Force Majeure

Free cancellation policies may result in lost revenue for hoteliers but are appropriate for unavoidable circumstances on your customers’ end, such as government restrictions (like the ones during the COVID-19 pandemic), natural disasters, or medical emergencies. 

Free cancellation policies attract advance bookings with the reassurance that they can be canceled for free up to a certain time before check-in, after which a cancellation fee or full charge of the reservation will apply. If the guest cancels before the cut-off time, the hotel should still have plenty of time to resell the room and recover the revenue.

Non-refundable Policies

These are best applied to last-minute bookings, late cancellations (such as within 24 hours of check-in), and no-shows.

Partial Refunds

Partially refundable policies offer flexibility to guests while protecting revenue and can include one-night penalties (which charge guests for the first night of their canceled stay) or refunding a percentage of the total reservation leading up to the stay, with the refund decreasing closer to check-in.

Special Event and Group Booking Cancellations

Hoteliers have more to lose from large groups (such as weddings or business conferences) canceling their reservations. For this reason, hoteliers may implement stricter cancellation policies for these types of bookings to prevent loss of revenue.

Peak Periods

Properties have the potential to make the most money and achieve maximum occupancy rates during peak travel periods. When someone cancels last-minute during this time, hotels lose out on revenue they would have almost certainly made otherwise. During periods of high demand, hotels can choose stricter cancellation policies, such as minimum stay policies (which base the cancellation fee on minimum stay requirements) or seasonal cancellation policies.

A would-be traveler sadly cancels her booking online.
Some cancellations are beyond the guest’s control.

The Importance of Flexibility

No matter what cancellation policies you choose as a hotelier, remember to remain flexible and open-minded and to update your policies regularly. The travel and hospitality industries are never static; they undergo constant shifts.

Creative Solutions to Encourage Rebooking

There are ways for hoteliers to provide mutually beneficial solutions for unexpected cancellations. For instance, WRP allows you to convert reservations into gift certificates for future stays as a way for hotels to offer flexibility to guests while avoiding lost revenue. Further, incentivize guests with a value-added option when rebooking a future visit, such as a basket of locally made goodies or a free room service dessert.

Where to Highlight Hotel Cancellation Policies

It’s important for hoteliers to clearly and directly state their cancellation policies where customers will see them.

  1. Put it on your hotel website’s FAQ page and display it within your online booking engine. Get customers to click “I agree” when booking.
  2. Include it in your OTA* profiles and anywhere else your property is listed.
  3. Include it in booking confirmation and pre-arrival emails.

*A note about OTAs: Statistically, OTA reservations have higher cancellation rates than direct bookings. Increasing direct bookings over third-party bookings works hand-in-hand with implementing an effective cancellation prevention strategy. Also, hotels can better push gift certificates, rebooking opportunities, and guest loyalty.

Cancellation policies protect a hotel’s bottom line by preventing last-minute cancellations and no-shows while encouraging client confidence and loyalty when booking. These policies are an extension of your property’s customer service. Flexibility, understanding, and creative solutions go a long way in providing a positive experience.