Deposit - Cancellation Policy Advice

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07/01/2015

Looking for advice on cancellation policies. I inherited our current policy years ago and feel more in a position to make a change. I'm just having a very hard time finding resources online for setting a good quality cancellation policy and I'm stumped aside from researching multiple sites of other small properties.

We are a lodge in a seasonal, recreational town in the Northern US. We find most of our guests book between 30 days to 2 weeks in advance. Walk-ins and same day bookings are RARE due to our location. Our main competition, sadly, are chain hotels (which seem to ruin everything for us little guys). Our current policy doesn't feel ideal or in line with other small properties, but maybe I'm wrong. Every once in a while I go through a spurt of customers who comment my policy is too strict (probably because again, we have chain hotels within 10 miles of us who offer free 24 hour cancellation). 

We require a 1st night non-refundable deposit at the time of booking. Yes, this means one night stays are non-refundable.  
If you cancel >8 days, 1st night deposit forfeited 
Cancel <7 days, 100% non-refundable

Does this seem too harsh? Too confusing? Not harsh enough? What's a good standard? 

I had an idea to require a smaller deposit, like $50 and offer a more progressive policy (cancel 1 week in advance = 75% nonrefundable, 2 weeks = 50% nonrefundable, 3 weeks = 25% nonrefundable etc. (or similar), but maybe that is more confusing. I like the idea of smaller deposits because cash flow is always an issue in seasonal places like ours and I always prefer to take money, not give it back. 

Thoughts?
What is your cancellation policy?

TIA!

 

P.S. Please forgive me, I'm new. I've read this forum as needed for a couple years, but this is my first time posting.

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-B

 

OnTheShore's picture
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08/28/2011

Cottages -- rented by the week in peak season, two night minimum during the shoulder seasons. We ask for a downpayment of 25% of the rent at the time of booking, balance due upon arrival. In the event of cancellation (at anytime after we've taken booking), the downpayment is non-refundable unless we succeed in renting the cottage to someone else.

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ChrisandShelley's picture
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04/13/2014

We charge a $25 non-refundable deposit. Most people don't balk at sacrificing this when they cancel. They have to pay one night if they cancel within 7 days or 14 days of a festival or holiday weekend.

It's not in our policy, but when we get a cancellation for medical issues, car trouble or any legitimate reason, we always offer to forward the deposit or the room charge to the next stay. It's good PR and it lets people know that we're human too.

Now if someone cancels for a BS reason within the time, they pay. Very rare, though.

Our policy is pretty close to what others in town have as well. People will look at cancellation policies and sometimes that is a deal breaker when they are comparing two or three places. Since we are all similar, it's a non-issue.

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Christopher and Shelley Smith, Innkeepers
The Wildflower Bed & Breakfast, Mountain View, AR

 

Generic's picture
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02/24/2011

There are a few considerations....

  1. The country of origin of your clientele. This makes a real difference in if/why people will accept the deposit.
  2. Your competition. If your competition isn't charging a deposit and you are, this will make people consider your property.
  3. Intent of the deposit.

Basically, deposits are more common in some markets than others. It relates to how people view an oral/written contract. In my market people generally consider an oral/written contract to be important. I still don't take a deposit on direct reservations and that's going on over 20 years. I can count on my fingers the number of times that someone has stiffed me, including one lady who reported her CC stolen to avoid the charge (had I pursued it, not only would I have won in court, she would have had a police record for fraud). But from my understanding a deposit is more common in the US.

On the other hand, on all the OTAs, I charge a deposit, equal to one night with a much stricter cancellation policy. I find that the OTA customers are much more flaky than my direct customers. While most of my direct customers are worthy of the trust that I put in them, the OTA customers often don't think a contract is a contract and even ask them to call to see if they can get out of the cancellation policy and/or out of non-refundable reservations. I will give up to 50% back of a non-refundable reservation if they give me enough lead-time to resell, but I NEVER give back 100% of the money, because then they won't have learnt the lesson of what non-refundable means. And if they say it's a hospital emergency, I offer a copy of the invoice for their insurance.

Most of my competition doesn't charge a deposit and many don't have automated reservation systems. That gives me a leg up on the competition. The other part of not taking a deposit is that it also means that they don't have to worry about putting in a reservation as a place-holder. They see, they buy, they stop worrying about it... they have a place. A deposit makes them think about it, hold off on making the reservation, makes them shop around and maybe not come back to you.

With the OTAs and cancellation, the steadfastness to not refund any more does have a downside. Sure, you are paid... but you could also be paid TWICE. One summer, I had a no-show for 4 days and the room sat empty with people calling and knocking and begging for rooms. Since they could show up on day 2 or 3, I couldn't do a thing about it. By offering even a partial refund on cancellation, they want back SOME of the sunk money, so they would call and release the room.

 

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04/02/2014

10 room Lodge - we take 50% of deposit at time of booking, full amount for one night stays.  So if someone is booking a $2000 foliage stay, we take $1000.   Two week cancellation policy - if you cancel before 14 days, refund minus $25 cancellation fee.  (Reservations over $1500 have a $100 cancellation fee.). Within the 14 days, we charge the balance and then put it back into our system and if someone books it we refund their money.  Been working for 14 years and the cash flow is essential because we do 80% of our business from July-October, then just weekends and in mud and stick seasons we're barely half full during those weekends.

Do what will work for you - we haven't changed because of the ads on last minute cancellations, etc that hotels honor through the OTAs.  People realize we are not a huge hotel.  Good luck.

JimBoone's picture
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12/18/2014

BRLodge wrote:

Looking for advice on cancellation policies. 

We find most of our guests book between 30 days to 2 weeks in advance. Walk-ins and same day bookings are RARE due to our location. Our main competition, sadly, are chain hotels. What is your cancellation policy?

We are a mom and pop motel, 8 rooms, competition like you mostly chain hotels, a few nice B&B Inns, some other smaller motels in a nearby town. My goal is to be a well rated property and keep my prices at a reasonable point to help draw guests. I charge $10 when a reservation is made, you cancel, you lose that amount, with the statement that the balance of the cost will be charged if the room isn't cancelled 3 to 7 days in advance (depending on season) of the intended stay. I suppose I'm easy, the small amount is not a lot for a real guest to risk, but discourages those who would reserve a room and call back an hour later to cancel, it works for me. As to charging the balance, not usually too much problem, if it is a truly busy time, likely I can re-rent the room, if it is a dead time, I tend to be lax.

I expect only you can judge your property/location, do you have a lot of folks that cancel and lose their initial payments? Is it a problem to you? Would you gain more bookings with a simple policy and smaller deposit or just more cancellations? 

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Jim & Maxine

 

Morticia's picture
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05/22/2008

It really depends on what is standard in your area. My policy might be too easy going for what you encounter.

Are you getting a lot of pushback, or is it you just don't want to deal with any?

I would make the terms as simple as possible. And, include a line that tells the guest a last minute cancellation has a severe impact. 

Hotels gets lots of walk in guests and plenty of opportunity to make up a cancellation. Plus, it might be a one room cancellation is 1% or less of their nightly income. It's 15% of mine.

We take a $100 deposit. Non refundable under 7 days unless I rebook the room completely. You get a $75 refund if someone else takes that room. If no one takes the room, you're out $100. I don't require the guest pay the entire loss, just the $100. Most people don't argue with that when they realize they lost $100, but saved $500.

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