What is Cancellation Policy?
A cancellation policy defines the rules and penalties for guests who cancel or modify a confirmed reservation.
Hotels typically offer three types of cancellation policies: flexible (free cancellation up to 24 hours before check-in), moderate (free cancellation up to 48-72 hours), and strict (non-refundable or partial refund only). Some hotels use a tiered approach where the penalty increases as the check-in date approaches.
The right policy depends on your market. Business hotels in high-demand areas can afford stricter policies. Guest houses in competitive leisure markets may need flexibility to attract bookings. Many hotels offer lower rates for non-refundable bookings as a revenue management strategy.
Why Cancellation Policy matters
A cancellation policy protects your revenue from last-minute cancellations while remaining fair enough that guests feel comfortable booking. Too strict and you lose bookings to competitors. Too lenient and you absorb the cost of empty rooms.
Related terms
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