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Dealing with holiday refund requests & cancellations

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Business, as in life, is full of unexpected events and sometimes there’s no knowing what’s going to happen next. In the holiday letting business this inevitably means you’ll have to deal with cancellations and refunds at some point due to bereavement, illness, job etc.

Here, we provide some tips on how to respond to a guest who has to cancel their holiday.

Plan ahead – Cancellations will happen

The secret to handling cancellations well is to think ahead. It will eventually happen so decide on a plan of action for cancelled bookings and make sure this is clearly outlined in your booking terms and conditions. This should involve:

  • Time frames
  • Amount of refunds due
  • Advice on holiday insurance
  • Good-will policy

It’s up to you to decide on a time frame for refunds and how much money to return. For guests who give plenty of notice (e.g. over two months), you might be prepared to give them a refund if you manage to re-let. On the other hand, guests who cancel at short notice should only expect a small percentage of what they paid as a refund.

You also need to consider:

Administration fee: Many holiday let owners charge an administration fee for cancellations to cover the cost of the extra work involved in filling the cancelled weeks (e.g. £30).

Bank charges: If you’ve had to pay bank charges or payment processing fees via Paypal or your merchant account for example, you may also want to take these off the amount you’re refunding.

Damage deposits: These should always be returned in full if the stay is cancelled.

Re-advertising: Any costs incurred in re-advertising your rental, special offers or discounts should also be deducted.

Cleaning and utility charges: If you’ve included charges for cleaning and utilities, these should be refunded in full to the guest as you haven’t incurred these expenses.

Have a clear written policy in place

So considering the above points you should work out a clear policy when you first launch your rentals business with regards to cancellations. The booking terms and conditions should form part of your rental contract that your guests enter into to when they book, and having this in place will greatly help you in dealing with cancellation requests. Ethical rental owners will stick by the booking policy and its time frames and amounts, and if you need to refund money, do it as quickly as possible.

Typically, a non-refundable deposit of 25% of the holiday price is payable at the time of booking, with the balance payable 6-8 weeks prior to the holiday. If guests cancel less than 6 weeks prior to the holiday then the full balance remains due and is not refundable.

Beware of scams

Asking for holiday let refunds shortly after payment is a known scam. Before refunding any money check the payment has been cleared by your bank. Never make a refund on un-cleared funds or into an overseas account unconnected with the original transaction.

Holiday insurance

One of the most important things to emphasise in your booking terms and conditions is that a holidaymaker can protect their money in the light of unforeseen circumstances by taking out holiday insurance. Travel insurance policies will cover many events that could cause them to have to cancel their stay at your holiday let, e.g. accidents, illness, injury and unemployment.

As well as mentioning it in your booking conditions, you can also make sure your guests are aware of their responsibility to take out travel insurance by including a short sentence in your booking confirmation email.

For example, “we strongly advise taking out comprehensive travel insurance to cover possible cancellation costs and your stay at our holiday let. If you choose not to then you accept responsibility for any loss that you may incur due to your cancellation”.

Replying to cancellation requests

Most guests will only cancel a holiday if they have to and for legitimate reasons, and they’re likely to be disappointed (and probably upset over the event that led to the cancellation) so remember to be sympathetic.

Start your reply understandingly and if necessary, offer condolence or sympathy, but don’t lose sight of the fact that a cancellation can mean lost business for you.

Start off by showing good will. Depending on timescales, maybe offer the guest a choice of alternative dates, and mention that you will re-advertise the cancelled dates. Explain that if you get a new booking you will refund for the cancelled stay (the exact amount will depend on the terms in your booking contract) minus your administration fee and possibly the costs involved in re-advertising the property.

If you’re unable to get a new booking the guest may not be entitled to a refund, so in this case you should gently encourage them to speak to their insurance company and continue your gesture of good will by offering to help with paperwork to support a claim for insurance purposes. In order to make a claim they will need a copy of the original booking confirmation, receipts for payments made to date, and possibly a copy of your terms and conditions. Ensure you have all the necessary paperwork in order for each of the bookings you take.

Being understanding and not seeing everything in black and white is what sets holiday rental owners apart from faceless multi-chain accommodation providers. How would you like to be treated in the same scenario?

If guests ‘demand’ a full refund they you are entitled to stick to your booking terms. For genuine unforeseen cancellations, then a partial/full refund or an offer of alternative dates may be a solution that’s mutually beneficial, encourages repeat bookings and makes you feel like you have done the right thing.

To summarise

Considerate owners are what sets the private holiday rental industry apart, you need to be caring, but firm when dealing with cancellations. Don’t lose sight of the fact that a cancellation can mean lost business for you.

If you don’t manage to re-let the dates:

You are entitled to keep the amount paid less any costs that you won’t now incur such as cleaning and utility bills. If they haven’t paid in full and owe you the balance, pursue for the outstanding money.

If they want to book for next year then you might feel like offering a small discount as a generous gesture against a future booking.

If you manage to re-let:

You refund less any re-advertising costs, last minute discounts and a reasonable admin charge to cover loss of revenue. You could also offer to put their payment towards a future booking.

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

12 Comments

  • 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 http://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
    Lynne

    • 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 |

    Hi,

    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.

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