What's the purpose of a cancellation fee?

INNspiring.com | Innkeeper Forum & Innkeeping Resources

Help Support INNspiring.com | Innkeeper Forum & Innkeeping Resources:

Morticia

Administrator
Staff member
Administrator
Moderator
Joined
May 22, 2008
Messages
17,563
Reaction score
446
Joey's query made me think of this. If you have a cancellation fee ($10, $25, whatever) what is the purpose? Is it for your time and effort? Is it to make guests think before they book? Is it a punishment?
Why did you institute it?
How has it worked out?
Do you get a lot of grief over the $ from the cancelling guest?
Do you also have a deposit that you deduct this fee from?
When does the fee kick in? (Immediately, one week from date of booking, what have you... Is there a grace period?)
 

gillumhouse

Moderator
Staff member
Moderator
Supporting Member
Joined
May 22, 2008
Messages
15,723
Reaction score
369
I do not take a deposit but do have the 48 cancel policy full reservarion charge. With the Thanksgiving package if they cancel after Nov. 15 I will post a 50% charge to the credit card - spelled out on the web page and in the confirmation letter - because of all the food I will have to buy for the Thanksgiving dinner. If I end up without guests tomorrow (horse people who broke down 2 hours from here) I will add the stable fee to whatever I charge for the cancel - also posted everywhere.
 

Don Draper

Well-known member
Joined
Aug 10, 2008
Messages
2,863
Reaction score
0
We instituted the $25 processing fee to offset the credit card fee that we are charged for processing the deposit.
This fee is enforced from the moment the reservation is made/we process the deposit (usually the day after the reservation is made).
Our cancellation policy is 14 days and I cannot tell you how many people cancel at 15 days out...no one has yet been upset about the $25 fee.
 

wendydk

Well-known member
Joined
Jun 7, 2009
Messages
1,656
Reaction score
0
In the beginning, all debits and credits to credit cards were processed by us by telephone. The charges were automated, but the credits (refunds) involved us talking to real people during bankers hours only, which was a huge pain in the hiney for me.
No one ever complained about paying that $10.00 fee, which applied to any cancellation wherein a refund was forthcoming. Since, cellcharge has offered us virtual terminal processing online, so I can do charges or credits anytime, so I have dropped the cancellation fee, since it is no longer a pain in my tushy.
 

seashanty

Moderator
Staff member
Moderator
Joined
Jun 2, 2008
Messages
5,730
Reaction score
59
i looked to see what the successful places in the area did and decided to follow their lead in a lot of areas. this was one of them. like innsider, i took deposits by credit card. refunding the deposit we incurred a fee. also time to rearrange the schedule. you have to be careful (as you know) ... removing it from your reservation system, etc. often had to spend time trying to determine why a customer's deposit had not been refunded.
the fee was $25.00 ... it is easier if your neighbors do the same thing of course. the little hotel across the road did not charge the service fee. but he also did not accept credit cards.
 

Tx RH

Member
Joined
Aug 13, 2009
Messages
6
Reaction score
0
Let's say you have 2 or 3 rooms and are not a high traffic location. There are events in the area every so often that could bring some people looking for a place to stay. If you don't have a cancellation fee, someone could book your place and a few others places way in advance. They know they can change their mind 2 weeks out if needed.
Then others see no availablity for that room, when they want to book it. The original people cancel, and you don't get the last minute booking. You lose out.
If you have a cancellation fee, then they would think twice about place holding. You would take the cancellation fee out of the deposit.
If you have no problem filling the rooms after someone cancels, then it does not make sense to charge a cancellation fee.
If you do have a cancellation fee, you could offer them the ability to use that amount towards a future stay at your place in the next year.
Unless you are getting cancellations and are not able to book the rooms consistently, the you are probably better off without a fee. It could keep some people from booking on a whim and still showing up.
 

Iris

Well-known member
Joined
Jun 8, 2009
Messages
811
Reaction score
4
Isn't it all a part of being a business?.
Yes and no. In department stores when you return electronics or appliances they charge you now a restocking fee.
Basically we charge that fee to deter people from messin' with us. I can't stand it when people call and say "we know that your area is busy. We want to rent a cottage in case we can come up this summer. what is your cancellation policy?" What? are you telling me that it is entirely possible that you are going to cancel?
 

seashanty

Moderator
Staff member
Moderator
Joined
Jun 2, 2008
Messages
5,730
Reaction score
59
sorry, i did not answer all your questions.
the fee was right away. if you paid a $100 deposit and cancelled the next week for your room in three months, your refund was $75. i tried to be 'reasonable' ... i could have a grace period if i chose. my choice.
i think 'money talks' ... the deposit and the administrative fee cuts way down on shoppers. people who book rooms at a number of different places and then cancel.
 

Innkeeper To Go

Well-known member
Joined
Oct 27, 2009
Messages
1,395
Reaction score
0
sorry, i did not answer all your questions.
the fee was right away. if you paid a $100 deposit and cancelled the next week for your room in three months, your refund was $75. i tried to be 'reasonable' ... i could have a grace period if i chose. my choice.
i think 'money talks' ... the deposit and the administrative fee cuts way down on shoppers. people who book rooms at a number of different places and then cancel..
seashanty said:
i think 'money talks' ... the deposit and the administrative fee cuts way down on shoppers. people who book rooms at a number of different places and then cancel.
That's no doubt true. Charge a deposit and a cancellation fee, no matter when the guest cancels, and you'll no doubt cut way down on shoppers.
But the shoppers are a small percentage of actual bookings.
And they're not the only ones you're cutting down on.
Remove those restrictive booking policies and the reservations will flow. Enough to cover the credit card cancellation fees.
Easily.
 

seashanty

Moderator
Staff member
Moderator
Joined
Jun 2, 2008
Messages
5,730
Reaction score
59
sorry, i did not answer all your questions.
the fee was right away. if you paid a $100 deposit and cancelled the next week for your room in three months, your refund was $75. i tried to be 'reasonable' ... i could have a grace period if i chose. my choice.
i think 'money talks' ... the deposit and the administrative fee cuts way down on shoppers. people who book rooms at a number of different places and then cancel..
seashanty said:
i think 'money talks' ... the deposit and the administrative fee cuts way down on shoppers. people who book rooms at a number of different places and then cancel.
That's no doubt true. Charge a deposit and a cancellation fee, no matter when the guest cancels, and you'll no doubt cut way down on shoppers.
But the shoppers are a small percentage of actual bookings.
And they're not the only ones you're cutting down on.
Remove those restrictive booking policies and the reservations will flow. Enough to cover the credit card cancellation fees.
Easily.
.
well, i won't disagree just to be disagreeable. but i put policies in place by following the example of the successful, popular places in my area and was not disappointed by my bookings. i did not feel my booking policies were so very restrictive because they were in line with similar b&b's.
a nearby b&b without the 'administrative fee' had many more cancellations than i did. and she did not have people lining up to take those empty slots. she LOST money.
to each his/her own.
 

JBloggs

Moderator
Moderator
Joined
Oct 7, 2008
Messages
17,743
Reaction score
0
I guess I am shocked by this, it needs a poll!
 

Don Draper

Well-known member
Joined
Aug 10, 2008
Messages
2,863
Reaction score
0
sorry, i did not answer all your questions.
the fee was right away. if you paid a $100 deposit and cancelled the next week for your room in three months, your refund was $75. i tried to be 'reasonable' ... i could have a grace period if i chose. my choice.
i think 'money talks' ... the deposit and the administrative fee cuts way down on shoppers. people who book rooms at a number of different places and then cancel..
seashanty said:
i think 'money talks' ... the deposit and the administrative fee cuts way down on shoppers. people who book rooms at a number of different places and then cancel.
That's no doubt true. Charge a deposit and a cancellation fee, no matter when the guest cancels, and you'll no doubt cut way down on shoppers.
But the shoppers are a small percentage of actual bookings.
And they're not the only ones you're cutting down on.
Remove those restrictive booking policies and the reservations will flow. Enough to cover the credit card cancellation fees.
Easily.
.
Innkeeper To Go said:
But the shoppers are a small percentage of actual bookings.
And they're not the only ones you're cutting down on.
Remove those restrictive booking policies and the reservations will flow. Enough to cover the credit card cancellation fees.
Easily.
This is entirely dependent on each individual innkeeper's demo. We are in a high volume tourist area and get very many "shoppers". Just because it's easy for us to rebook cancellations does not mean it doesn't cost us money to do so, in terms of our time and the actual credit card fees.
 

Don Draper

Well-known member
Joined
Aug 10, 2008
Messages
2,863
Reaction score
0
I guess I am shocked by this, it needs a poll!.
And we should both be in bed right now!!!!!
.
InnsiderInfo said:
And we should both be in bed right now!!!!!
I can't breathe I have a terrible cold. I got up for a sudafed.
.
I hope you feel better!
I just woke up and so came out to check on things, the freaking phone rings and it's some moron asking if I have a monthly rate! NO! And don't call my house at 1:30 in the morning!!!!
 

egoodell

Well-known member
Joined
Jun 1, 2008
Messages
3,023
Reaction score
0
I would charge a fee because when I initially charged the deposit the cc processor charged me, and when I refund they charge me, and for my time.
Riki
 

egoodell

Well-known member
Joined
Jun 1, 2008
Messages
3,023
Reaction score
0
AND when we book wine tours we make them mail us a deposit. Because we would lose our shirts with shoppers. They will book and never cancel so you don't know until you try and pick them up. We take two couples per van or a group of six, and only have two vans.
If I didn't take deposits in check form we would never be full. They have changed their minds and called me on my cell to cancel when I was on the way to pick them up.
And yes I do charge a fee. Period. Does not affect my bookings. We have just run 21 days of tours straight right now in October. Booked for this weekend.
We could be selling our rooms twice over as well.
So, I don't believe in not charging for service to cancel and rebook. All kinds of businesses do it, and if you don't then it will cost you money in the long run.
RIki
 

Iris

Well-known member
Joined
Jun 8, 2009
Messages
811
Reaction score
4
I guess I am shocked by this, it needs a poll!.
And we should both be in bed right now!!!!!
.
InnsiderInfo said:
And we should both be in bed right now!!!!!
I can't breathe I have a terrible cold. I got up for a sudafed.
.
I hope you feel better!
I just woke up and so came out to check on things, the freaking phone rings and it's some moron asking if I have a monthly rate! NO! And don't call my house at 1:30 in the morning!!!!
.
InnsiderInfo said:
I hope you feel better!
I just woke up and so came out to check on things, the freaking phone rings and it's some moron asking if I have a monthly rate! NO! And don't call my house at 1:30 in the morning!!!!
If you are a moron you do

 

Copperhead

Well-known member
Joined
Jun 24, 2008
Messages
5,968
Reaction score
0
CANCELLATION charge, an Administrative or Processing fee - what ever you want to call it.
I do not charge a fee for cancellations before the set cancellation date. I charge a 1 night deposit to hold the room, this is not taken until the cancellation window closes (14 days before checkin - 30 for event periods). The only fee I have is not charged unless someone cancels after WITHIN their cancellation period and only is taken IF I rebook the room and I refund their deposit, minus the $10 fee.
I do not get a lot of cancellations, the few that I do get are usually before the window closes. In looking at this closely, I realized I could save myself some effort by not taking the deposit until the window closes, thus decreasing the odds of refunds to nearly zero. If someone cancels after the window, then they should be thankful for any refund and should not balk at the fee.
This works (at least currently) in my market... we are not all in the same market and must look at what the market holds to help us determine our policies.
 

Latest posts

Top