How to Manage Holiday Cottage Cancellations & Refunds
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.
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.
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.
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.