It is increasingly common to find hotels offering their services at slightly cheaper prices in exchange for assuming the conditions of any cancellation, change or modification. In other words, there is an increasing number of tourist accommodations those that include non-refundable fares in their policies, which always raises the same question: are non-refundable fares legal?
What are non-refundable fares?
A non-refundable rate is a type of rate applied in the hotel industry and other service sectors. When you choose a non-refundable fare, you are accepting the conditions that, in the event that you need to cancel, change or no-show your booking, you will not receive a refund or reimbursement of the money you paid in advance.
Non-refundable rates are used by hotels as a way of guaranteeing revenue and compensating for losses that may occur due to last minute cancellations, also known as “no shows”.(when a guest does not show up without prior notice). By paying in advance and agreeing to these conditions, the hotel ensures that it receives its revenue safely, even if the guest does not show up.
Although policies vary from hotel to hotel and booking platform to booking platform, as a customer it is always important to read the terms and conditions carefully before booking a non-refundable rate, so that you can understand the implications in the event of cancellation.
What are they used for?
As mentioned above, non-refundable fares are used as a strategy to counter the risk of “no show”.(when a guest is a no-show) and protect the hotel from last minute cancellations and rebookings. In essence, when a guest chooses a non-refundable rate and then cancels, changes or no-shows, the hotel retains the full amount paid for the reservation, as the customer has previously accepted the non-refundable conditions at the time of booking.
These non-refundable rates are very useful for tourist accommodation in situations where there is uncertainty, such as during the COVID-19 pandemic, where hotels faced difficulties due to mass cancellations and demand was very volatile.
Today, such policies are making a strong comeback in the industry, which may be due to a combination of factors, from increased confidence among travellers that they will be able to fulfil their travel plans to hoteliers’ efforts to attract travellers with attractive offers and prices.
Non-refundable rates are very beneficial for hotels as they provide immediate liquidity, diversify the rate offer, guarantee a certain level of revenue and minimise the impact of last minute cancellations. However, they can also have disadvantages, such as a perceived lack of flexibility on the part of customers and the possibility of reduced revenues compared to flexible tariffs.
What needs to be taken into account?
In order to implement a non-refundable fare policy, certain key elements need to be taken into account. Here are some considerations to bear in mind:
Market segment and demand
Conduct an in-depth analysis of your customer profile and carefully analyse the dynamics of demand in the market. Non-refundable fares are often very attractive to travellers who are very sure of their plans and do not anticipate changes to their itineraries. This group of customers often find these offers very convenient, as they provide them with the opportunity to access lower costs in exchange for their commitment to the established arrangements. It is therefore essential that you analyse and understand your demand.
Comprehensive competitor analysis
It is important to carry out research on the non-refundable rates of other hotel establishments within the same geographical area. This analysis will provide you with a comprehensive view of the market dynamics, allowing you to adjust the prices and benefits of the accommodation in question. In addition, this analysis allows us to identify patterns, trends and strategic approaches, which is extremely useful to ensure that our proposition stands out in terms of perceived value to potential guests, whether through more affordable rates, additional benefits or other distinctive elements.
Attractive prices and discounts
An effective cancellation policy lies in the implementation of very attractive price discounts. These should serve as an incentive for potential guests to book their accommodation well in advance and thus fully commit to the planned stay. In this respect, it is vital that the discount offered is undeniably attractive, so that visitors are tempted to accept the “challenge” of foregoing the cancellation option. It is essential to strike a balance: the discount must be sufficiently tempting to counteract any reluctance related to the lack of flexibility in booking, while at the same time ensuring that the profitability and viability of the establishment is not compromised in the process.
Establishing a transparent and understandable cancellation policy
It is vital to ensure that the terms and conditions associated with the non-refundable fare are clearly communicated during the booking process. It is essential that potential guests understand what they are agreeing to by opting for this type of tariff.
Guests should be aware that by selecting this rate option, they are agreeing to waive the right to a refund in the event of a cancellation. Transparency in this regard not only helps to avoid misunderstandings and potential conflicts, but also highlights the integrity and honesty of your establishment in all its interactions. In addition, a clear and well-communicated cancellation policy reinforces customer confidence and lays the foundation for positive and long-lasting relationships.
Flexibility in dates
It offers advance booking options over a wider range of dates to appeal to different types of travellers. Some may plan months in advance, while others may have more flexible plans.
Easy booking process
Ensuring a smooth and simple online booking process for non-refundable fares is essential to maximise their attractiveness. Potential guests should be met with a booking experience that is intuitive and efficient, allowing them to navigate smoothly and access the non-refundable rate option directly. This is only possible through a clear and accessible user interface that prominently highlights this option, possibly accompanied by highlighted information that concisely but fully explains the implications and restrictions associated with this choice. In addition, it is also useful to provide support tools and resources, such as FAQ sections or an online chat that are available at all times during the booking process.
Monitoring and adjustments
The key to success with this type of strategy is to remain attentive to market fluctuations and changing customer needs. To achieve this, it is essential to implement a robust monitoring system that closely tracks demand, booking patterns and industry trends. Collecting and analysing real-time data on occupancy, bookings and guest preferences is essential to identify seasonal patterns and periods of high demand. Remember that the implementation of a non-refundable tariff policy must be part of a comprehensive broader pricing strategy, should not be the basis of the business and should be aligned with the overall objectives of your hotel or tourist accommodation.
by 
