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.
NB: This is an article from WebRezPro
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The Purpose of Cancellation Policies
A cancellation policy protects both you and your customers by:
- 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.
- 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. 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.
These are best applied to last-minute bookings, late cancellations (such as within 24 hours of check-in), and no-shows.
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) cancelling their reservations. For this reason, hoteliers may implement stricter policies for these types of bookings to prevent loss of revenue.
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.