What is a Hotel Cancellation Policy?
A cancellation policy defines whether a guest gets a refund — and how much — when they cancel a booking. The right policy protects your revenue during peak season and keeps bookings flowing during lean months.
Types of Cancellation Policies Explained
| Policy Type | How It Works | Best Used For |
|---|---|---|
| Free Cancellation | Full refund if cancelled before deadline (e.g. 24 or 48 hrs) | Lean season, budget travellers, first-time OTA listings |
| Non-Refundable | No refund regardless of when cancelled | Peak season, special events, discounted rates |
| Partial Refund | Refund minus one night's charge or a % penalty | Mid-season, corporate bookings |
| Flexible | Full refund up to check-in day (rare, used in promotions) | OTA visibility programs, last-minute deals |
Setting Cancellation Policies on MMT and Booking.com
MakeMyTrip
In the MMT Partner Central extranet, go to Rate Plans and set the cancellation policy per rate plan. You can create separate rate plans — one with free cancellation at a higher rate, one non-refundable at a lower rate. This lets travellers self-select based on flexibility preference.
Booking.com
In the Booking.com extranet, go to Rates & Availability > Policies. You can set a property-level default policy and override it for specific rate plans. Booking.com's "Genius" programme may require a free cancellation option — check the programme terms before enrolling.
How Cancellation Policy Affects Revenue and Occupancy
Your cancellation policy directly affects two revenue metrics:
- Booking volume: Free cancellation policies attract more bookings — but more cancellations too
- Revenue protection: Stricter policies retain revenue from guests who cancel late
| Scenario | Free Cancellation | Non-Refundable |
|---|---|---|
| Booking volume | Higher (more guests willing to book) | Lower (only committed guests) |
| Cancellation rate | Higher (up to 30–40% in lean season) | Near zero |
| Revenue certainty | Low — bookings can vanish | High — payment secured at booking |
| OTA ranking impact | Better listing visibility | May reduce impressions slightly |
High cancellations are also the main driver of overbooking. When you expect cancellations, you accept more bookings than rooms available — which can backfire if cancellations don't materialise.
Best Practices for Indian Hotel Owners
- Seasonal tiering: Free cancellation in June–September (monsoon, low demand). Non-refundable or 72-hour policy in October–January (peak season).
- Rate plan split: Offer both a free-cancel rate (higher price) and a non-refundable rate (10–15% lower). Let guests choose — this is standard practice on all major OTAs.
- Long-stay protection: For bookings of 3+ nights, enforce a minimum 48–72 hour cancellation notice regardless of season.
- No-show charge: Always set a no-show charge of at least one night's tariff. Without it, guests who don't show simply cost you the room with no recovery.
- Communicate clearly: Make your policy visible at check-in confirmation and in the booking voucher. Disputes happen most often when guests claim they didn't know the policy.
Frequently Asked Questions
What is a hotel cancellation policy?
It defines whether a guest gets a refund when they cancel. The three main types are: Free Cancellation (full refund before a deadline), Non-Refundable (no refund), and Partial Refund (refund minus a penalty).
What policy should I set on MMT and Booking.com?
Use non-refundable or 72-hour policies in peak season to protect revenue. Use free cancellation in lean season to attract bookings. A rate plan split — one flexible rate at a higher price, one non-refundable at a lower price — works well year-round.
Can OTAs override my cancellation policy?
Yes. OTAs can display a "Free Cancellation" badge or override your policy in promotional programmes. Always check terms before joining any OTA promotion that mentions cancellation flexibility.
What is a typical no-show charge for Indian hotels?
Most Indian hotels charge one night's room tariff as a no-show fee, applied when a guest fails to arrive without prior notice.
How do cancellations affect revenue?
High cancellations reduce effective occupancy, increase overbooking pressure, and create last-minute inventory gaps. A tiered seasonal policy balances bookings with revenue certainty.