Hotel cancellation policies offer hotel guests the opportunity to cancel their booking up until a certain amount of days before check-in. Once this date has passed, the hotel might charge the guest a set cancellation fee, a percentage of the booking, or the full amount.
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Your booking cancellation policy must be made crystal clear during the hotel reservation process. Your cancellation policy is essentially a legal document – if it is vague, incorrect or offers any wiggle room, resourceful guests may find loopholes and leave you out of pocket.
But while your hotel booking cancellation policy needs to be legally sound, it can’t be written in lengthy legalese. Your average guest needs to understand it easily, and the most important terms – the timeframes and applicable cancellation fees – need to be displayed clearly.
As a hotelier, you have the choice of a number of different cancellation policy options. Ten of the most common include:
Three decades ago free cancellations of reservations in hotels were common, but they are now a rarity, as the internet has made it far quicker and easier to book a hotel, which has increased instances of travellers making bookings ‘just in case’.
Sitting at the opposite end of the spectrum, a non-refundable cancellation policy takes full payment from the customer. Hotels may choose to implement this policy when a guest decides to cancel particularly late, such as in the 24 hours before check in.
More common than non-refundable policies, partial refund policies see the guest refunded a percentage of the total reservation value in the days leading up to their stay. This percentage may decrease as check-in approaches.
Another common form of partial refund, ‘one night penalty’ policies see the guest charged for the first night of their cancelled stay.
Sometimes guests won’t cancel, but will simply fail to show up. In these cases a hotel might choose to charge the full total, a percentage of the total, one night, or a set cancellation/no-show fee.
Hotels stand to lose more on group cancellations than individual cancellations, so may choose to implement a stricter policy for groups, e.g. a non-refundable policy that stretches 14 days before check-in.
Many hotels have a minimum stay policy, particularly during peak periods. In cases of cancellation, no shows or if a guest wants to cut their stay short, a hotel may choose to base the cancellation fee on the minimum stay.
Similar to minimum stay policies, seasonal cancellation sees a hotel’s cancellation policy tighten during peak periods, to ensure the property minimises losses during the most profitable times of year.
Hotels will often be more lenient when the cancellation is out of the guest’s hands. Force majeure policies cover cancellations due to natural disasters or government restrictions, such as those during COVID. Force majeure cancellations are generally free.
If a guest is hosting a special event at a hotel, such as a wedding or business conference, stricter cancellation policies will usually apply.
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Your hotel cancellation policy must be easily accessible to all guests. It should be displayed prominently on your website, in your hotel booking process flow, and as a link on your booking confirmation email. In terms of the content, it should feature the following elements:
Now that we understand the ‘what’, let’s look at the ‘how’: how should you handle booking cancellations? While it’s tempting to avoid losing money by being as strict as possible, it’s wise to take a longer-term view.
If a guest has to cancel, for whatever reason, and you enforce a particularly harsh cancellation policy, it can leave a bad taste in their mouth. You can do damage to your reputation, even if you stated your policy very clearly before they booked.
This is why most large hotel chains tend to offer free cancellation up to 24 hours before check-in – they realise the value of making fans by being flexible and understanding.
As a compromise, rather than issuing a refund, consider issuing a credit that allows the customer to rebook their stay at a later date!
Little Hotelier makes it easy to set up and take control of all aspects of your hotel reservations: booking, management, cancellations and more. Using our single, simple portal you can easily set up and display your hotel’s cancellation policies and penalties for reservations made through Little Hotelier.
The Little Hotelier direct booking engine forms a key part of our all-in-one reservation system, which can increase your hotel revenue by up to 43%!
By Shine Colcol
Shine is the SEO and Content Manager of Little Hotelier, the all-in-one software solution purpose-built to make the lives of small accommodation providers easier. With more than five years of experience and expertise in content strategy, creation, and management, Shine has produced informational content across various topics, mostly around improving daily operations and increasing business metrics. She aims to share well-researched articles in hopes of helping bed and breakfast owner-operators win more bookings and gain more control of their small property.
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