A cancellation policy is a set of rules that define how and when guests may cancel or modify a reservation, and what fees apply. It helps hotels protect revenue by reducing last-minute cancellations and ensures that guests are aware of costs before booking.
The policy is used to decide who can get a refund, when the deadline is, and what the penalties are. For example, it might say that you can cancel for free up to 48 hours before arrival, or that no refund is possible if you cancel later.
It is set up in the Property Management System (PMS) and shown on the hotel website, OTAs, and confirmation emails at the time of booking.
Clear communication of cancellation terms helps prevent disputes and improves guest satisfaction. Integrations with automated PMS or Channel Managers make sure that the same rules are applied across all booking platforms.
More bookings are made when cancellation policies are flexible, but this may also lead to more cancellations. Strict policies can reduce risk, but they can also discourage early reservations. Many hotels have cancellation rules that change depending on the time of year.
