A cancellation policy defines until when a guest can cancel a reservation without penalty and what is charged afterward. It is set per rate plan, balancing booking conversion against protection from late cancellations.
Flexible policies convert better but expose the hotel to last-minute holes that are hard to resell. Non-refundable rates trade a discount for certainty. Most hotels run both in parallel and adjust cutoffs seasonally, tightening around high-demand dates.
Enforcement is where policies earn their keep. Penalties must be charged consistently and be defensible in disputes, which requires the policy shown clearly at booking and stored with the reservation. A policy applied only when convenient trains guests and OTAs to contest it.
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