You don’t have to offer free cancellation.

Consider this challenging proposition… charging a fee for cancellation of bookings is fair, reasonable and justifiable. Crazy? I don’t think so.

While the big OTAs try to push for price parity and free cancellation, these practices are against the interests of tourism suppliers and erode the overall sustainability and efficiency of our industry.  Some customers may find such fees inconvenient, but here’s why tourism suppliers are well justified in charging cancellation fees.

You invest time and money in preparing for and accommodating bookings. This includes technology, such as booking systems, credit card processing, staffing, maintenance, and myriad logistical arrangements. When customers cancel, many of these costs are recoverable, and a tiered cancellation fee will help offset ‘sunk’ costs.

Most accommodations, tours, attractions and events have limited availability. When customers make reservations, that inventory, when presented with live, dynamic availability (as it should be), is unavailable to other potential customers for the period of time after the customer books. If they then cancel, there is a loss to the supplier.

Cancellation fees help mitigate that risk and ensures deeper consideration of the booking and a commitment that discourages frivolous bookings.

When customers are aware of potential costs associated with cancellations, they are more likely to honour their commitment (booking), thus reducing risk of subsequent cancellation.

While some flexibility is important, offering “FREE CANCELLATION”, as the OTAs like to promote, has led to abuse of the practice with customers making multiple bookings without any commitment, only to, later down the track, then cancel all but one.

The supplier has committed, once the booking comes through, that the inventory the customer has booked is guaranteed to be available. Without a cancellation fee, the customer has no incentive or commitment to what they have booked. Whereas, a carefully crafted cancellation fee strikes a balance between offering flexibility and holding customers accountable for any change of mind, change of plan or simply ‘rate shopping’.

Pause for a moment and consider the inverse. A customer books, and sometime after the booking, the tourism supplier decides to re-sell the inventory because they change their mind or can attract a higher rate etc. And offers no compensation to the customer. That practice is as unacceptable as customers expecting no fee if they cancel.

If you are a smaller tourism operator, cancellations can have a significant impact on your financial stability. Cancellation fees will help mitigate the risks associated with loss of an, until then, ‘guaranteed’ booking.

Through TXA, our suppliers deliver live rates and availability to all channels to ensure the customer can book with confidence the products they are after. We constantly encourage TXA suppliers to invest in providing high-quality service, to maintain the confidence and loyalty of customers. A fair cancellation policy gives suppliers confidence in their commitment to guarantee the booking and deliver excellent service and meet customer expectations.

All businesses need a degree of predictability in their operations. Knowing that most confirmed bookings are likely to materialise, because all bookings carry a cancellation fee, helps effective operational planning and resource allocation.

By reserving a seat, ticket or room, customers are essentially securing a service. A considered cancellation fee acknowledges the value of the inventory reserved and compensates the supplier for the time and effort spent in securing, maintaining and managing the reservation.

Our industry is founded on the good will and commitment of suppliers. A fee for cancellation contributes to the overall viability and sustainability of the tourism sector by helping suppliers manage their finances and maintain a healthy business model.