Survey Results: Reservation Payment & Cancellation Policies for Hotels and B&Bs

December 6, 2017 by Ben Lloyd

What are your strategies when it comes to reservation payment and cancellation policies? This is a hot-button topic in the hospitality industry, which is exactly why we decided to make it the subject of our first ever Odysys survey. 117 properties of all sizes and locations participated in the Reservation Payment & Cancellation Policies Survey and the results were fascinating. The innkeepers & hoteliers that participated had a lot of questions about how others set and manage their policies as well as a lot of solid advice. To help you see the overall themes and trends industry-wide, we’ve compiled your answers here and generated some helpful stats. Hopefully the results of this survey help you to make better decisions about these policies for your bed & breakfast or hotel, or make you feel more confident that you are doing things right. Feel free to comment below!

Reservation & Payment Policy for Bookings

The two most common approaches to payment policy are to: a) Require an initial deposit and collect the balance after the guest arrives on your property, or b) Require a valid credit card to secure the reservation but not charge the guest until after arrival

Differences in Policies by Property Size

  • Properties under 20 rooms are more likely to have a “non-traditional” payment policy
  • Properties with less than 10 rooms or over 20 rooms are much more willing to set a policy of “Full Payment Due at Check-In/Check-Out” than properties with 11-20 rooms
  • Properties with 11-20 rooms are much more likely to require the full amount when a reservation is made
  • Properties with over 20 rooms do not require a deposit and tend to mirror the payment policies of larger brands or chains. Nearly ⅔ of the properties in our survey with over 20 rooms have a policy of “Full Payment Due at Check-in/Check-out
  • 70% of properties with 11-20 rooms require a deposit of some kind vs 36% of properties with over 20 rooms and 58% of properties with under 10 rooms
“Get a partial payment up front – it means the guest has ‘skin in the game.’”  – Jack North, Mayhurst Inn, Orange VA

“Take a 50% deposit!  This ensures guests are serious about staying with you and I have never had anyone complain about this.– Lori Reinhold, Alma de Sedona Inn, Sedona AZ

“Guests openly appreciate that their credit card is not charged until check-out; however our policy is clear that any cancellation carries an administrative fee.” – Hotelier, name and property withheld by request, 31-50 rooms

Advice for Setting and Managing Your Reservation Policies

When in doubt, opt for a “traditional” policy

If you fall under the “other” category, consider aligning your reservation and payment policies with a more traditional policy. For reference, the most common deposit / reservation policies cited by survey respondents are:
  • 1 night stay due upon booking, balance charged at checkout
  • 50% deposit upon booking, balance charged at checkout
While many of our respondents’ answers coincided with the options we gave then, many also selected “other” and explained their own unique policies. While some work well, many of them appear to create a lot of unnecessary administrative headaches and may in fact deter guests. Here are some examples of the other “non-traditional” reservation/deposit payment policies we received:
  • Taking a deposit and or full payment 14 days in advance of arrival
  • Balance due 30 days prior to arrival
  • 2 week advance payment in high season
  • Full payment 3 days prior to arrival
  • 25% deposit for reservations over 6 months in advance

Whether you take a deposit or not, always require a valid credit card to secure a booking.

Nearly every property that responded to the survey requires a valid credit card to secure a reservation, regardless of their deposit/payment policy.

Cancellation Policies

The most common approaches to cancellation policies are to: a) Offer a full refund for cancellations within a defined window (ie: 10 days or more in advance) b) Charge a cancellation fee or partial refund for all cancelled reservations

Cancellations, cancellation policies, and cancellation fees are a hotly debated issue in the hospitality world. We saw many common themes, questions, and advice in the responses. Here are a few of the most interesting trends we found.

Differences in cancellation policies by property size

  • Only properties with less than 10 rooms had a “no refunds” policy
  • Properties over 20 rooms are more likely to offer full refunds within a certain window (ie. “Full refunds for cancellations at least 7 days in advance”)
  • Properties with less than 10 rooms are much less likely to offer a full refund within a certain window (i.e. properties with less than 10 rooms are more likely to charge a cancellation fee no matter how far in advance the cancellation takes place)
  • Properties with less than 20 rooms are more likely to offer a full or partial refund if able to re-book the room.

Have defined and published policy…but be flexible–  Bob Thomason, Wayne Bed & Breakfast Inn, Wayne PA

We typically give a refund for cancellations inside of 14 days if we can re-book. Stick with your policy….everybody has a story.Innkeeper, Beaufort House Inn, Asheville NC

We handle things on a case by case basis, aiming for repeat and referral business.” – Dan, Georgetown Mountain Inn, Georgetown CO

Advice for Setting and Managing Your Cancellation Policies

Understand the competition and weigh the pros/cons

Your market & competition should play a large role when setting a cancellation policy. It is also essential to take into account your property size. Realize that your policies will have a significant impact on your conversion rate/occupancy. “Your policies should reflect your destination and its demand.– Xavier Ramirez, Combate Beach Resort, Puerto RicoPay attention to your market and what they are doing. It is easier to reverse a deposit policy than to add one on later.” – Hotelier, name and property withheld by request, 51+ rooms

Make sure your policy is clear

Dedicate a page or clearly designated section of your website to firmly and clearly stating your cancellation policy. Also make sure to include your policy in your booking engine, so guests know exactly what they are signing up for. “Have a clear policy and make sure it is stated on your website, and on your booking engine. Guests booking through your booking engine should have to acknowledge it by checking a box when making a reservation, and include the policy on your confirmation emails. Make sure your staff informs guests of your policy prior to making a booking over the phone.” – Fabrizio Chiariello, Albemarle Inn, Ashville North CarolinaCancellations negatively affect small Inns/B&Bs and create a wrong set of expectations and attitudes among travelers, especially those coming from OTAs. We advocate putting one’s foot down and establishing strict cancellation policies. Once you clearly communicate and explain your business practices to prospective guests, you will notice that, while some travelers are turned away (they are not your target market anyway), others will understand and follow them. Communication and clearly set expectations are key.– Anatoly and Rose Polyakov, Heart of the Village Inn, Shelburne VT

Be flexible in the interest of future business

You should be clear and firm in your cancellation policies, but you should leave a little wiggle room for when specific situations arise. Emergencies or accidents happen, and being open to these unforeseen scenarios will build guest trust and boost future bookings. “Generous terms” often result in retaining the full guest booking for a future date but have to be managed on a case by case basis – separating the “BS” from the truth.  Real emergencies do arise – hurricanes, medical, etc.– Bill Segil, Sea Cliff Gardens Bed & Breakfast, Port Angeles, WADo the right thing.  Treat your customers how you would like to be treated.”– Innkeeper, The Reynolds Mansion, Asheville NC

Charge a cancellation fee? Think about calling it a “Non Refundable Deposit” instead.

Language matters. If you don’t want to deter guests, feel free to change up your wording. “We have like the idea of a non-refundable deposit instead of a cancellation fee.  Everyone hates cancellation, they don’t seem to mind the non-refundable deposit. – Alan Fielding, Cameo Heights Mansion, Walla Walla WA

Consider gift certificates/rain checks rather than cancellation fees & refunds

There are options beyond cancellation fees or refunds. Many innkeepers offer their guests gift certificates or rain checks instead. “We sometimes give gift certificates in lieu of “cash” refunds depending on the circumstances.  Most guests respond positively to this rather than totally losing their deposit or payment.– Keith Hansen, Franklin Street Inn Bed & Breakfast, Appleton WI “Consider offering a “raincheck” for a future date – which means you don’t have to do a refund and their deposit is still in your bank.” – Jack North, Mayhurst Inn, Orange VA

Consider explaining why your policy exists

They say a person can’t hate something they understand. Explaining why you chose your current policy might help ease any negative guest reactions. “I explain to the guest something along the lines of – “We are a small business and all cancellations impact us greatly. When I reserve a cabin for you, I turn away all other inquiries for those nights as we have agreed to hold them just for you. I’m sure you can understand, it’s purely an economic choice, we just ask that you be sure about your timing”. Most if not everyone is understanding when framed in this manner.” – Innkeeper, Cherry Springs State Park PA

Set policies that you are comfortable enforcing

Try to set a cancellation policy that you can stand behind. We get very frustrated when people expect us to change our policy case by case, and unfortunately usually we do!– Emilie Kapp, Chestnut Street Inn Bed & Breakfast, Asheville NCYour policies have to be something you’re comfortable enforcing. We recently purchased a b&b and we left the former owner’s policies in place because we felt conflicted about changing the policies that the guests had originally booked under. This created problems for us this year in handling several cancellations because we weren’t really comfortable with the policies in place. We ended up compromising in many instances. We have since changed the policies for our second season to better fit the way we choose to operate the business.” – Innkeeper, name and property withheld by request, 6-10 rooms

Set different policies for OTAs

Online travel agencies place a big burden on properties in terms of cancellations. There is nothing wrong with setting different policies for rooms booked through OTAs as opposed to bookings made through your site. If anything, this will just encourage more direct bookings, which is never a bad thing! “OTAs are the worst for cancellations. Our OTA rates offer no changes, no cancellations and it has helped.” – Colin Brownlee, Hotel Banana Azul, Costa RicaMy policy on OTAs is more stringent than on my own site as my direct guests do not mess me about as much as OTA guests.– Di Beach, Hotel Los Castaños, Ronda, SpainFor Booking.com instead of our normal 50% deposit we require a 100% deposit which is fully refundable up to 2 weeks in advance of arrival.  We do this only because of the ridiculously high cancellation rate.” – Hotelier, name and property withheld by request, 11-20 roomsBooking.com has a high cancellation rate for us, we charge the full amount 30 days prior to arrival. Many times the credit card is not accepted. This policy gives us time to ask for a new card or cancel and still have time to rebook.” – Chris Moreno, Mountain Song Inn, Floyd County, VA

Have You Changed Your Reservation, Payment or Cancellation Policy in the Last 3 Years?

The responses to this question were fairly evenly split, but most of you have stuck with your current payment or cancellation policies for five years or more.

Differences by Property Size

  • Half of the properties with less than 10 rooms have changed their policies in the last 3 years
  • About ⅓ of properties over 10 rooms have changed their policies in the last 3 years
 

Thank You!

We had 117 properties participate in this survey. We enjoyed reading your responses and seeing all the different ways properties across the world handle payment and cancellation policies. This is one of the trickiest topics for innkeepers & hoteliers, so we hope these answers shed some light on the things you are doing right and the places where you can improve. We’d like to thank everyone who participated in the survey and provided such thoughtful and illuminating responses. We welcome your thoughts, comments, advice, questions in the comments below.
DOWNLOAD THE CANCELLATION POLICY SURVEY RESULTS AS A PDF