Refundable Versus Non-refundable Hotel Reservations. Are They a Good Deal?

This weekend while reading the LA Times, I noticed a letter written to the travel editor. The writer was about to make a hotel reservation in Europe and noticed that there were two options for room he wanted. One was nonrefundable, while the other option for the same room was about $300 more but was cancellable. He wondered if this was a European phenomenon, and whether the nonrefundable ($300 less) reservation was a good idea.

The answer to the first part of the question is that nonrefundable hotel reservations are becoming a more and more common option being offered by most hotels in the U.S. The hotels learned this from the airlines. It is a way to increase their sales rates. In the past, hotels had a significant problem with travelers booking a reservation, and then continually searching for a cheaper option. Then, if the traveler found a better deal, they would cancel the original reservation and take the new, cheaper room. Now it is normal to see a nonrefundable rate and a free cancellable rate, with the cancellable rate 10 – 25% higher. By doing this, the hotels are able to substantially eliminate the churn of reservations as travelers continued looking for better deals. They offer an attractive low price option, but for that discount, the offer in nonrefundable and noncancellable.

Are nonrefundable/noncancellable reservations a good idea? The answer is that it depends. First, nonrefundable and noncancellable reservations really are noncancellable and nonrefundable. Most hotels will not accept any changes or modification. Think about all the issues that could affect your ability to use that reservation – job, illness (yours or family members), weather, etc. You must be prepared to lose all the money you paid if you are unable to use the reservation regardless of the reason (no matter how good a reason).

Other factors to consider are: distance – the closer the hotel is to you geographically, the less likely you will have travel problems (weather, mechanical, etc.) getting there. How much is the nonrefundable reservation and how comfortable are you if you lose that amount. How long is the reservation? The shorter the number of days, the less risk you have. However, if you are certain the dates work for you, and are prepared to lose the amount you paid if you don’t make it, then the rates are a very good value.

Finally consider travel insurance, especially on long trips, expensive trips or trips involving multiple destinations. Trip cancellation or interruption insurance can cover nonrefundable losses you incur when you cancel a prepaid flight, tour, or reservation for covered reasons. Depending on the policy, covered items can include cancellations due to sickness of you or a family member, death, layoff or other listed reasons, or for good reasons such as an accident, inclement weather, or a strike. Make sure you read the policy carefully.