Last Tuesday, Rajesh got an email he dreads: "Hi, we need to cancel our Singapore trip. Can you refund everything?" The booking was SGD 8,500. He'd already paid SGD 4,000 in hotel deposits that were non-refundable. His cancellation policy said "full refund up to 30 days," but this was 28 days out, and the hotels wouldn't budge.
He lost SGD 4,000 that day because his cancellation policy didn't match his supplier terms. Don't make the same mistake.
Why Most Cancellation Policies Don't Work
Most travel agents copy their cancellation policy from somewhere online or use whatever their booking system defaults to. Then they realize too late that their policy doesn't protect them from supplier penalties.
Your cancellation policy needs to do three things:
- Match or exceed supplier terms: If hotels charge you at 45 days, you need to charge clients before that
- Be clear enough that clients understand: No legal jargon that confuses people
- Give you room to be flexible when needed: Sometimes you want to waive penalties for good customers
Here's the cancellation structure that works for most B2B travel agencies using DMCQuote and similar platforms.
The Standard Cancellation Tier Structure
Don't reinvent the wheel. This cancellation structure is used by successful agencies worldwide:
More Than 60 Days Before Departure
Charge 20-30% of total booking value. This covers your time, effort, and any supplier deposits you've made. Even if suppliers give full refunds at this stage, you've invested hours planning the itinerary.
For a SGD 10,000 Thailand package, that's SGD 2,000-3,000 cancellation fee.
45-60 Days Before Departure
Charge 50% of total booking value. At this point, most hotels and tour operators have charged you their first major penalty. You need to recover those costs.
This is also when it gets harder to resell the booking dates to another client.
30-45 Days Before Departure
Charge 75% of total booking value. Most suppliers are now fully non-refundable. Airlines won't refund tickets. Hotels keep their deposits. You're absorbing losses if you charge less than this.
Less Than 30 Days Before Departure
100% non-refundable. Full stop. At this point, everything is locked in. Suppliers won't refund you, so you can't refund clients.
Some agents make exceptions for medical emergencies with documentation, but that's a business decision, not a policy requirement.
Special Cases That Need Different Terms
The standard structure works for most bookings, but some situations need different handling:
Peak Season Bookings
For Maldives resorts during Christmas or Dubai hotels during New Year, make the cancellation terms stricter:
- 90+ days out: 40% penalty (instead of 20-30%)
- 60+ days out: 75% penalty (instead of 50%)
- 45+ days out: 100% non-refundable (instead of 75%)
Peak season inventory is harder to rebook if someone cancels. Your policy should reflect that risk.
Non-Refundable Promotional Rates
If you're offering discounted rates on hotel bookings or packages, those should be 100% non-refundable from the moment of booking. Make this crystal clear before clients pay.
Put it in bold in your quote: "This discounted rate is completely non-refundable and non-changeable for any reason."
Group Bookings (10+ People)
Groups need longer lead times and different deposit schedules. A typical group cancellation policy:
- Initial deposit: 25% non-refundable at booking (often 6-12 months out)
- Second payment at 90 days: Additional 25% becomes non-refundable
- Final payment at 60 days: Remaining 50% becomes non-refundable
Groups also need partial cancellation terms. What happens if 15 people book but 3 cancel? Spell this out clearly.
How to Communicate Your Cancellation Policy
Having a good policy doesn't help if clients don't understand it. Here's where to put it:
In Your Quote/Proposal
Don't hide it in fine print. Put a clear cancellation table right in the quote:
Cancellation Policy:
- 60+ days before departure: 30% cancellation fee
- 45-60 days: 50% cancellation fee
- 30-45 days: 75% cancellation fee
- Less than 30 days: 100% non-refundable
Use bullet points. Make it scannable. Don't use paragraphs of legal text.
In Your Booking Confirmation Email
When they pay the deposit, send a confirmation email that includes the cancellation policy again. People don't read quotes thoroughly. They definitely read booking confirmations.
Require Acknowledgment for Large Bookings
For bookings over SGD 15,000, make clients reply to your email confirming they understand the cancellation terms. This saves arguments later.
Simple email: "Please reply to this email confirming you've read and agree to the cancellation policy outlined above."
Handling the Actual Cancellation
Policy is one thing. Executing it when someone cancels is another. Here's the process:
Step 1: Check Supplier Refund Terms Immediately
Before you tell the client anything, check what suppliers will actually refund you. Log into your DMCQuote dashboard, check hotel cancellation terms, check tour operator policies.
Sometimes you get lucky and suppliers are more flexible than your policy requires. Sometimes it's worse than you expected.
Step 2: Calculate the Numbers
Make a simple spreadsheet:
- Total booking value: SGD 12,000
- Your policy says charge: 50% = SGD 6,000
- Supplier penalties: SGD 5,200
- Your actual loss if you charge policy rate: SGD 0 (you break even)
- Amount to refund client: SGD 6,000
Know these numbers before you call the client.
Step 3: Communicate with Empathy (But Firmness)
People hate cancellations. They're often canceling for legitimate reasons - illness, family emergency, work issues. Be kind, but don't negotiate your policy.
Good response: "I completely understand this is frustrating. Unfortunately, the hotels and tours have already charged us their cancellation penalties. Based on our policy and supplier terms, we can refund SGD 6,000 of your SGD 12,000 payment. I'll process this within 7-10 business days."
Bad response: "Our policy clearly states..." - don't lecture them about what they should have read.
Step 4: Process Refunds Quickly
Don't make people wait 30 days for refunds. Process them within a week. Slow refunds generate bad reviews and angry social media posts.
Even if suppliers are slow to refund you, issue the client refund promptly. Your cash flow buffer should cover this.
When to Bend the Rules
Sometimes it makes business sense to be more generous than your policy requires:
Repeat Clients
Someone who's booked five trips with you and this is their first cancellation? Consider waiving some fees. You'll make it back on future bookings.
A SGD 1,500 goodwill gesture to keep a client who spends SGD 30,000/year with you is smart business.
Genuine Emergencies You Can Verify
If someone's in the hospital and can provide medical documentation, or there's been a death in the family with a death certificate, you might absorb some costs.
But verify. Don't just take their word for it. "I'm sorry to hear that. Please send the medical certificate and I'll see what we can do."
When You Can Rebook the Inventory
If someone cancels a Hong Kong package and you immediately find another client for those exact dates and hotels, you haven't lost anything. Consider giving a larger refund in this scenario.
What to Do About Partial Cancellations
Partial cancellations are messy. A family of six cancels two people. What do you charge?
Standard approach:
- Recalculate the package cost for the new number of people
- Apply cancellation fees to the per-person difference
- Account for room configuration changes (lost double room discounts, etc.)
Example: Family of 6 books for SGD 18,000. Two people cancel. The package for 4 people would cost SGD 13,500 (not just 2/3 of the original price - you lose room sharing discounts). Apply your cancellation % to the SGD 4,500 difference.
Insurance: The Answer Everyone Overlooks
Here's the truth: the best cancellation protection is travel insurance. If every client bought proper travel insurance, you wouldn't need this guide.
But most clients don't buy it unless you strongly recommend it. So recommend it. Every single booking.
Add this to every quote: "We strongly recommend comprehensive travel insurance that covers trip cancellation, medical emergencies, and trip interruption. Insurance typically costs 4-8% of trip value."
When clients have insurance, cancellations become the insurance company's problem, not yours. They file a claim, you process the refund according to policy, everyone moves on.
Common Cancellation Mistakes to Avoid
I've watched agents make these mistakes repeatedly:
- Not checking supplier terms before setting your policy: Your policy must be stricter than supplier terms, not looser
- Making verbal exceptions that contradict your written policy: Never say "don't worry, we'll work something out" - it creates expectations
- Not documenting policy acceptance: Get it in writing that they agreed to terms
- Delaying refund processing: Fast refunds prevent bad reviews, even when the refund amount is disappointing
- Taking cancellations personally: It's business. People cancel. Your policy exists to protect you when they do
The Cancellation Policy Template
Here's the exact language you can use in your quotes and booking confirmations:
Cancellation & Refund Policy
All cancellations must be submitted in writing via email. Cancellation fees are calculated based on the date we receive written notice:
- More than 60 days before departure: 30% of total booking value
- 45-60 days before departure: 50% of total booking value
- 30-44 days before departure: 75% of total booking value
- Less than 30 days before departure: 100% non-refundable
Refunds are processed within 10 business days of receiving cancellation notice. Supplier-imposed penalties may exceed these percentages, in which case the higher amount applies. We strongly recommend purchasing comprehensive travel insurance.
Done. Simple, clear, enforceable.
The Bottom Line on Cancellations
Your cancellation policy isn't about being mean to clients. It's about protecting your business from losses you can't control. Suppliers don't negotiate their penalties with you. You shouldn't negotiate yours with clients.
Set fair terms that match your supplier exposure. Communicate them clearly upfront. Execute them consistently. Make exceptions rarely and strategically.
The agents who struggle with cancellations are the ones who don't have clear policies or don't enforce the policies they have. Don't be that agent.
Whether you're booking European tours, Malaysia packages, or Sri Lanka adventures, the same cancellation principles apply. Protect your business first, because without your business, you can't help any clients at all.
