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How to Manage Holiday Cottage Cancellations & Refunds

Reading Time: 6 minutes

The holiday letting business is full of unexpected events and there’s no knowing what’s going to happen next. This inevitably means you’ll have to deal with booking cancellations and refund requests due to bereavement, illness, the weather or pandemics.

Why holiday booking cancellations can be damaging

When guests cancel their booking, you lose the time and acquisition costs you’ve invested in the booking. There’s also the added pressure and extra work involved to find a replacement booking. If you cannot find another booking, there’s also the impact of the lost income.

Therefore, to minimise the impact we provide some tips on how to anticipate and manage guests cancelling their cottage holiday.

Have a clear cancellation policy in place

The secret to handling booking cancellations professionally is to plan ahead. Nobody wants to cancel their holiday, but unexpected cancellations will inevitably happen. To avoid disputes and protect your income, you should ensure your cancellation policy for direct bookings is clearly outlined in your booking terms and conditions so guests are aware of what refund they may get.

If guests are clear about what your cancellation and refund terms are, they have the assurance that they have some refund protection which can create a sense of security and even make them more likely to book with you.

Cancellation policies and options

A common policy that owners and holiday cottage agents use is the closer to the holiday dates you cancel, the lower the refund as the likelihood of re-selling the dates decreases.

Typically, a scale is applied to determine the percentage amount of the total cost of the booking that the guest remains liable for.

For example:

Number of days before the holiday when cancelled     The % of booking cost payable

More than 60 days                                                                              5% of the booking cost
45 to 59 days                                                                                        40% of the booking cost
30 to 44 days                                                                                        50% of the booking cost
15 to 29 days                                                                                         75% of the booking cost
3 to 14 days                                                                                           90% of the booking cost
0 to 2 days                                                                                             100% of the booking cost

Another policy is to offer two different tiers of pricing – refundable, and non-refundable, with the refundable option attracting a price premium. This is because there’s a high risk that last-minute cancellations are difficult to re-let.

If a booking comes from a third-party booking (OTA’s Airbnb, agents etc.) their T’s and C’s apply.

Avoid unfair cancellation terms in your booking contract

Can you keep the guest’s money if they cancel? Hosts are entitled to charge a fee if guests cancel or keep a proportion of the payment to cover their losses. But the amount you keep must represent what you are losing because of the booking being cancelled.

For example, if a guest cancels and you manage to re-let the dates, the only amount you can legitimately withhold will be a non-refundable deposit or a cancellation fee. The amount should reflect the actual loss due to administrative costs and any difference in price between the customers’ booking and the replacement booking.

If the guest cancels at short notice and you can’t find another booking, typically you keep the amount paid, but refund any costs that are factored into the rental rate, but you haven’t incurred them (e.g. cleaning and utility charges).

In general, holiday letting businesses are free to use whatever cancellation terms and conditions they want, but they cannot be unfair (e.g. excessive cancellation fees).

How to reply to booking cancellations

Most guests will only cancel a cottage holiday due to unforeseen circumstances. They are likely to be disappointed (and probably upset over the event that led to the cancellation) so remember to be sympathetic.

When you reply, be understanding and if necessary, offer condolence or sympathy – but don’t lose sight of the fact that a cancellation can mean lost income for you. Stick to your booking cancellation terms and conditions.

Sample booking cancellation reply email

Dear (guest name)

We are very sorry to hear that due to (the reason) you have decided to cancel your holiday at (your property name) from (holiday dates). As per our booking terms and conditions, the cancellation policy will apply.

We will make every effort to re-let the booked holiday dates. If we are successful in re-letting the dates, at the same rate and terms, you will receive a refund of the deposit/full amount (delete as appropriate) less a £x administration charge and any costs incurred in re-advertising the holiday.

If re-rented for a lesser amount, the difference between your booking and the lesser rental amount shall not be refunded. 

If we are unable to re-let the dates, we will refund any costs which we will not incur due to your cancellation, being (the cleaning and estimated utility costs).

As per our booking terms and conditions, we advise all guests to take out travel insurance to protect themselves from the financial impact of cancelling. If you would like us to supply any paperwork to support a travel insurance claim, then please let us know.

We will let you know if we manage to re-let the dates and confirm any refund due.


(your name)

How to reduce holiday booking cancellations

If travellers know what to expect from the outset, cancellations due to misunderstandings can be avoided.

Clarify your cancellation policy
It’s important that customers read, understand and agree to your cancellation policy before they book. If guests are aware payments are non-refundable in case of a cancellation, they are less likely to cancel their booking for trivial reasons.

Also, if guests know that they are due a higher refund the earlier they cancel, this gives you plenty of time to find another guest to fill the availability.

Be clear about house rules
If you don’t accept pets, large groups, parties, and smoking at your holiday let then make it clear from the beginning. Your house rules are a great way to deter troublesome guests and prevent cancellations further down the line.

Use a channel manager
If you update your calendars manually there’s always the risk that they are not up to date and two guests could book the same dates. A channel manager synchronises all your calendars simultaneously on listing sites which avoids double bookings – and you having to cancel a booking.

Have a clear and honest description
If your holiday home is not safe for young children or is not suitable for guests with reduced mobility, make it clear on your website and listing site description. If guests know what to expect, there are no shocks on arrival and early departures.

It’s the guest’s responsibility to take out holiday insurance

Emphasise in your booking terms and conditions that guests should take out holiday insurance to cover cancellation costs. Clarify that if they choose not to take out insurance, then they accept responsibility for any loss that they may incur due to cancelling their holiday.

How to cancel a booking

In the rare, but unfortunate occasion when you have no choice but to cancel a booking, there are a few things you can do to hopefully avoid a negative review and keep the guest happy. Be aware that if you cancel bookings via a listing site, you may face certain penalties and a ranking decline.

Inform them as soon as possible
No one wants to have their holiday cancelled at the last minute. Make sure you inform the guests as soon as possible so they have time to look for a new holiday cottage.

Tell the truth and apologise
Although disappointed, most guests will be understanding if you are truthful and apologise, especially if it’s an unforeseen event. If you simply cancel their booking without explaining, you can expect complaints and negative reviews.

Provide a full refund
If you cancel the booking then the guests should be refunded in full.

Offer a discount
As a sweetener, offer a discount (20%) off a future stay. It may prevent a negative review plus you get a future booking.

To summarise:

Having a cancellation policy in your booking terms and conditions means guests are clear about what happens should they cancel their holiday. This should hopefully avoid refund disputes and protect you from losing income due to a cancellation.

If you need any advice on dealing with cancellations then please comment below.


  • Emma |

    I’m currently dealing with a guest who is supposed to arrive in 2 days time, but a family member has passed away so they aren’t able to make it for their weekend stay. He asked if it was possible to swap to a future weekend which I unfortunately had to say no because with less than 48 hours until arrival there’s just no chance of it being re-let. Following my reply, the guest became irate over email and threatened to leave a bad review online of me and my company because of my ‘lack of understanding’. I was very understanding and sent my sincerest condolences for his situation. I honestly feel very upset by his reaction but at this late notice, we will be seriously out of pocket (and it’s summer booking that tides us over throughout the year). Our terms and conditions are clear about our cancellation policy and guests have to agree to them during the online booking process. I’m not sure what to do, except just wait for the bad reviews to come in.

    How do you handle an unreasonable guest?

    • Philip |

      Sorry to hear this. It’s unfortunately the guests can’t come, did they take out travel insurance? If not, then it was their decision to take the risk and not take out travel insurance to protect against situations like this. This is why owners have booking terms so everyone knows what happens should the holiday be cancelled. I would refund any costs which you will not incur due to the cancellation, e.g. the cleaning and utility costs. There is an email template to use for cancellations in this post https://www.schofields.ltd.uk/blog/3982/holiday-let-email-examples/. I wouldn’t worry about ‘review blackmail’, you can always respond giving your side of the story. As holiday rental owners, we try to be flexible and understanding where we can, but you are running a business after all and only have a limited supply of weeks to let. This situation highlights the importance of having booking terms and recommending that guests take out travel insurance to cover cancellation. I hope everything is resolved amicably.

  • Lynne Morrison |

    Hi. I’m having a problem with a guest who had cancelled their holiday three week before they are due to arrive

    The airline that they booked has gone into liquidation and they couldn’t find another flight in their price range so cancelled. They are now looking for a full refund because they cannot take the holiday

    It clearly states on my booking form to take out Comprehensive Travel insurance in the event of cancellation and it also states cancellation fees. We refund 10% if cancelled in this time frame

    Why should I lose out also …The PERSON completed, signed and dated the booking form in order to accept the terms and conditions

    • Philip |

      Hi Lynne, I expect there are other accommodation providers who are in the same situation after the airline collapse. If travellers don’t take out comprehensive travel cancellation insurance that’s the risk they take. Your accommodation is still available after all. If you manage to re-let the dates then you could refund as advised in the post above. Terms and conditions are there to protect both you and the renter. It’s essential that the cancellation fees are included so everyone is clear should a booking be cancelled.

  • Lynne Morrison |

    Thank you for taking the time to reply to my predicament Philip.

    I did return the damage bond immediately with a coveting letter informing the traveller that if I can re let the property that I would reimburse in full but as it’s quite a late cancellation if I don’t manage to get the property booked my terms and conditions will stand at a return of 10%.

    I did point out that this reservation has been held for 16 months and in that time I have declined a lot of enquiries and potential bookings for this date which is Oct half term, the traveller said that this is irrelevant in terms of how long this booking has been reserved. I disagreee !!!

    I have offered to give the traveller a letter for their insurance company only to be told that the policy he holds is only for possessions which in my opinion is not Comprehensive Travel Insurance which we encourage travellers to take on our booking form.

    He obviously paid for his flights on credit or debit card so will be reimbursed for flights, if I also give a full refund, I will be the loser in this scenario

    The traveller said he will take the matter further if he doesn’t receive a full refund but I believe I am in within my rights.

    Thanks again for your reply

    Kind regards

    • Philip |

      If in doubt get the legalities of your booking contract looked at by a lawyer. Ideally, travel insurance should be taken out that includes end supplier failure and covers bookings for villas, car hire etc.

  • Rick Bond |

    Good article. To nip a problem in the bud, respond to it the moment it is reported is so important. Even if you can’t fix it straight away, get on the phone – listen to the complaint and then let them know what you plan to do and when, seeking confirmation that they are happy with this. If not, guests tend to scrutinise a property for the rest of their stay to find every last excuse to ractchet up a number of complaints to justify their claim for a refund, (example: “the pots in flower in your photos were not in flower when we arrived. – This is a flagrant contrvention of the Trades Description Act.” – this from a guest who arrived on a snowy afternoon in late January, who really wanted to complain about the fact that the WiFi wasn’t working on arrival, which the owner failed to address for 24-hours).

    In all our terms and conditions we include the following statement:

    Any complaints must be notified in the first instance to My Holiday Marketing immediately so that they can investigate the circumstances and take any necessary action. In no circumstances can compensation be made for any complaints that are made after the date of departure, or where your have denied or prevented us or our agents the opportunity to try to put matters right during the bookers stay.

    It usually does the trick! However, if ever there has been a genuine fault and properly reported I can’t save how important it is to over compensate. It’s actually proved useful in securing repeat bookings when handled properly. Everyone knows things can go wrong – it’s how you respond is how you are measured in the long run.

    • Philip |

      Great tips Rick, thanks for your valued input.

      Listen to the complaint and then let them know what you plan to do and when, seeking confirmation that they are happy with this. If not, guests tend to scrutinise a property for the rest of their stay to find every last excuse to ractchet up a number of complaints to justify their claim for a refund

      You are absoloutely right, simple communication with the guest and an action plan can put a stop to the situation escalating beyond repair.

  • Sean |

    We just had guests stay at our luxury 4 bedroom villa in an upmarket resort on the beach in South Africa, there was absolutely no problem with the property and the guests in fact expressed how happy they were with the property. Then a huge storm hit the area and took out the power, blew roofs off of buildings and damage many of the beachfront properties. Power was out for 2 1/2 nights and the guests moved out of the property on the last night to stay in the resort hotel. The guest is now claiming a refund for the cost of the hotel and a partial refund for his 2 nights without power. I have offered him a nights refund and 10% discount on any future stay. As I understand it the storm was an act of god which affected the municipality supply over which I had no control or influence, so essentially I have no liability and my offer to him is a gesture of goodwill. Please advise where I stand on this.

    • Philip |

      Maybe a refund for the 2 nights affected? Can you claim on your insurance? Put yourself in their shoes, how would you like the situation to be resolved?

  • Grainne |


    My dad had a family of 4 stay in our apartment abroad in spain. They booked for a week. On nearing the end of their trip they emailed to say they had a terrible time as there was construction going on in the apartment below which my dad had no idea about. The guests are now looking for a full refund and more on top of what they paid. My dad was going to refund half and im all for that but would it be disrespectful to investigate how long they had to vacate the apartment for or how would this be best measured on refunding their money? My dad also lent them his own sat nav so they would find the apartment better has we found the ones provided in car rentals hard to use. Im weary about my dad refunding all just because they demand it…any advice?

    • Philip |

      Did they stay for the whole week? If so then refunding half is reasonable as you have incurred expenses. They should have informed you straight away rather than at the end of their trip. This should be in your booking contract. I would inform future guests about the construction work to avoid further complaints.

  • Claire Hadgraft |

    Hi, i’m new to holiday lets and my property isn’t yet compete, but i’m trying to plan ahead! What happens if, heaven forbid, a guest causes damage that cannot be rectified before the next booking? Can i get insurance to cover this or other disasters that affect a guests stay?

    • Philip |

      If it’s an insured event you can claim on your insurance for loss of rent/alternative accommodation. It’s essential to have trusted tradespeople on hand who can help out in an emergency to put things right. Have a read of this guide https://www.schofields.ltd.uk/holiday-let-insurance/

  • Lilia |

    We rented our villa in Spain to the big family for one month . So this Tenants was little bit a pain … complaining about little things or demanding extras during their staying . However there wasn’t really serious issues . We was trying to sort the extras they demanding , without any extra charges . We just tried to be nice . A week after they Left our villa , they are demanding A FULL REFUND . We just received all kind of treads , they apparently was “extremely unhappy” ( what we wasn’t even aware of till now ) . I thought if someone unhappy with their holiday property , they wouldn’t stay for whole month there . So they knew they was going to claim whole payment back plus extras , while holidaying at our place which cost us in bills so far around 6000€ .

  • jenny doran |

    my sister paid deposit for holiday rental she saw on facebook, but now cant get time off work
    .she signed nothing can she get refund as the owner has no advertising fees cleaning etc.

    • Philip |

      What does the booking contract state with regards to the deposit? Typically, it’s not refundable.

  • Hannah |

    We have had a lot of cancellations due to this virus. We have also been told by the french authorities that ‘deep cleaning’ is needed in between guests and if we cant provide that then we cant take guests. So we have Begrudgingly decided to write the summer off. While we obviously refund any previously booked guests due to us cancelling, i’ve had a complaint that people have paid for flights and crossings that are now likely to go ahead so they wont be refunded by the airlines. Are we in any way responsible? I feel bad but not sure really what we can do.

  • Amanda |

    Should I have a separate Cancellation Policy in addition to T&C’s?

    • Philip |

      Include your cancellation policy in the terms and conditions – but make them clear with a heading so they stand out.

  • Neil Shaw |

    I am trying to move a booking six weeks ahead to another date due to an unexpected work commitment the letting company has said as it is less than 10 weeks away they will not amend and suggest I cancel and hope the get a replacement booking and then refund me. This seems unreasonable as they will be no worse by simply moving my booking – I have said I would pay any additional rate and a reasonable admin fee but consider their standard terms unreasonable. I do not think my Barclays holiday insurance covers for an unexpected work commitment.

    • Philip |

      Hi, the booking terms and conditions will outline the cancellation policy. This seems standard practice for a late cancellation.

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