Understanding Cancellation Policies

A cancellation policy is a policy type that specifies the cancellation, prepayment (also known as guarantee payment) and/or no show penalty fee applicable when guests cancel a booked reservation.

This topic helps you understand the different penalty conditions that forms a cancellation policy. You can use the Policies API to manage cancellation policies on the property level.

What is a cancellation policy?

A cancellation policy is a combination of penalty conditions, which consists of cancellation, prepayment (also known as guarantee payment) and/or no show penalty fee that is enforced when guests cancel a reservation. Each penalty condition defines how much (in percentage of the total booking price or in nights) and when a guest is charged in case of cancellation or no-show.

Cancellation policies are specific to a property. When you create a cancellation policy, the system returns a policy ID which you can use to uniquely identify the policy and its combination of penalty conditions. You can use the policy ID to assign it to a roomrate or modify the policy's penalty conditions.

What are the advantages of creating cancellation policies?

Cancellation policies help your properties define terms and conditions that they can apply to specific roomrates when guests:

• Cancel a booking.
• Need to make a prepayment for a reservation.
• Do not turn up for the reservation (no show).

💡 Remember that you create cancellation policies on the property level, but assign them on the roomrate level using the policy ID.

How to define a cancellation policy?

When creating a cancellation policy, you can specify whether to collect:

• A cancellation fee if the guests cancel their reservation.
• A prepayment/guarantee payment fee. The prepayment amount is the same as the cancellation amount.
• A No show penalty.

What is a cancellation fee?

Booking.com provides cancellation conditions with varying cancellation deadlines and penalties each identified using a cancellation code. Based on your business needs, you can use an appropriate cancellation code while creating a cancellation policy. You can create multiple cancellation policies with different cancellation codes and later attach them to specific roomrates.

Booking.com provides cancellation codes categorised at a high-level based on when the booking is cancelled, mainly:

• Before the arrival date.
• On or after the arrival date.

Each cancellation code specifies the:

• Cancellation deadline - The minimum number of hours or days before/after the arrival date.
• Penalty - A percentage of the total booking price or an amount calculated based on per night's room cost.

For a full list of cancellation codes, see the cancellation policy codes.

What is a prepayment fee?

In addition to cancellation terms, you can also specify prepayment terms. Note that Booking.com uses prepayment and guarantee payment interchangeably, but they both mean the same.

You can specify whether a reservation needs prepayment and if it does, specify the deadline when guests need to prepay. The prepayment amount is the same as the cancellation penalty.

The API offers the following 2 prepayment deadlines:

• After the guests make a reservation (after_reservation_is_made). With this option, the guests need to make a payment immediately after the reservation.
• After the guests can no longer cancel for free (after_cancellation_fee_begins). The guests need to make a payment only when the free cancellation window has closed.

For policies with no cancellation window (such as non-refundable penalty), make sure to set the GuaranteePayment Required to "true" and EffectiveFrom to "after_reservation_is_made".

When creating a fully flexible policy, make sure to set the GuaranteePayment Required to "false".

By providing flexible cancellation and prepayment options, you have the chance to increase room bookings.

What is a no show penalty?

You can also specify a penalty if the guests do not show up for the reservation from the following 2 choices:

• Same as the cancellation fee (default)
• Full reservation amount (total_price)

For example, if you create a cancellation policy with the following cancellation code and the NoShowPolicy Penalty set to default :

If the guests do not turn up for the reservation, then they are charged for the price of 1 night as the no show penalty (same as the cancellation fee).

Quick Actions

→ To create a policy, see Creating a policy.

→ To modify policy details, see Changing policy details.