Most of our hotel partners told us that guests with non-refundable reservations are using the Corona virus pandemic as an emergency situation in order to cancel their non-refundable reservations with a full refund or make use of more favorable terms.
Since this is a global phenomenon that affects a lot of fellow hoteliers worldwide, we wrote this article to point out our thoughts and help hoteliers successfully deal with this matter.
Ready?
Let’s begin.
We have two different groups of non-refundable reservations.
a. The first group is non-refundable reservations that fall into periods of government operational restrictions
In some countries hotels and b&b’s are faced with complete closure and are not allowed to operate for a certain period.
So even if guests want to visit the hotel, it is impossible since due to operational restrictions the hotel needs to stay closed for this period. For hoteliers that have non-refundable reservations that do belong into this category the truth is that there is not much you can do about it. Some fellow hoteliers have proposed partial refund and a voucher for the remaining amount that can be used on future date (more on this below). A considerable number of those hotels report that a good number of bookings did take this option but in case guests demand a full refund you will need to go ahead and refund the total reservation amount.
b. The second group is non refundable reservations that do not fall into periods of government operational restrictions
Now there are cases where guests wish to cancel their reservation due to fear of travelling. This is a situation that is quite understandable since people around the world are bombarded with negative news everywhere. However, in this situation fortunately you have more options.
But before we go through those options. we believe that it is worthwhile to point the following. When guests make a non-refundable reservation, they have in essence taken the risk to accept a payment the day they made the reservation in exchange for a lower rate.
Since there are no operational restrictions not at the least at the moment of the cancellation request, then it is fair to say that the traveler shall also share the implications of such decision.
Now what are your options?
1. Adhere to your cancellation policy.
In case your hotel cancellation policy calls for a 0% refund for your non-refundable rates, adhere to this policy.
The issue with this approach is that since you show zero flexibility in a world class health situation you will most likely create some bad impression and negative talk on your hotel business.
At the same time though, it increases your hotel cash flow which is strongly needed in this particular period.
2. Partially refund the guest
Instead of not refunding guests at all, you can opt to return a percentage of the reservation amount of your choice while you withhold the remaining amount as cancellation fee. A typical refund policy could be 30% or 50% of the total reservation amount.
In this case you show more flexibility. Most of the guests do understand that they have taken a risk with the non-refundable reservation and are willing to share the loss with the hotel. Guests in most of the cases emphasize with the hoteliers for this loss of their business.
3. Modification of booking dates with no penalty
With this option guests with non-refundable reservations are given the opportunity to reschedule their trip and book at a later date with no penalties.
The potential issue with this approach is that some people do not know for sure whether they would like to travel to your destination anymore.
An additional point is that most people who work in companies are not able to know in advance the dates they will be able to travel. Furthermore, since nobody knows how companies will respond with days of leave after the quarantine is over, it is difficult to reschedule accurately.
4. Modification of booking dates with penalty
This is a similar approach with the one we discussed above with the only difference being instead of providing modification of booking dates with no penalties hotels can opt into allowing modifications with some fee.
Again, the same issues apply as in the modification of booking dates with no penalty.
5. Coupons for future stays
Instead of offering modification of booking dates with or without charge, hotels can offer coupons. Those coupons can be equal to the reservation amount guests have prepaid in order to be used for a stay in the hotel. Hotels normally make those coupons available for use within a certain period for example till the end of 2021.
This is quite a popular approach among hotels for a number of reasons. It gives more flexibility to guests since they can reschedule their trip whenever possible within a certain timeframe without losing money. At the same time, this approach preserves some much-needed liquidity.
6. Full refund
Hoteliers and b&b owners can provide their guests with a full refund option. This approach gives the highest flexibility to guests since they get the total reservation amount. At the same time though, hoteliers may suffer by liquidity issues. In addition, this policy might be one sided and characterized as not that “fair” since hoteliers are the only ones that shoulder the losses of a non-refundable reservation with strict cancellation policies attached to it.
7. Hybrid approach
Apart from all the above hotels can use a combination of the above stated approaches. Some hoteliers might choose to offer a coupon for a percentage of the reservation amount while withholding the remaining as cancellation fees. Another option might be to offer a refund for a percentage of reservation amount while adding a coupon for a future date on the remaining amount.
In this final part, I have included the email I use in my own hotel business for our guests with non-refundable reservations that wish to cancel their reservation and ask for a full refund. Feel free to copy it in your communication with your hotel or b&b guests.
Dear guest [guest name],
good afternoon from Hesronissos.
We are reaching out because we received your message stating that you wish to cancel your reservation with us for the 10th of July.
We fully understand that due to the current situation, things are uncertain and you will need to cancel your trip.
In those difficult moments we choose to stay side by side with our guests. Having that in mind we have decided to be fully flexible on guests that wish to cancel or modify their plans and alter their trip at a later date due to the Corona virus situation.
With regards to your specific situation, it is possible to cancel your reservation. Normally the cancellation fee is 50% of your reservation amount. However, having taken into consideration your specific situation we have decided to grant you a voucher equal to 50% of the total reservation amount or “x” euros which can be used at a future date of your choice within the end of the year 2021.
The remaining “x” will be refunded to you after the cancellation of your reservation.
Please do not hesitate to contact us for any additional questions or clarification you might need.
We will be more than happy to help!
In those difficult moments we all face we warmly wish you the best, stay healthy and take care of yourself!
Kind Regards from Hersonissos
Nikos, George, Teo and Zeta
The team of Erofili
Notice here that we have selected the hybrid approach for a partial refund of 50% of reservation amount while the remaining 50% is regarded as a deposit for a future reservation.
To sum up, as also noted above in most of the cases guests are happy to share part of the problem. Whatever you decide, make sure that you take into consideration your future guests as well as your hotel business in order to make your journey out of this crisis as smooth as possible.
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