The traditional accommodation industry has trained guests to expect easy, hotel-style cancellation policies when they’re booking a vacation rental.

But as a vacation rental property manager, you understand that vacation rental cancellation policies cannot be quite as flexible as a hotel.

After all, as a short-term rental business, you can’t count on walk-in traffic to snatch up any lost bookings like a hotel can. Many property managers compensate for the risk of lost revenue with strict cancellation policies.

But harsher cancellation policies can lead to booking friction - causing guests to hesitate before committing to your rental - as well as make your properties less attractive to the listing site as a result. The disconnect between the customer's expectation of a flexible cancellation policy and the tendency for property managers to hedge risk against lost revenue creates a gap in the overall guest experience.

However, this defensive strategy may do more harm than good.

Simon Lehman, Co-founder and CEO of vacation rental consulting firm AJL Consulting, recently suggested “property managers need to become more flexible with their fee structure.” We’ll elaborate on why this is and offer tips on how to create a flexible cancellation policy that will lead to more business (and not less!).

Choosing the right vacation rental cancellation policy category

While it might seem counterintuitive to offer a Flexible or Relaxed cancellation policy when you want to reduce the number of cancellations you get, it may actually be the best strategy to increase your overall number of bookings. Let us explain.

Major vacation rental listing sites allow you to select a cancellation policy based on a category, ranging from Flexible to Strict/No Refund. By listing your vacation rentals in the Flexible category, you may actually be getting more eyes on your properties. Many prospective guests filter out Strict listings in their queries - not even considering them - or pass on vacation rentals that demand a hard commitment.

On the other side of the spectrum, short-term rentals that offer a less-strict cancellation policy may see a slight uptick in cancellations, but a large increase in overall bookings.

Over time, property managers who employ flexible cancellation policies will enjoy a large boost in net occupancy rate and performance in the long-run - making up for the incremental cancellations.

Part of what mitigates this cancellation risk is the added impressions you gain by diversifying your listings on multiple channels. Holding your average rate of conversion constant, increasing the number of potential guests that see your listing will dramatically increase bookings and performance over time.

For best results, we suggest that you choose the Flexible or Moderate option within channels while protecting yourself with an intelligently crafted booking agreement if you choose to employ this strategy.

Here are some tips to keep in mind when writing a cancellation policy for your properties

  • Accept credit cards as your preferred method of payment. When you accept credit cards, guests who cancel outside of the terms they’ve agreed to can immediately be charged accordingly.
  • Recommend that your guests purchase travel insurance upfront so that if something comes up that forces them to cancel after the designated period, they won’t be billed for their stay.
  • Consider writing it into your cancellation policy that you will refund any cancellation fees if you manage to re-rent your property on the previously reserved dates. This act of goodwill can go a long way in establishing your reputation as a good, fair vacation rental host.

MyVR users can change each of their channel’s cancellation policies from one centralized dashboard, as well as ensure that cancellation policies are clearly outlined and optimally displayed on each listing channel.

If you decide to heed the advice in this article and provide your guests with a more flexible cancellation policy, we hope you’ll enjoy greater performance and even more bookings as a result.