Cancellation policy for a vacation rental

Cancellation policies for vacation rentals are a critical component of ensuring successful property management and improving the guest experience. When starting to manage a vacation rental property, many first-time hosts overlook this part of the process, unaware of the problems that can arise from not having a clear cancellation policy.

With this guide we aim to provide you with a deeper insight into the importance of having effective cancellation policies, the different types available, how they work on popular portals such as Airbnb, Booking and Vrbo, as well as the disadvantages of not having a clear policy. We hope, with these guidelines,  it will be much easier to get better results, attract guests on rental portals and not reduce the profitability of your vacation rental business.

What do we mean by cancellation policies?

Cancellation policies are essential to provide financial security to both the owner and the guest. Without clear policies, a number of problems can arise:

1. Financial loss

Lack of an effective cancellation policy can result in significant loss of revenue for the host/owner. Last minute cancellations or cancellations without penalty can leave gaps in the booking calendar that can be difficult to fill.

2. Declining occupancy rates

Owners depend on planning to effectively manage their properties. Sudden cancellations can affect the availability and management of resources, such as cleaning and maintenance, while decreasing the occupancy rate, which will translate directly into losses and empty calendars.

3. Distrust among guests

The absence of a clear policy can generate distrust among guests, who may feel insecure about booking if they do not know the cancellation terms. This can result in a decrease in bookings and generate a bad reputation for you as a host, as guests may wonder what problems the rental property has.

4. Balance between flexibility and financial security

Without a proper policy, it can be difficult to find the balance between being flexible to adapt to the changing needs of guests and the market, and ensuring the financial security of the vacation rental.

As you can see, cancellation conditions are not an issue to be taken lightly, but should be addressed and weighed based on real problems that may arise.

Before deciding on one cancellation policy or another, it is a good idea to study the most common types of cancellation policies for vacation rentals. By analyzing the needs of your vacation rental, those of your target group and the conditions of each rental platform, you will find that these types mentioned below are the most common.

Types of cancellation policies

There are several common types of cancellation policies, each with their own conditions and terms. Some of the most common include:

Flexible cancellation 

Allows free cancellation up to a specified number of days prior to arrival, with a full refund depending on how far in advance the cancellation is made.

 Moderate Cancellation

Offers a full refund if cancellation is made a certain amount of time in advance (usually between 5 and 14 days prior to check-in), and a partial refund if canceled with less notice.

Strict cancellation

Usually requires a cancellation further in advance to receive a full refund, and only a partial or no refund is offered if canceled closer to the arrival date.

Super-strict or non-refundable cancellation

This policy generally offers little or no refund, even if the cancellation is made well in advance.

Cancellation policies on Airbnb, Booking and Vrbo

Each vacation rental portal has its own cancellation fees, which can vary in terms of flexibility and general conditions, as well as the accommodation service offered. Here we bring you a summary of how they work on Airbnb, Booking and Vrbo:

Airbnb

• Flexible: An additional service fee applies.
• Moderate: Requires cancellation at least 5 days prior to check-in for a full refund.
• Strict: Requires cancellation at least 14 days prior to check-in for a full refund.
• Super Strict: Specific conditions apply and may require additional documentation.

Find out more about Airbnb’s cancellation policy and conditions in this guide.

Booking

• Flexible: Varies according to the provider’s policy, but generally allows free cancellations up to a few days before check-in.
• Moderate: Offers a full refund if canceled at least 5-14 days in advance.
• Strict: Cancellations made at least 14-30 days prior to check-in are allowed for a partial refund.

If you are interested in learning more about Booking.com’s cancellation policies, take a look at our cancellation guide.

Vrbo

The rental platform Vrbo works with a cancellation policy based on days prior to the arrival date, so the conditions will vary (from full refund to non-refundable) depending on the time of cancellation.

How to prevent guests from canceling the reservation?

As you can imagine or have probably experienced first-hand, a cancellation (especially if it’s last minute) can put a damper on your plans and even affect other bookings. Not only because of the economic loss this entails, but also because it will affect the management of aspects such as cleaning or guest check-in.

Although you will not be free from suffering emergency cancellations due to exceptional circumstances, the truth is that there are some aspects that can be put into practice so that travelers do not cancel or, if they do, these canceled reservations do not pose a big problem for you.

Make the cancellation policy clear from the first contact

It may sound obvious, but it wouldn’t be the first time that a guest claims not to know what kind of cancellation policy applies to your vacation rental because they didn’t read the booking conditions properly.

Making it clear in the description of the listing on the booking portals and in the summary of the conditions will avoid this kind of misunderstanding. Make sure to adjust the information on all platforms, since as we mentioned before, they may vary depending on the booking site.

A clear and safe option for the host is to sign a vacation rental contract, which will explain the details and possible cancellation scenarios.

Ask for an advance of the final price when making the reservation

Another way to avoid that the canceled reservation generates a 100% loss, is to ask for an advance payment. It is important to make it clear to the guest that this deposit is non-refundable.

Offer promotions and discounts for confirmation

At times when you need to fill the calendar and ensure a full reservation, one strategy will be to offer a discount if the guest confirms their arrival in advance, knowing that they could lose the money if they cancel at the last minute, but offering a discount will be a good way to attract them.

Open and friendly communication

In the digital age, the human touch is especially important. Showing your guests that you are an open and hospitable host will generate more empathy. Likewise, it will also be a way to connect with them and be able to see if the reservation is in jeopardy.

Don’t be afraid of feedback

Knowing the cause of cancellations will be the most important form of prevention for the future. Knowing the guests’ reasons will help you see if there are aspects of your vacation rental that need to be improved, or give you peace of mind that the cancellation was not your fault.

Know your target audience

If you’re getting a lot of cancellations, one reason may be that you’re targeting the wrong audience. Perhaps the rental doesn’t suit their needs and they decide to opt for another property, for example. Be that as it may, knowing first-hand what elements, flexibilities and considerations to take into account from your target group will allow you to improve your services and really offer them the accommodation they are looking for.

How to manage the consequences of having to cancel a guest’s reservation?

The reverse may be true: you may be the one who has to cancel the reservation. How do you deal with this as a host? Although it is likely to be a well-considered decision for compelling reasons, as was the case with travel restrictions during the COVID-19 pandemic, or an indisposition leading to an emergency cancellation, the truth is that bookings canceled by the host can be poorly received by travelers.

Booking portals impose quite severe penalties on those hosts who cancel reservations regularly, so it will be important not to abuse it and offer the guest solutions, if possible.

This way you can avoid problems and situations that affect your business reputation by canceling bookings:

• Your calendar should always be up to date: this way you will not have problems with double bookings or overlaps resulting in cancellations.
• Use a Channel Manager to manage all reservations centrally: a channel manager is the best ally when it comes to avoiding problems in the business, from the moment of booking to the guest’s departure.
• Be transparent with the rules of your vacation rental: if you do not accept children, pets, parties or large groups, you must be clear before accepting the reservation. Make sure that guests agree with the rules to avoid problems.
• Be clear in the listings on the platforms: sharing exhaustive information and photos of the property will prevent guests with special needs (e.g. people with limited mobility) from booking by mistake.
• Offer an alternative or discount: if you find you need to cancel a booking after all, you can avoid a bad review by offering an alternative accommodation to the guest, for example on another date or other accommodation you manage, and a discount for the inconvenience caused.

Conclusions

In summary, cancellation policies for vacation rentals are essential to provide financial security, promote guest confidence and facilitate effective property management. By understanding the importance of these policies, the different types available and how they work on popular platforms such as Airbnb, Booking and Vrbo, owners can make informed decisions that benefit both themselves and their guests.

Always remember to clearly communicate your cancellation policies to avoid misunderstandings and potential conflicts with travelers, so that your business’ reputation will only improve over time.

Using integrations and tools, such as a channel manager, to help you with day-to-day management will also have a positive impact on your business and avoid classic problems, such as double bookings or unexpected cancellations.

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