Here’s a scenario that every vacation-rental owner faces sooner or later: The day before your guests are due to check in, they call with bad news. One of them is too sick to travel. Or there’s been a death in the family. Or a major ice storm has brought down power lines and closed the airport. They’re going to have to cancel their travel plans.
You know what comes next: They ask for their money back. The need to cancel wasn’t their fault, after all.
The VR Owners Dilemma
So the question is: Do you issue a refund and take the hit? Or do you refuse to do a refund, but feel guilty as heck about keeping their money? The answer to both questions is no, in our opinion, assuming you’ve handled things right from the beginning.
Yes, refusing a refund creates an uncomfortable interpersonal situation. We know because we’ve been there. Just recently, a woman who had booked our property called to say she and her husband were going to have to postpone their trip. Could they possibly shift their reservation to another week later in the summer?
We were sympathetic, but explained that because we were so close to their planned arrival date—just 10 days away—we could only grant a refund or reschedule for another week if we were able to rebook the dates they had reserved. We did, however, offer to do our very best to rebook the cancelled week. Here are the steps we took:
- We immediately updated our online calendars to show that the week was now available.
- We posted a special offer at our website and in the headlines for our online ads.
- We contacted other prospective guests who had previously expressed an interest in booking our cottage for that week.
We were under no obligation to spend time doing any of these things. But if we could rebook some or all of the dates, we would have happily issued a refund. That’s how we ourselves would like to be treated had the situation been reversed.
In the end, we didn’t get a replacement booking and kept the money without feeling the least bit guilty about it. We’re not a hotel, after all. We have only one property to offer. If a guest cancels and we issue a refund, that’s one week’s rental income lost forever. That’s one week’s income that won’t be available to help pay the mortgage, property taxes, maintenance, and insurance bills.
Setting a Clear Cancellation/Refund Policy
We all know stuff happens. If you operate your vacation rental for any length of time, you will face this situation. So start by establishing a clear cancellation/refund policy. Like many long-time vacation-rental owners, we’ve chosen “30 days prior to arrival” as our “no refund” period. Experience has shown that if a guest cancels before that deadline, we’ll still have a reasonable chance of booking the cancelled time period and replacing the income.
Here is the language we use:
CANCELLATION/REFUND POLICY: The rental charges are fully refundable if you cancel your reservation on or before [xx/xx/xx]. If you cancel after that date, we will refund the damage deposit, but the rental charges are nonrefundable unless we are able to rebook the cottage for the dates you have reserved. To recoup the cost of nonrefundable travel expenses, we encourage you to consider purchasing trip-cancellation insurance. For more information and price quotes on specific policies, visit InsureMyTrip (www.insuremytrip.com).
When we take a reservation for close-in dates, we delete the first two sentences and use this one instead:
Because we are within 30 days of your planned arrival date, the rental charges (except for the damage deposit)
are nonrefundable unless we are able to rebook the cottage for the dates you have reserved.
Communicating Your Policy on Refunds
Our cancellation/refund policy—including the recommendation that our guests consider buying trip-cancellation insurance—is clearly stated at our website and in all of our online ads. It’s part of the “boilerplate wording” we use in responses to email inquiries and in our rental agreement. We also make a point of explaining it when we have our initial phone conversation with prospective guests, especially if we get a sense that the person might be relatively new to booking a vacation rental as opposed to a hotel.
There are several good companies that provide Web-based tools to simplify the process of finding the right trip-cancellation policy and comparing costs. InsureMyTrip, the one we like and recommend to our guests, offers a toll-free number they can call to talk with a real-live human being.
Back to Our Example
Going back to the case we cited at the beginning of this post, let’s assume these guests had taken our advice. They visited InsureMyTrip and searched for a policy that would reimburse them for the $1,200 they would lose if they had to cancel their travel plans within our 30-day no-refund period. They would have found that for $50 to $100, they could have bought a basic policy from one of several companies that would cover cancellations due to things like illness or injury or a death in the family. For a bit more, they could have bought a “cancel for any reason” policy.
Our guests chose not to do that. They took a risk and lost. We’re certainly sorry about that. But having done everything right, in our view, we didn’t feel at all guilty about how we handled this last-minute cancellation.
Alfred and Emily Glossbrenner
Alfred and Emily Glossbrenner own and operate a very successful vacation-rental property in Bucks County, Pennsylvania (www.buckscountycottage.com). They are also the founders of FullyBookedRentals (www.fullybookedrentals.com), a website focused on helping new and experienced VR owners advertise, market, manage, and make money from their second homes.