My strategy on issuing refunds for reservation cancellations May 22, 2016 16:47:29 GMT
Post by High Priestess on May 22, 2016 16:47:29 GMT
I am posting this in two places --- see the other post here: globalhosting.freeforums.net/thread/2321/strategy-issuing-refunds-reservation-cancellations
When a guest cancels a reservation, they often want more of a refund than the cancellation policy allows for, particularly if the reservation is on long term or strict cancellation policy. Hosts often ask what they should do if guest asks for a refund.
One of the things that can most help guests, in the event they would need to cancel, is to have travel insurance. THis is something that Airbnb should be telling all guests, and which you as a host may want to tell guests when they book. Travel insurance can compensate guests in the event of a cancellation, and thus remove the burden from you for feeling that you need to do so. The host is not the guest's private travel insurer, and it behooves both guest and host to understand this.
Keep in mind that you are not in any way obligated to refund a guest over and above what they would get through your listing's cancellation policy, but I consider it a "win-win" situation to refund guests when you are able to rebook some or all of the dates that they had booked with you. I will generally (but not always) offer a refund to the guest, less an "administrative fee", which is like a "processing and handling fee", that pays me for my time spent in processing and communicating about the cancellation, communicating with one or more new inquiries, and issuing the refund.
Airbnb has no rule or policy that requires you to issue a refund, or in any way guides the amount of the refund you are willing to issue. Sometimes Airbnb will send you a message asking if you will refund the guest, but if you say no, they won't push you to do so. Airbnb has no say in how much you refund the guest.
Say for instance a guest is entitled to zero refund. We could say, "If I can rebook all of the dates I'll give you a 100% refund" or we could say, "If I can rebook all of the dates I'll give you a 50% refund" There is no obligation to refund guests in full if one rebooks the dates -- at least not through Airbnb. So, an offer of a refund less administrative fees (for processing and handling the cancellation) is quite reasonable I think.
If you want to get technical about it, various municipalities or states, nations may have laws that say you can't charge two people rent for the same space -- in other words if one person has paid rent and cancels, that you can't keep their rent as well as charge someone else rent if you are able to fill that space. This may be a law on the books in various places, but it's likely hosts won't know the laws in their area. As well, it would be pretty hard for anyone to prove what you did with your property and how much if any $ you got from anyone else, and what was a fair "administrative fee", if one was permitted by local laws at all. But Airbnb doesn't have this rule, that you HAVE to refund a guest in full if you are able to rebook. I suppose if Airbnb wanted they could TRY to institute such a rule -- but it would be relatively simple for hosts to get around that. (Besides which ABB has no knowledge of or control over hosts' bookings from other sites...)
Considerations/Deductions when offering a Refund
(1) The first consideration in offering a refund, is to consider whether you want to offer one at all. As mentioned you are not obligated to do so. But realize as well that if you don't offer the guest any refund, then particularly if they are going to get zero refund when they cancel, they may not see the point in cancelling the reservation if they get no refund. Then you could have a guest whose reservation blocks your calendar, and who is upset at you for not refunding them. THough a guest may not be able to apply for a refund under "extenuating circumstances" if they dont' even cancel the reservation, they may cancel late, in order to do so, and thus have blocked you from being able to get another guest for that period of time. So all in all, if only to motivate a guest to cancel their reservation, it helps to offer some refund. As well, if their reservation is still fairly far in advance when they cancel, the likelihood that you can rebook the dates and thus be pretty much unimpacted by their cancellation, is high.
I generally take into account these factors in deciding whether to offer a refund:
(a) WHether the guest asked for a refund. If the guest isn't expecting or asking for a refund beyond what they get from the cancellation policy, do you want to offer one? Consider that some guests feel bad if they cancel on you, and feel that they owe you something because of that. If you decline to keep any of their payment they may not have the opportunity to redeem themselves from what they consider the inconvenience of cancelling on you.
(b) Amount of time in advance of the reservation that guest cancelled. The further in advance they cancelled, the more likely they will get a refund.
(c) The guests' attitude and behavior in asking for a refund. If the guest DEMANDS a refund, pesters me about it, argues about it, sends me 8 to 20 messages/phone calls about it, I am much less likely to offer them a refund. Because they clearly don't get the point that this is optional for me to do, and that they have no "right" to a refund beyond that which they get from the cancellation policy.
(d) Whether the guest is cancelling only a part of their stay, or the whole stay.
(e) THe likelihood that this will be a repeat guest, who may want to stay with you again, or has already stayed with you more than once. MOst of us will feel more generous toward repeat guests and also see the benefit to pleasing them in order to keep their business.
(f) The reason for the guest's cancellation. Did the guest cancel because found another place he preferred to stay instead, or did he cancel because his business trip was cancelled by his company, or because he got sick, etc? It helps to realize that guests will not necessarily tell the truth when they cancel, about their reason for doing so. They may claim that they ended up being sick and couldn't travel, when in fact they found another place to stay that they liked better -- but they suspect you wouldn't be eager to refund them in the latter case.
(2) Then, if you have decided to offer a refund, take into account all those factors, as well as others, in deciding how much of a refund to offer. THink about:
(a) How much time you spent on getting the dates that the guest cancelled, rebooked. Since I have been self-employed for so many years, I am finely attuned to the various ways in which we either do or don't get paid for our time, when people ask us to do something for them. I've become very aware of and concerned about instances when I am expected to do something for someone, without compensation. Handling a cancellation and then trying to rebook (dealing with one or more new inquiries) is a lot of time spent. We should be paid for that. We can pay ourselves for it.
I would advocate that hosts generally have a "flat fee" that they charge as an administrative fee for cancellations, but charge a higher amount if a greater than usual amount of work is required. Eg if it isn't a one-for- one rebooking -- but one person cancels, and then the dates they had, are now being taken by 4 or 5 different reservations. That is a lot more work.
(b) Whether you are able to rebook ALL the dates from the guests' cancelled reservation, or only some of them.
(c) Whether you took a loss or had a gain in rebooking the cancelled dates. You may take a loss if you don't rebook all the dates. You may also take a loss if you rebooked them at a lower nightly or lower weekly or lower monthly rate. For instance say a guest booked a reservation for December in July, when you had summer rates applying to winter bookings. If the guest cancels in November, when you have winter rates a replacement booking will bring in a lower amount.
Note: in order to avoid refunding the guest either more than they actually paid, or more than they are due, you need to refund them in proportion to the dates rebooked, not based on the AMOUNT you obtain in rebooking -- unless you have a loss. The point being that if you make a profit from rebooking the dates, that profit should go to you and not to the guest.
(d) Whether you had unreimbursed damages caused by any replacement guest(s) from replacement bookings. If you did, then such losses should be figured into your total replacment income, which will now be lower. ANd if you are refunding the guest in proportion to what you have been able to recover, then you would definitely be taking this into account.
(3) When to offer the refund.
I strongly suggest that hosts should not refund anything to a guest who cancels their reservation, until any and all replacement bookings for that cancellation, are completed. The rationale for this is a saying that I find myself resorting to a lot in my home repair business, which is, "You don't know what you've got , until you know what you've got." People love to plan in advance, but there are many things you just can't know in advance. In many home repairs, you can give an estimate for the replacment of a porch, for instance, but it's not until you remove the old porch and inspect the structure underneath, that you really "know what you've got." So all guesses in advance are only that.
Similarly with replacment bookings. If you get all excited that you got a replacement booking for your guests' cancelled booking, and then refund them in full, how would you feel if the replacement booking also ended up cancelling...and more, how would you feel if that 2nd cancellation actually fell under extenuating circumstances or some other justification by Airbnb for a full refund, and so in the end, you did NOT get any replacement income for the first guests' cancelled booking?!!! I am telling you now, you will kick yourself if you refunded the first guest in full too early, before all this came down and you ended up making no money in any replacement booking.
So do not refund the first guest who cancels, until the entire replacement reservation has been completed and there are no signs that that 2nd guest might request a refund for some or all of their stay. Sure, the first guest may not like that they have to wait so long, but since they are not entitled to any additional refund, and this is all only optional for you to do, do not let them pressure you to refund them by a certain date.
FORMULA FOR CALCULATING REFUND -- IF YOU WANT TO ISSUE AN ESSENTIALLY FULL REFUND TO THE GUEST
If you have decided that you want to offer an essentially full refund to the guest, this is how you could calculate that.
So the formula for the amount to be refunded to the first guest (who cancelled) would be:
Amount to be refunded = Proportion of original booking recovered - administrative fee
Proportion of original booking recovered = ( number of days rebooked X daily rate for the original reservation) - any damages to my property during rebooked reservation, not reimbursed to me by replacement guest or Airbnb
Administrative fee = $75 or more if more work is required
So , let's take this example:
Guest number one booked 2 weeks for let's say $900 total (at a weekly rate of $450/wk or daily rate of $64/day) , and then the replacement guest two booked 6 days for $420 total, (at a daily rate of $70 per day) and let's say replacement guest caused $40 of damage to an appliance that was not reimbursed.
Proportion of original booking recovered: 6 days X $64/day = $384 (note that you would not refund the guest the entire amount from the new booking, or $420, because the original guest did not pay at the rate of $70/day as the second guest did, but at a lower rate. You would refund them proportionately by number of days rebooked, not by amount you earn, not least because potentially you could earn more from the replacement guest than the first guest, but secondly the first guest should not be the beneficiary of any additional daily profit you accrue.)
Thus amount to be refunded = $384 - $40 - $75 = $269