Guest Refunds

Should I offer my vacation rental guest a refund? 

This is one of the toughest decisions vacation rental hosts make.  In this article, I have provided three specific scenarios for when a guest refund is appropriate and, ultimately, the right thing to do.

Also, be sure to check out my alternative to a guest refund that may save you some money and still keep your guests happy.

Guest Refund #1 – Double Bookings

Double booking – it happens.  It is isn’t very pleasant to notify your guest of the mistake. And many times we don’t realize a double booking has occurred until the last minute.  Yikes!

No matter your refund or cancellation policy, in this instance, giving your guest a refund is always the right thing to do.

OTA glitches happen.  And sometimes we are the ones who accidentally double book our guests.  Regardless of what caused the double booking, it is not the guest’s fault.  Apologize, issue the refund, and try to keep the guest happy by offering alternative dates of availability.

Guest Refund #2 – Repeat Guests

This instance is a little more controversial. I’ve heard of hosts who will not budge on issuing this type of refund, so we will have to agree to disagree.

Let’s say you have a guest who has booked with you every year for the past three years.  Two weeks before their arrival date, the guest’s 80-year-old mother becomes ill and is hospitalized.  The guest wants to cancel.

What do you do about refunding this guest?

The cost of acquiring a new customer is much more expensive than the cost of keeping an existing customer.

Even though a last-minute cancellation is annoying, a good repeat guest emergency is not an appropriate time to withhold a refund.

When you treat this guest with respect and do the right thing by refunding, they will likely book with you again.  But holding steady on your no-refund policy, may make this guest bitter.  Then if they reserve your property in the future, but it could become awkward, and they may start nit-picking.

If you choose to issue a refund, they’ll remember your thoughtful gesture and will keep you in mind for their next trip.

Guest Refund #3 – Emergency at Vacation Rental

The third instance that necessitates a refund is when there is an emergency at your vacation rental.  It could be an appliance failure, a water line break, or a furnace that quits working. 

In this type of situation, the guest is not to blame.  Unfortunately, these emergencies usually happen at the last minute, and it leaves the guest with a significant change in vacation plans.

You should notify your guest of the need for cancellation as soon as possible.  Offer the guest some options for booking another rental in your area.

Alternative to a Guest Refund

Refund alternatives allow some flexibility with the amount of lost revenue, while still keeping your guest happy.  

Applied Payments

As an alternative to giving your guest a refund, offer to apply the payments to a future scheduled reservation.  Typically, the guest would need to schedule the future booking immediately or within a specified timeframe.

Issue a Credit

Another alternative is to offer all or a portion of the payments as credit towards a future reservation.  The guest would not have to reserve the dates immediately; however, it is wise to put some reasonable timeframe on when the credit expires.

Offer a Future Discount

A future discount may be in the form of actual dollars off the reservation or free nights.  This type of compensation has some additional guarantees for the host.  In other words, the guest would be required to book extra nights in order to get the discount.

Have a Solid Refund Policy

The best way to protect your income is to have a solid refund policy.  Your refund policy should be clearly communicated on your website and in your rental agreement.  It should include a clear timeframe for when (or if) a refund will be issued.  

Remember, you are the business owner, and having a vacation rental means you should run it like a business.  Don’t allow guests to manipulate your decision with a blackmail-type of response where the guest threatens a bad review if you do not refund.  Hold steady when necessary.

On the other hand, you also have the option to be lenient when circumstances warrant an ethical refund.  As mentioned above, you may find value in offering a refund to a repeat guest.

All in all, evaluate each situation and act accordingly.  Your business reputation and the relationship with your guest is essential. 

Every refund offered should be initiated and dictated at the discretion of the vacation rental owner, not the guest.   

Before you start into the next rental season, take the time to review your refund policy and make any necessary updates.  Decide when (or if) you will consider issuing a refund and stick to it.