Let’s talk a little about cancelation policies because this is an important thing to figure out when you run a short-term rental. Initially, it may seem best to go with a super strict policy because that helps provide more protection for lost income. However, when a policy is very strict, it could also make it harder to bring in more bookings. That’s why it’s important to weigh a few factors when deciding what cancelation policy is best for your particular property.
Cancelation policies tend to range from flexible/relaxed to very strict (and everything in between). We’ll discuss this in more detail below. But, first, let’s talk about what policies tend to be best depending on your situation. If the goal is to attract more guests, a relaxed policy can be a great option. Many guests will be more inclined to book a property with a generous refund policy. In addition, a flexible policy may be a good option during the off-season when you’re trying to encourage more bookings. A policy that falls somewhere in between flexible and strict may also be attractive to guests, especially those scheduling their trips with lots of time to spare. It also provides a little more protection for the host than a flexible schedule. A stricter policy may be better for those who have an inflexible schedule and those who don’t live near their rentals. Hosts may also want this type of policy if they have rentals in an area that books up fast. Now let’s talk about what these policies tend to look like.
Relaxed Cancelation Policy
A relaxed policy is going to be more flexible and guest-focused. This is the policy that allows a larger window of time for a guest to cancel and still receive a refund. The policy may start out by allowing the guests a set number of months to cancel their reservation in order to receive a full refund. After this specific point has passed, the policy will probably allow the guests to only receive a certain percentage of the total they paid as a refund (often 50%). Then, if they don’t cancel until they’ve shown up at the place, the guests may be charged for the amount of time they stay and then be refunded a percentage for the days they don’t stay. Some relaxed policies are even more lenient allowing guests to cancel up until 24 or 48 hours prior to their booking for a full refund, and if they decide to cancel after staying in the property for part of the duration, the host may charge for the number of nights the guest stays. The host may also have in their cancelation policy that the guests will have to pay for one extra night in addition to the nights they actually stayed.
Moderate Cancelation Policy
A moderate policy is obviously the in-between policy. It considers the guest’s and host’s needs carefully to determine a plan that works well for both. Some moderate plans will allow guests to cancel within about a week prior to their arrival in order to receive a full refund. Once that deadline has passed, the policy will probably only provide a certain percentage of the refund back to guests. If the guest doesn’t cancel until they’ve shown up at the rental, then they will most likely be charged for every day they stay. Sometimes hosts also charge for an additional night, then they charge about 50% for the remaining nights that the guests do not stay.
Strict Cancelation Policy
This type of policy focuses on providing the host with more protection. It can range from firm to very strict. A host may choose to allow guests to cancel up to about a month prior to their arrival in order to receive their full refund, then the host may offer a 50% refund for those who cancel within a week of their arrival. If the guest doesn’t cancel until after that time, then the guest would not receive a refund. A stricter policy may only provide a full refund if the guest cancels the booking within 48 hours of making it. This policy may still allow guests to receive a 50% refund if they cancel within 1-2 weeks of the arrival date. Just like with the previous example, there would be no refund after this timeframe. Of course, the strictest option here is to not allow any refunds. Keep in mind, if you do choose a stricter policy, it’s a good idea to recommend guests purchase travel insurance so they can protect themselves in case they would need to cancel.
While these policies provide you with some examples of your cancelation policy options, keep in mind that you may want a different policy for longer stays. This is an important thing to consider if you allow month-long stays.
No matter what policy you do decide on, the most important thing is to make it clear. Guests need to know your cancelation policy before booking. Make sure that it’s easy for them to access and understand.
Keep in mind, the above policies are for examples only, there could be special exceptions depending on specific cases.
If you’d like help determining the best policy for your property and would like to partner with a trusted property manager, please reach out to us at PMI. Visit our website here at: https://www.propertymanagementinc.com/